IP Theft: How Often Does Your IP Walk Out the Door?

It happens — employees leave. Sometimes they find growth opportunities and are encouraged, even cheered, by their employers to go for it. Other times, they are let go due to downsizing or performance issues, recruited by rivals or otherwise lured to greener pastures. In all scenarios, the employer’s intellectual property (IP) is at risk.

Revenge, greed and resentment are the main factors that motivate outgoing employees to commit IP theft. That’s why it’s important to have an exit process when a worker departs from your company — one that can be accelerated if that employee is departing for cause.

The Exit Process

Every organization should have an exit interview and departure protocol in place. A manager or a human resources representative should interview the departing employee to asses motivation for departure and solicit suggestions for improvement. The paperwork should include a signed attestation that all intellectual property has been returned to the company.

The interviewer should have a list of all devices issued to the employee and recover these devices. Furthermore, if endpoint telemetry allowed, the departing employee should be given an opportunity to identify the disposition of all storage devices, especially those used in the previous 90 days.

Once all devices are accounted for, the interviewer or company representative should escort the employee out the door and collect his or her identification credentials. Upon the employee’s departure, the IT department should adjust the technology infrastructure to abolish all access permissions to data, infrastructure and the facility.

The exit process is essential to protect the company from IP theft, preserve the revenue stream and prevent the inadvertent or inappropriate exposure of customer data. While no organization is immune to the vulnerabilities that lead to security breaches, those without a comprehensive exit process are ripe for harvesting.

Noteworthy Examples of IP Theft

A rather famous incident involved the departure of two hotel employees who took the entire playbook for a brand concept from one hotelier to the other. According to The New York Times, the employees were recruited on the condition that they brought their former employer’s intellectual property with them. In the end, the original employer received a substantial monetary award and its concept was protected, thanks to an HR dispute that revealed evidence of IP theft. This discovery had nothing to do with IT security or internal controls, however — just pure luck.

In a more recent case, a software gaming company accused outgoing employees of wholesale IP theft. According to the court filing, the company had a departure protocol in place that required appropriate attestation of the protection of all IP. The company also had the ability to conduct robust forensic examinations of the departing employee’s devices and online activity. In total, the employee in question purloined more than 14,000 documents and 26 GB of information and copied it to identified storage devices, Ars Technica reported.

In another case, an IT administrator who amicably departed from his employer went on to exploit access to the company’s infrastructure and steal insider information to facilitate securities fraud. All registered devices were returned according to proper exit protocols, but the former employee had used his administrative access to provision an undocumented laptop that had been issued to him early in his career. The exit process failed to catch the unregistered device and the greedy ex-employee made $350,000 by exploiting internal data prior to earnings announcements, according to the Securities and Exchange Commission (SEC) complaint.

Revenge frequently comes into play in cases of IP theft. Last year, a network administrator for an internet service provider (ISP) wrought havoc on his former employer’s IT infrastructure after being terminated. The technically savvy ex-employee installed backdoors that gave him continued access and destroyed thousands of files and directories. The network crashed as a result, and the ISP was unable to sustain service to more than 5,000 residential customers and 500 business customers for over a week, according to the U.S. Department of Justice. The company was ultimately forced to rebuild its network from scratch.

Pride can also motivate outgoing employees to compromise a company’s IP. In 2014, for example, a departing software engineer in Australia copied 120,000 files of his work as a “trophy,” according to law firm Meerkin & Apel. The court found him guilty of theft and fined him approximately $37,000, concluding that the former employee was “fully aware” that the information was central to his employer’s business and that it would be useful in future employment.

Ask the Tough Questions

It behooves both employees and employers to ask indelicate questions during onboarding and exit interviews. When your employees arrive, have them attest that they are not bringing with them any intellectual property from another entity. When they depart, ensure they leave all intellectual property behind. An effective exit process is key to resolving disputes and validating or refuting suspicion in this area.

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Christopher Burgess

CEO at Prevendra

Christopher Burgess is the CEO of Prevendra, a security, privacy and intelligence company. He is also an author, speaker and advocate for effective security strategies, be they for your company, home or family. Christopher co-authored "Secrets Stolen, Fortunes Lost: Preventing Intellectual Property Theft and Economic Espionage in the 21st Century" (Syngress, March 2008) and authored the e-book, "Senior Online Safety" (Prevendra, March 2014) and is the voice behind the website, "Senior Online Safety." Prior to the founding of Prevendra, Christopher held a variety of private and public sector positions, which included, chief operating office and chief security officer of a big data analytic company, Atigeo; Senior Security Advisor to the CSO of Cisco, a Fortune 100, and 30+ years within the Central Intelligence Agency. The CIA awarded him the Distinguished Career Intelligence Medal upon his retirement. Christopher resides in Woodinville, WA with his family, two dogs and two horses.