Category Archives: Intellectual Property

Electronic Health Records, Intellectual Property, IT Consultants, Network Security, Privacy, Risk Management

A Data Security Trend For 2011: The Data Threat Hype Continues

The new year appears to be continuing a trend begun in 2008 — ever increasing hype concerning the level of data security threats faced by public and private entities.  This hype is not just about increasing public breach disclosures (which have primarily been driven by the increase in breach notification laws) given it also manifests in:   the perceived threat of involuntary corporate transparency brought into public view by the “Wikileaks Effect”, the fact that papers such as the LA Times are able to report as true the powerful Stuxnet worm was able to trim years off of the Iranian nuclear program, and the fact that the Organisation for Economic Co-operation and Development (OECD), in a recent report, paints a picture of a world where “[p]reventative and detective security technologies will not provide protection against all the threats [so] considerable effort will be needed to mitigate and recover from losses.”  OECD Report (dated 14 January 2011) at 82.

For example, in the LA Times article, the Stuxnet worm was removed from its unique Iranian context and given broad scare appeal:  “Now that Stuxnet is in the public domain, experts are deeply concerned that hackers, criminals or terrorist groups could use some of the vulnerabilities it reveals to attack systems that control power grids, chemical plants and air traffic control.”

Third-party threats have indeed shifted but that shift took place over five years ago – when organized crime realized that stealing data could be more lucrative — and much safer — than traditional criminal activity.  The ego-driven hackers of yesterday may still exist in the form of the hackavists of today but they remain a minor threat compared to the threats driven by organized crime.  But that is not something new.

On the other hand, the hype that has filled the data security landscape has only risen to a fever pitch these past several years.  Not exactly sure why this is happening.  It may be the fact that more big business has entered the data security consulting/technology space – well equipped with PR firms in tow.  It may be because news organizations have found a new bogeyman that can help drive sales.  It may just be the case reporters and pundits truly feel the hype is justified.

No matter what the cause, one thing is for certain.  This hype does not help companies or governments better protect themselves.  Employees faced with this barrage of hype may be just a bit more lax — thinking there is little they can really do to prevent a theft.  This would be a grave mistake given that a significant source of data loss incidents is directly tied to employee negligence.   As well, if hype causes a CFO to think that state-sponsored incidents such as Stuxnet may be an imminent threat, he or she may suggest diverting resources from more important initiatives like employee training.

There are obviously ongoing data security threats faced by companies that are very real and not going away any time soon.  Marching into 2011, focused companies will weed the hype and address these many challenges utilizing a cost-effective risk management approach.   And, should they need legal or consultative advice, they will choose seasoned partners with the lowest volume setting.  Smart companies realize that succumbing to the hype is a zero-sum endeavor that will only benefit those who feed off the hype.

Intellectual Property, Law Firm, Litigation Management, Middle Market Business, Network Security, Privacy, Risk Management

NJ Supreme Court: Fired Employee Can Use Stolen Confidential Documents

In a decision that might have significant ramifications in future discrimination and whistle-blower lawsuits, the New Jersey Supreme Court  ruled in Quinlan v. Curtiss-Wright Corp., No. A-51-09 (N.J. Sup. Ct. Dec. 2, 2010) that an employee who copied 1,800 of pages of documents that she came upon during the normal course of her work — many with confidential information — could share them with the  attorney representing her in a lawsuit against the employer.  The Supreme Court allowed the usage of these documents even though the plaintiff signed her employer’s standard confidentiality agreement that bars employees from using confidential information for private use.

According to the dissent:

From this point forward, no business can safely discharge an employee who is stealing highly sensitive personnel documents even as she is suing her employer and disregarding the lawful means for securing discovery. Moreover, lawyers may think that, even after they have initiated a lawsuit, they can accept pilfered documents and benefit by using them to surprise an adversary in a deposition rather than abide by the rules of discovery.

Although the decision did reaffirm the ability of an employer to fire an employee for the theft of confidential documents, it provides for a potential safe harbor to the extent such documents are used in a subsequent suit for discrimination.   Newspapers as well as law firms have written on the decision, including Lowenstein Sandler, Proskauer Rose, Jackson Lewis, and Fox Rothschild.

