From Pirating to Privacy

Oct. 1, 2004
Imagine what might happen if competitors "found" data relating to your business transactions with customers or suppliers on the Internet.
Imagine what might happen if competitors "found" data relating to your business transactions with customers or suppliers on the Internet.

Ah, the benefits of outsourcing. Lower costs. Lower employee benefits. More profits. Broader markets. No unions. Pirated software. And now, data insecurity. Pirated software is only one potential problem material handlers need to consider when outsourcing material handling processes abroad. Another issue is how to ensure that private data stays private.

Threats to privacy come from several sources that are either internal or external. For internal, there are disgruntled employees, who reside in every country. News reports of employees threatening to release sensitive data to the Internet if certain demands are not met occur in other places besides the U.S. For example, recently an employee in India threatened to put medical data of patients of a U.S.-based hospital on the Web if a desired salary was not paid.

For external, there's always the issue of hackers, who exist in every country. They routinely make source code of various software programs available on the Internet. Windows 2000 is just one of the latest examples of source code that is supposedly readily available on the World Wide Web.

And let's not forget that old-time favorite, industrial espionage. Incidents of this external threat may not be large in the U.S. However, in the rest of the world, the story is different, especially in poor nations that want a share of the industrial revolution. According to KeyTone Technologies Inc., a global intellectual-property-based consulting organization, not enough countries have strong laws to protect foreign companies from the theft of intellectual property. Thus, if a software program was developed using foreign labor, a common practice today, there's risk that the program could be stolen or private data used for extortion. For example, imagine what might happen if competitors "found" data relating to your business transactions with customers or suppliers on the Internet.

Now, the U.S. has strict privacy laws. If sensitive data are supposed to remain private, like customers' bank accounts, and the information is accidentally released, say on the Internet, there are ramifications. The FTC, at the least, will prosecute. And some countries have security measures in place that would put many U.S. companies' efforts to shame.

There are several foreign countries, however, with no protection. According to the KeyTone report, observers say India has a culture that generally seems to respect intellectual property. However, China and Russia have work to do. The report cites these countries' record on such intellectual property as shrink-wrapped software and copyrighted material such as movies and music. If they can sell it, well, it's all about profit.

There are steps material handlers can take to protect their intellectual property. When outsourcing, examine a country's laws about property protection. Check on what processes are in place and what processes need to be put in place for Internet and networking security as well as business continuity and disaster recovery.

Check to see whether the potential host country implements treaties from the World Intellectual Property Organization (WIPO). These treaties were developed to help create a "legal environment conducive to investment and growth in Internet-related businesses and technologies." Two treaties went into force in 2002: the WIPO Copyright Treaty and the WIPO Performance and Phonograms Treaty (WPPT). These treaties should raise the minimum standards of intellectual property protection around the world.

As a U.S business, you have leverage with foreign countries' government; everyone wants to attract U.S. business investment. While China is a popular country to outsource to today, Mexico is trying to regain U.S. interest, and Japan is making overtures to U.S. businesses to "get a piece of the action." Intellectual property protection can be a strong part of negotiations.

Other steps KeyTone advises, include:

  • Establish a well-articulated Intellectual Property Policy that covers intellectual property acquisition, exploitation, distribution, monitoring and enforcement.
  • Clearly define what is considered intellectual property and owned by your company.
  • Define employee obligations to safeguard that property.
  • Define how ownership of copyrighted material works.
  • Develop manuals and training courses for the employees to ensure they understand the policy. Intellectual property, whether it's a program, customer information or transaction information, is still yours and deserves to be protected from piracy and extortion.

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