PwC and CREATe.org Launch Report Assessing the Economic Impact of Trade Secret Theft

NEW YORK and WASHINGTON, Feb. 25, 2014 /PRNewswire/ -- Estimates of trade secret theft range from one to three percent of the Gross Domestic Product (GDP) of the United States and other advanced industrial economies, according to a new report launched today by PwC US and the Center for Responsible Enterprise and Trade (CREATe.org): Economic Impact of Trade Secret Theft: A Framework for Companies to Safeguard Trade Secrets and Mitigate Potential Threats.

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The report highlights:

• An original five-step framework to help companies assess and safeguard trade secrets;
• The economic impact of trade secret theft;
• An analysis of key threat actors most active in targeting trade secrets including nation states, malicious insiders, competitors, transnational criminal organizations and hacktivists;
• Three future scenarios that envision trade secret protection outcomes in 10-15 years based on different drivers making trade secrets more or less secure.

Given the reputational and financial risks of trade secret theft for companies, the report primarily focuses on a framework for individual companies to safeguard their secrets and mitigate potential threats. The framework provides a platform to identify and categorize trade secrets, a methodology to rank the threat actors seeking to induce economic harm, steps to evaluate the vulnerabilities in a company's existing control structure, and a model to assess losses attributable to trade secret theft. 

"As drivers of innovation, economic growth and prosperity for employees and shareholders alike, trade secrets enhance our economic security and stability through job creation, technology development, and robust research and development," said George Prokop, managing director in PwC's Advisory practice focused on Forensic Services. "Trade secrets' value to companies as well as their attractiveness to threat actors speaks to their criticality, as well as to the need to guard them carefully while also balancing competition for limited resources."

The framework encompasses five core elements:

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Each element is discussed in-depth and a case study explores how a company could use the framework within their own organization.

To estimate the economic impact of trade secret theft, the analysis leverages multiple studies on illicit economic activity– e.g., occupational fraud, tax evasion, copyright infringement and software piracy, and corruption – across the U.S. and advanced industrial nations as a proxy for the theft of trade secrets, resulting in an estimate of one to three percent of GDP. Such measures capture economic behavior that may inflict harm on national economies and, like trade secret theft, are under-reported, often wilfully ignored by their victims and difficult to measure.

The report considers the motivations and capabilities of threat actors who target and attempt to steal trade secrets, including nation states, malicious insiders, competitors, transnational criminal organizations and hacktivists.  These threat actors were selected based on a well-documented track record of attacking multinational companies; their stated intent to misappropriate companies' trade secrets and critical data; and their capability, as demonstrated by past attacks and by U.S. and other government reporting, to target companies' trade secrets for their own profit or to advance another country's interests.

The study also outlines three potential scenarios focused on trade secret protection over the next 10-15 years. The models are based on a narrow combination of drivers including: (i) the balance of cyber power, (ii) the openness of the internet, (iii) the pace of innovation, and (iv) regulation focused on trade secret protection. These scenarios can enable companies to visualize and plan for a more secure future for their trade secrets and, at the same time, enhance their ability to make investment decisions today.

"The challenge of trade secret theft is too large for any one government, company or organization to deal with alone—only a collective focus on this issue will help improve innovators' ability to secure their most critical information and trade secrets," said Pamela Passman, President and CEO of CREATe.org "The trade secret evaluation methodology provided in this report can be a first step in this larger collective effort and can help companies to understand the impact of theft on their trade secrets is a critical step in helping to shift the mindset from seeing trade secret protection as a cost to an investment."

To download the report, please visit: http://www.pwc.com/us/en/forensic-services/publications/economic-impact.jhtml.

About the Center for Responsible Enterprise And Trade (CREATe.org)
The Center for Responsible Enterprise And Trade (CREATe.org) is a non-profit organization dedicated to helping companies and their suppliers and business partners reduce counterfeiting, piracy, trade secret theft and corruption. To achieve our objectives, we have developed CREATe Leading Practices for IP Protection and CREATe Leading Practices for Anti-Corruption, two programs based on best practices drawn from companies around the world, academics, and other leading organizations. Our offering includes practical, scalable and cost-effective online assessments, independent evaluations, training and other resources designed to benchmark and improve practices for safeguarding IP and preventing corruption. Companies around the world are using CREATe Leading Practices to measure and improve systems for IP protection and anti-corruption. The service is available in Chinese, English, Brazilian Portuguese and Spanish.

For more information, please email [email protected] or visit www.CREATe.org.

About PwC US
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SOURCE PwC US