Commentators have suggested that employers implement comprehensive confidentiality policies that are  communicated firm-wide and uniformly enforced.  Although that is certainly sound counsel, it is also suggested that adequate security measures be implemented that allow employers to prevent or at least track the copying and removal of over one thousand documents.  Moreover, although not discussed in either the ruling or subsequent  commentaries, there is only a minor leap to be made to extend this holding to whistle-blower suits.  Although choice of law issues remain untested, the new Dodd-Frank’s whistle-blower provisions — which allow employees to obtain significant rewards for providing information to law enforcement authorities about violations of the federal securities laws, the Foreign Corrupt Practices Act, the Investment Advisers Act and the Investment Company Act — may even be in play.   Bottom line:  New Jersey employers need to review their data security and confidentiality policies to address this new decision.

Intellectual Property, IT Consultants, Middle Market Business

New York Metropolitan Area Tops Tech Jobs Ranking

According to a recently released report, the New York metropolitan area — including several nearby New Jersey counties — has more technology workers than any other in the United States.  The New York metro area had 317,000 technology jobs in 2009, topping a list of 60 other metropolitan areas, according to the Cybercities 2010: The Definitive Analysis of the High-Tech Industry in the Nation’s Top 60 Cities survey.   These New York metro jobs paid on average $98,500 annually and are mainly in computer systems design and related services.  

Although the New York metro area traditionally is known for being dominant in the financial sector, this report demonstrates something those in the tech/telecom industry have known for years.  Whether born out of Bell Labs in Murray Hill, New Jersey or IBM in Armonk, the New York metro area has laid claim to some of the major technology innovations of our time.  Couple those breakthroughs in core technologies with the new media leaps taken in Silicon Alley during the early days of the Internet and New York’s recipe for tech growth is quickly realized — it is all about innovation.  Those who innovate usually lead.

Electronic Health Records, Intellectual Property, Law Firm, Middle Market Business, Network Security, Privacy, Risk Management

Ponemon Institute: Lost Laptops Cost Billions

The Ponemon Institute’s latest report, “The Billion Dollar Laptop Study,” shows that 329 organizations surveyed lost more than 86,000 laptops over the course of a year.  Based on these findings and an earlier survey that put the average cost of lost laptop data at $49,246, the total cost amounts to more than $2.1 billion or $6.4 million per organization.

Some other key findings of the report:  (1)  while 46 percent of the lost systems contained confidential data, only 30 percent of those systems were encrypted; (2) only 10 percent had any other anti-theft technologies; and (3) 71 percent of laptops lost were not backed up so all work in progress was lost.

At the release media event reported on by InformationWeek, Larry Ponemon explained that most of the cost “is linked to the value of intellectual property on these laptops and the fees associated with data breaches and statutory notification requirements.”   During this same press conference, Ponemon recounted interviewing one woman at a company who had lost 11 laptops in two years:  “She claimed she wasn’t really that careful with laptops because the only way she could get a better one was to lose it.”

It is this disconnect — the value of the information lost vs. the relative interest in the user in protecting such information — that becomes the ultimate challenge faced by most firms.   Employee training remains the front line in addressing this challenge but having employees pay for their lost corporate laptops may actually yield more desirable results.   It would be interesting to have the next Ponemon lost laptop study include the ratio of lost business laptops compared to lost personal laptops, i.e., those actually purchased by an employee.

Copyright Infringement, Intellectual Property, Middle Market Business, Risk Management, Small Business

Exposure to Software Copyright Claims

Claims arising out of internally-used software continue to be a significant retained IT risk factor.  When President Obama picked the Business Software Alliance’s General Counsel Neil MacBride for a senior Justice Department post, it was a clear message that we will see increased software compliance audits – and possible new penalties.  The increasing use of open source software is also leading to unanticipated software copyright exposures. In other words, the reasons continue to mount why users of desktop software should carefully monitor their use of software and maintain careful records of each license.

Financial Reporting, Intellectual Property, Middle Market Business

Business Method Patents Live on Another Day: Bilski Decided by SCOTUS

Today’s Bilski v. Kappos decision rejected having a Federal Circuit test for determining patentable subject matter as a “knock out” test for business methods.  If affirmed, this Machine-or-Transformation Test (if applied as the sole test) would have likely rejected all business method patent applications.  As it stands, the United States is the only country that allows for business method patents.  After today’s United States Supreme Court decision, that remains the case.

In today’s decision, the Court ruled that “business methods” can be patentable if they meet the requirements set forth in longstanding precedent notwithstanding the fact they do not “recite a particular machine or apparatus, nor transform any article into a different state or thing.”  Although the Court ruled that the Machine-or-Transformation Test remains as a helpful tool when resolving patentable subject matter questions, it should not be considered a “knock-out” test.

This is a huge win for financial institutions and software companies with strong patent portfolios — as well as those law firms who help build and protect those portfolios.