Industrial espionage

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Actions directed toward the acquisition of information on industrial production facilities, techniques, or capabilities through clandestine operations.

See the Introduction, Abbreviations and Pronunciation for further details.

The systematic use of spies by American companies to report on their employees began after the Civil War with the rise of American industry and reached a peak during the 1930s. Employers originally recruited spies from among their workers but eventually turned to trained men from such agencies as Pinkerton, Burns, and Baldwin-Felts. Spies reported on various matters, such as inefficiency, theft, and worker unrest. Companies used spy reports to discharge union activists, and relied on state and local police to provide protection or even aid to professional strikebreakers. The use of industrial spies accelerated during the 1920s along with rising anticommunist and antiunionist sentiment, and climaxed during the heyday of the Congress of Industrial Organizations (known as the Committee on Industrial Organization until 1938), over which John L. Lewis presided after 1935. In 1937 a report by the U.S. Senate Committee on Education and Labor found that American companies employed labor spies in virtually every plant and union. By this time employer associations regularly provided professional labor spies and strikebreakers for their affiliated companies, and some large corporations employed their own private police forces to combat unionization.

The adverse publicity of the 1930s and the maturation of labor-management relations after World War II brought about the virtual cessation of professional anti-union espionage. After 1959 federal law required agents of employers reporting on the labor-management relationship to register with the U.S. Department of Labor, although few do so and not many are believed to exist. Some companies continue to spy on their employees for various reasons, but industrial espionage is now largely confined to spying by companies upon each other. Nearly universal in one form or another, the latter practice is systematic among competitive industries affected by changes in fashion or taste. Its function is to discover trade secrets. The disagreements about it center on the methods used, not on legitimacy of purpose.

As the emphasis of industrial espionage shifted after World War II from antiunionism to protecting and uncovering professional trade secrets, the Cold War context became increasingly important. Fear existed that agents from the Soviet Union and its allies would obtain sensitive technology or information from American industries that could hurt the national security of the United States. Although much information was available in scientific and technical publications, as well as through public conferences, espionage or spying proved necessary to acquire more sensitive items. No one can accurately estimate the dollar value of direct losses to U.S. industry, as well as the indirect costs of higher U.S. defense budgets, that resulted from industrial espionage during the Cold War. One authority, however, estimated that the Soviet Union had as many as 20, 000 agents working as industrial spies.

The end of the Cold War failed to reduce concern about industrial espionage, however. U.S. business and political leaders had long worried about how foreign economic competition could affect national security, and shifted their attention to countries that were political allies but commercial rivals. In June 1982, for example, six executives with the Japanese firms Hitachi and Mitsubishi were arrested in Santa Clara, Calif., for trying to steal documents and computer parts from IBM. In 1993–1994 U.S. and German officials dealt with claims by General Motors that Volkswagen had obtained proprietary information from a former GM vice president who had taken a position with the German company. A former director of the French secret service publicly stated that he had instructed French agents to secure industrial information. U.S. political and business leaders were divided over whether or not U.S. intelligence organizations, such as the Central Intelligence Agency, should conduct its own counterespionage.

With U.S. businesses increasingly dependent on computer networks for relaying information, concern grew in the 1980s and 1990s about the security of their information networks. Major companies were forced to spend more money and time combating the efforts of hackers, skilled computer operators who would try on their own initiative or on behalf of others to penetrate company software programs used by companies. Ultimately, a dispute arose between U.S. private businesses, which desired sophisticated software programs to protect their information, and law enforcement and intelligence agencies, which wanted to have access to all programs and networks being used by companies operating under U.S. jurisdiction. This tension between the need to fight sophisticated means of industrial espionage and the requirements of law enforcement promised to be an increasingly contentious issue in the future global economy.

Bibliography

Calkins, Clinch. Spy Overhead: The Story of Industrial Espionage. New York: Harcourt, Brace, 1937.

Melvern, Linda, Nick Anning, and David Hebditch. Techno-Bandits. Boston: Houghton Mifflin, 1984.

Schweizer, Peter. Friendly Spies. New York: Atlantic Monthly Press, 1993.

Winkler, Ira. Corporate Espionage: What It Is, Why It Is Happening in Your Company, What You Must Do About It. Rocklin, Calif.: Prima Pub., 1997.

—John Hutchinson/C. W.

This article includes a list of references, related reading or external links, but its sources remain unclear because it lacks inline citations. Please improve this article by introducing more precise citations where appropriate. (December 2008)

Industrial espionage or corporate espionage is espionage conducted for commercial purposes instead of national security purposes.

