United States: Cybersecurity 2017 – The Year In Preview: Trade Secret Theft Takes Center Stage

Last Updated: November 24 2016
Article by Stephen T. Bychowski

Editor's Note:  This is the first of an end-of-year series of posts examining coming trends in cybersecurity.  Posts will examine trends in state regulations, federal regulatory authority, the changing nature of the threat landscape, and HIPAA.  This post discusses a shift in concern from personal consumer information toward company trade secrets.

When it comes to the issue of data privacy and security, especially among lawyers, the discussion generally concerns personally identifiable information.  This includes names, addresses, social security numbers, emails addresses, passwords, etc. of individuals.  Beginning with California in 2002, states have been imposing privacy and security obligations on companies that store personally identifiable information.  Now, fourteen years later, almost every state has laws protecting the personally identifiable information of its residents.  Federal laws play an important role too.  For instance, when you add medical information to the mix, it becomes protected health information governed by the Health Insurance Portability and Accountability Act (HIPAA).  If the information is held by a financial institution, then Gramm-Leach-Bliley Act (GLBA) might apply.

These laws are generally designed to protect the sensitive information of individuals that companies maintain as part of their business. The laws can require companies to take reasonable steps to secure that data, stop it from being stolen or inadvertently disclosed, and in the event a breach occurs, to notify the effected individuals.  All of this is unquestionably important.  And part of the reason it is important is that an ever increasing number of nefarious individuals are attempting to steal the cache of personally identifiable information stored on the servers of businesses.  Part of the incentive for such hacks is that this information can be sold on the black market and used to commit identify fraud and other criminal activities.

This is the world in which we live, and these laws and their implications are the mainstay of data privacy and security discussions.  My prediction for 2017 is that the conversation will shift from the security of information about individual consumers to the security of sensitive business information.  This is important because when hackers break into Yahoo and LinkedIn and steal millions of usernames and passwords, as was announced this year, the laws discussed above apply, and the effect on the individual consumers is the primary concern.  But when hackers steal confidential financial information, secret formulas, ongoing research and development projects, confidential agreements with third parties, long-term business plans, etc., the state and federal data security and privacy laws discussed above generally do not apply.  Yet these breaches can be utterly disastrous for a company.  Once in possession of this data, hackers can make the information public, sell it to competitors, or use it for extortion.  Thus, companies are well advised to develop strategies and policies focused on protecting their business information from such attack.

These breaches are common and appear to be on the rise.  In fact, their prevalence could be much greater than it seems because, unlike data breaches affecting consumer information, data breach and security laws generally do not require public disclosure of breaches that only affect business information.  One example is ransomware, which is becoming a prevalent form of such breaches.  In a ransomware attack, malicious software takes control of the company's computers and encrypts all of the data, making the information inaccessible.  The hacker then demands a payment in exchange for the decryption key necessary to unlock the data.  Such an attack not only places sensitive business information into the hands of unknown hackers, but it also blocks the company from accessing its data.  If the company does not have adequate back-ups, the ransomware attack could mean that the data is gone unless the company pays the ransom.  But even when the victim pays, sometimes the hackers still do not provide the decryption key.  Moreover, paying the hackers only encourages similar attacks in the future, and the company could be unknowingly funding even worse criminal activities.  A recent study found that 47% of U.S. companies have experienced a ransomware attack in the past year.  The CEO of PhishMe, a cybersecurity company, recently reported: "Barely a year ago, ransomware was a concerning trend on the rise.  Now, ransomware is a fully established business model and a reliable profit engine for cybercriminals ...."

Cyberattacks by foreign governments and competitors are also on the rise.  And when foreign governments and competitors attack, trade secrets and other sensitive business information are the likely target.  For instance, back in April, U.S. Steel Corp. filed a trade complaint with the International Trade Commission alleging that the Chinese steel industry formed a cartel to set steel prices, and in collaboration with the Chinese government, stole U.S. Steel's trade secrets.  Similarly, Chinese hackers were recently accused of perpetrating attacks on U.S. technology and drug companies seeking intellectual property and trade secrets, including designs and research for unreleased products.  Finally, this time last year, Samsung announced that hackers attacked its network in an attempt to steal the technology behind its Samsung Pay service.

Because the data security laws discussed above are not designed to deal with theft of business information, victims need to pursue other avenues if they want to seek redress.  One option is the Computer Fraud and Abuse Act, which generally prohibits accessing a computer without authorization and obtaining information from that computer.  Critically, the act includes a civil cause of action.  Another option is the recently enacted Defend Trade Secrets Act.  This act creates the first federal civil cause of action for trade secret theft.  The act also includes a controversial civil seizure procedure that allows a court "in extraordinary circumstances" to order the seizure of property in order to prevent the dissemination of trade secrets.  State law can also provide viable causes of action.  For instance, in the event of a cyberattack by a competitor, claims for torturous interference and unfair competition might be appropriate.

In the end, 2017 will certainly be an interesting year for data privacy and security.  Massive hacks involving the theft of personally identifiable information will continue, if not increase.  But I think we will also see the rise of attacks targeted at sensitive business information.  Companies should ensure in the year to come that they have strategies and procedures in place to combat such attacks.

To view Foley Hoag's Security, Privacy and The Law Blog please click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
25 Oct 2017, Webinar, Boston, United States

Foley Hoag will present a 60-minute webinar on Wednesday, October 25 at 12:30 pm EDT, offering guidance for in-house counsel regarding the basics of trademark and design protection in the European Union. Attendees will learn about the opportunities and pitfalls to be on the lookout for when looking to secure, protect, and enforce an IP portfolio overseas.

1 Nov 2017, Webinar, Boston, United States

Please join Foley Hoag on Wednesday, November 1, 2017 for a webinar that covers the details of drafting an appropriate arbitration clause for your company’s commercial contracts.

9 Nov 2017, Conference, Waltham, United States

Please join us on Thursday, November 9 at the Westin Waltham Hotel for our quarterly New England M&A Forum, which brings the latest in market trends and recent legal developments to the New England M&A professionals' community.

 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.