IP Theft: A Crime That Demands Law Enforcement's Full Attention
Intellectual Property (IP) theft is often dismissed as a victimless crime or simply a cost of doing business. However, this couldn't be further from the truth. IP theft is a complex issue with serious implications for individuals, businesses, and, after-all, economic security is national security. It's a crime that necessitates a robust response from law enforcement agencies as well as businesses who will need to take lead, especially considering its effects as further outlined in our blog.
The Many Faces of IP Theft: Understanding the Criminal Elements
IP theft is more than just the illegal downloading of music or movies. It encompasses a wide range of activities, each with distinct criminal elements:
Fraud: IP theft frequently involves fraudulent activities like misrepresentation, deception, and the intentional deprivation of another's property rights. The perpetrators have the motivation to deceive and gain an unfair advantage and come from inside the business, a.k.a. “insider threats” (Mendeley et al.).
Economic Crime: IP theft is a significant economic crime. It results in lost sales, diminished market share, and decreased competitiveness for legitimate businesses, which costs businesses and government in the tens to hundreds of billions of dollars (see: Gitnux Stats, 2013 NBAR IP Commission_Report and 2017 Update, which states that “the annual cost to the U.S. economy continues to exceed $225 billion in counterfeit goods, pirated software, and theft of trade secrets and could be as high as $600 billion”, as well as the hidden costs of an IP breach - reputational and organizational damage, etc.).
Espionage/Foreign Interference: In some cases, IP theft is perpetrated by foreign actors or entities seeking to gain an economic or strategic advantage (see our blog here).
Quantifiable Damage: The Real Cost of IP Theft
The damage caused by IP theft is not just theoretical. It has real, measurable consequences:
Lost Revenue: IP theft deprives creators and businesses of their rightful income, leading to lost profits and hinders innovation.
Loss of innovation pipelines: which means that some R&D initiatives and solutions of the future are prematurely disclosed to the market, or simply wiped out. This can occur by way of digital piracy (Bradley et al.) amongst other techniques;
Economic Instability: Large-scale IP theft can disrupt entire industries, causing job losses and economic instability.
National Security Threats: In cases involving sensitive technologies or trade secrets, IP theft can compromise national security, which includes economic security.
Consumer Harm: Counterfeit goods often pose safety risks and can lead to consumer harm.
The Role of Law Enforcement: Why Prosecution is Essential
Law enforcement has a crucial role to play in combating IP theft:
Deterrence: Prosecution sends a strong message that IP theft will not be tolerated, as in the case wherein a public utility employee was charged with espionage. It could act as a deterrent for potential offenders.
Protection of Rights: By enforcing IP laws, law enforcement protects the rights of creators and businesses, incentivizing innovation. This can be done through a multitude of ways, including provisions of the Criminal Code of Canada, IP laws, Customs and border protections (see: Canada Border Services Agency (CBSA) memorandum D19-4-3 - Copyright, Trademarks and Geographical Indications).
Upholding Fair Competition: Prosecuting IP theft helps to maintain a level playing field for businesses, fostering fair competition.
Safeguarding National Interests: In cases involving foreign interference or national security, law enforcement acts to protect national interests and our economic security.
Challenges and Solutions
Prosecuting IP theft is not without its challenges:
Jurisdictional Issues: IP theft can be transnational, making it difficult to investigate and prosecute across borders, as well as in countries where there are multiple layers of government (e.g., federal, provincial, state, municipal, territories, indigenous government, …). There will be issues of jurisdictional competence, amongst others.
Resource Constraints: Law enforcement agencies often have limited resources dedicated to IP crimes, which can result from contract policing (see also Public Safety Canada), of which a former law enforcement officer - Paul Garside (now of Vidocq Group) wrote in a 2020 Globe and Mail opinion that the “RCMP is overdue for renewal – and that begins with contract policing.”
Complexity of Cases: IP theft cases can be complex, requiring specialized knowledge and expertise, in which top investigators are usually allocated to matters of national security and counter-terrorism.
It might not be considered high priority according to law enforcement agencies and more particularly policing matrices, or priority assessment.
Despite these challenges, solutions exist:
International Cooperation: Collaboration between law enforcement agencies from different countries can help overcome jurisdictional issues, especially as it pertains to IP theft and improper patent filings (see our blog).
Specialized Units (or ‘federal policing’): Creating specialized units within law enforcement agencies can provide the expertise needed to tackle complex IP cases, which usually falls under federal jurisdiction. this regard, it has just been published that the Government of Canada and the Royal Canadian Mounted Police (RCMP) are considering making “federal policing "separate and distinct" from the RCMP's boots-on-the-ground policing obligations in the provinces and territories”, which means that it could finally receive dedicated funding, resources and members to pursue “national security files” that “will continue to grow in importance and complexity in the coming years”. Again, economic security is national security, and there would be a compelling case for the safeguarding of intellectual property rights.
Public-Private Partnerships: Collaborating with the private sector can leverage resources and expertise to combat IP theft, and
Include IP in Annual Threat Assessments: as in the case of the National Cyber Threat Assessment 2023-2024 released by the Canadian Centre for Cyber Security, which, interestingly, is not a law enforcement agency, but rather forms part of the Communications Security Establishment Canada. It is clearly stated in the National Cyber Threat Assessment 2023-2024 that: “States are targeting Canada’s economic value. State-sponsored threat actors engage in commercial espionage, targeting intellectual property and other valuable business information with the goal of sharing stolen information with state-owned enterprises or domestic industry in their home country. Commercial cyber espionage is often part of a broad spectrum of activity that includes intellectual property theft, foreign intelligence operations, covert equipment and materials acquisition, and export control violations. If successful, this activity can result in lost revenue, reputational damage, and lost investment for research and development. We assess that over the next two years, Canadian organizations with information of value to foreign states will almost certainly continue to be targeted by malicious cyber threat activity from state-sponsored actors.”
Effective management of IP and business information, and processes to combat the foregoing threats, whilst maximizing value.
Conclusion
IP theft is a serious crime with far-reaching consequences. It's not just about lost profits; it's about protecting innovation, safeguarding national and economic interests, as well as upholding fair competition. Law enforcement has a vital role to play in combating this growing threat. By actively investigating and prosecuting IP theft, law enforcement can send a clear message that this crime will not be tolerated, and that the rights of creators and businesses will be protected.
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