The term is distinct from legal and ethical activities such as examining corporate publications, websites, patent filings, and the like to determine the activities of a corporation (this is normally referred to as competitive intelligence). Theoretically the difference between espionage and legal information gathering is clear. In practice, it is sometimes quite difficult to tell the difference between legal and illegal methods. Especially if one starts to consider the ethical side of information gathering, the border becomes even more blurred and elusive of definition.

Industrial espionage describes activities such as theft of trade secrets, bribery, blackmail, and technological surveillance. As well as spying on commercial organizations, governments can also be targets of commercial espionage—for example, to determine the terms of a tender for a government contract so that another tenderer can underbid.

Industrial espionage is most commonly associated with technology-heavy industries, particularly the computer and automobile sectors.

Espionage takes place in many forms. In short, the purpose of espionage is to gather knowledge about (an) organization(s). A spy may be hired, or may work for oneself.

Contents 1 Information 2 Other 3 References 4 Further reading 5 See also 6 External links

Information

Information can make the difference between success and failure; if a trade secret is stolen, the competitive playing field is levelled or even tipped in favor of a competitor.

Although a lot of information gathering is accomplished by combing through public records (public databases and patent filings), at times corporations feel the best way to get information is to take it. Corporate espionage is a threat to any business whose livelihood depends on information. The information competitors seek may be client lists, supplier agreements, personnel records, research documents, or prototype plans for a new product or service. The compilation of these crucial elements is called CIS or CRS, a Competitive Intelligence Solution or Competitive Response Solution.

Other

In recent years, corporate espionage has taken on an expanded definition. For instance, attempts to sabotage a corporation may be considered corporate espionage; in this sense, the term takes on the wider connotations of its parent word. In some cases, malware and spyware has even entered the arena of corporate espionage.[1] [2]

That espionage and sabotage (corporate or otherwise) have become more clearly associated with each other is also demonstrated by a number of profiling studies, some government, some corporate (such as this paper from the Software Engineering Institute [3]). That the US Government currently has a polygraph examination for the "Test of Espionage and Sabotage" (TES)[4] is also demonstrative of the increasingly popular (though not necessarily the group consensus) notion, by those studying espionage and sabotage countermeasures, of the interrelationship of the two. In practice, and particularly in regards to 'trusted insiders', they are more often than not considered functionally identical when it comes to the majority of the countermeasures.

The government of France has been alleged to have conducted ongoing industrial espionage against American aerodynamics and satellite companies[5] and vice versa. This list, compiled from public sources over the last fifteen years of the countries that are known to be customers of stolen U.S. technology: Argentina, Brazil, France, India, Iran, Iraq, Israel, Japan, Lebanon, Libya, North Korea, Pakistan, Peoples Republic of China, USSR(Russia), South Africa, South Korea, Taiwan.^[1]

The Clinton administration has been accused of shifting U.S. intelligence assets from terrorism targets and toward economic targets to "level the playing field" for U.S. companies competing abroad.^[2]

References

1. ^ Pitorri, Peter. Counterespionage for American Business. Chicago: Butterworth-Heinemann Limited, 1998.
2. ^ The Baltimore Sun, "Mixing Business with Spying," Nov. 1, 1996. (Fee required to read entire article.) mirror

Further reading

• Barry, Marc and Penenberg, Adam L. Spooked: Espionage in Corporate America. Perseus Books Group, December 5, 2000. ISBN 0-7382-0271-1
• Fink, Steven. Sticky Fingers: Managing the Global Risk of Economic Espionage. Dearborn Trade, January 15, 2002. ISBN 0-7931-4827-8
• Rustmann, F.W. Jr. CIA, INC.: Espionage and the Craft of Business Intelligence. Potomac Books, November 2002. ISBN 1-57488-520-0
• Winker, Ira. Corporate Espionage: What It Is, Why It's Happening in Your Company, What You Must Do About It. Prima Lifestyles, April 9, 1997. ISBN 0-7615-0840-6
• Pitorri, Peter. Counterespionage for American Business. Chicago: Butterworth-Heinemann Limited, 1998.

See also

• Business intelligence
• Competitive intelligence
• Trade secret
• The American Industrial Espionage Act of 1996
• The American Economic Espionage Act of 1996

External links

• Spyware as Corporate Espionage Threat. NewsFactor Network, July 19, 2005.
• Directory of Corporate Espionage detectives at ExpertLaw
• Recent cases and future of industrial espionage
• Comparing Insider IT Sabotage and Espionage: A Model-Based Analysis.
• Intelligence Online Investigative news and reporting on industrial espionage and business intelligence (subscription and pay-per-article site).

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