A California-based software company has brought suit against the Mumbai police for failing to investigate a claim of software theft. Because corporate IP theft is still relatively rare in India, many local companies and enforcement agencies are not able to effectively deal with the related issues Unsurprisingly, this has serious implications for outsourcing.

Within months of opening a new research and development centre in Mumbai, Jolly Technologies discovered the theft of portions of its source code and confidential design documents in relation to one of its key products. Jolly approached the cybercrime unit of the Mumbai police, the body empowered to deal with such offences, but was not satisfied with its response. The company has now begun proceedings for negligence.

Cases of software-related theft and other IP violations are on the rise in India. In one case three software engineers in Bangalore were arrested for stealing source codes from their employer. In another, an employee of an offshore firm was arrested on charges of stealing code in relation to a computer-aided design program. These cases are likely to strengthen the demands of offshore companies that Indian service providers have in place security policies and procedures that meet international standards.

The majority of US-based software companies require their employees to sign an agreement that prohibits them from removing or transferring in any manner the company's source code. This type of theft is a serious risk for any software manufacturer as the exposure of its code to the world at large can potentially risk its investment in research and development. In addition, if source code is transferred or sold to a hacker or any other criminal, it can be altered and redistributed as the original, which could harm the reputation of the original developing company.

Many software companies in India do not have proper security and data protection policies in place to prevent IP theft. While there is existing legislation, both civil and criminal, to deal with this type of theft and misappropriation, there is a lack of (i) an efficient system of enforcement, and (ii) a powerful legal system. Poor education among law enforcement officers and deep-rooted corruption complicates the problem further.

The situation is, however, improving as awareness of the importance of data protection grows. This is vital in relation to outsourcing, especially when India is considered to be the back office of the world.

Prerak Hora, Nishith Desai Associates, India.