Poachers Are Out to Plunder Your Intellectual Property - Can You Do Anything? (page 4 of 4)

Companies could take certain steps to help reduce the risk of poaching. For example, they could protect themselves against shirking by requiring that their vendors execute performance-based bonds. This would make some resources available to compensate the client in case the contract is not fulfilled, and it would also introduce a third-party arbitrator to oversee whether the terms have been met. This may help in cases where the arbitrator can observe and verify that poaching has occurred.

Corporate reputation offers another possible safeguard against poaching. "Reputation is a form of bonding. A firm builds up a repuation over time for engaging in appropriate conduct. Should a firm engage in opportunism that were detected, it would be revealed in the marketplace and its reputation would suffer," say Clemons and Hitt.

Neither of these methods is foolproof, though. The effectiveness of bonding as a means to reduce the risk of poaching depends on the victim's ability to detect it. This is extraordinarily difficult to do in the case of intellectual property. Similarly, the difficulty in using reputation to reduce poaching is that it needs to be credibly demonstrated before the poacher's reputation can be affected. This, too, is rarely easy to do.

Given these formidable challenges, Clemons and Hitt suggest that companies might consider exploring new approaches - involving creative use of technology - to counter the risk of poaching. For instance, sensitive information could be embedded in software or systems rather than being shared with vendors or potential strategic partners. In addition, "confidential data could be encrypted or kept separate from the information that is necessary to reveal to a vendor to perform a service or build a product," they recommend. Developing modular products or processes could help prevent reverse engineering. Finally, when large bodies of information (that have potential resale value) are shared with a vendor, they could be seeded with dummy data that might help expose a poacher.

Clemons and Hitt conclude that poaching offers new and formidable challenges as the global economy becomes more knowledge-intensive. According to Clemons, it is "a newly significant form of opportunism" and it represents "the growth opportunity in e-commerce white collar crime." Poaching requires different analytical models and remedies - many of which still need to be developed. Only partly in jest, he quips: "Maybe companies should actually encourage poaching of their own intellectual property - but figure out a way to get paid for it."

That is not as incredible as it sounds. After all their legal wrangling, isn't that exactly what Priceline and Expedia did?