Intellectual Property Theft and Shadow AI

In my article last week on the costs impacting businesses where shadow - or ungoverned - AI exists, one that isn't discussed often is the cost of Intellectual Property (IP) losses.

There is a monetary cost per item lost in these instances. Research demonstrates that IP theft through data breaches increased by 26.5% in 2024. But the real cost is losing your competitive advantage; realizing that the strategic IP your organization expected to exclusively montetize is gone. And the shadow AI connection - 40% of shadow AI incidents involved intellectual property theft.

When employees upload proprietary data to unauthorized or ungoverned AI tools for "quick analysis" or "better drafting", they are potentially exposing:

• strategic plans

• product designs

• customer insights

• proprietary algorithms

• trade secrets

Once that IP enters an ungoverned or unauthorized AI system, you have more than likely already lost visibility, control and, potentially, ownership of that AI.

For organizations positioning themselves as prime movers or innovators in their fields and moving forward with the adoption of AI, protecting IP while enabling AI innovation requires a delicate balance:

✅ Provide approved AI tools that meet business needs

✅ Implement data classification and handling protocols

✅ Monitor for unauthorized AI usage

✅ Educate employees on IP risks and proper AI usage

✅ Align with regional AI governance frameworks

Innovation and protection aren't mutually exclusive. But they do require intentional governance through the implementation of an AI Assurance Framework and Assessment.

Reach out for a discussion on how I can assist you to put an AI Assurance Framework in place and help move your organization to a Responsible Use of AI Model.