Industrial Espionage: Reality of the Information Age

Abstract

Research managers have enough work without overseeing the lab's information security program too. Unfortunately, they have choice without risking the disclosure of innovative technical information. Never before in peacetime has there been such an intense effort to obtain a competitor's technical information. For instance, French intelligence agents conducted espionage operations against the overseas offices of IBM and Texas Instruments (1). Two Koreans were arrested by the FBI in Houston after allegedly paying $40,000 for blueprints of Dow Chemical's polymer plant in La Porte, Texas (2). A former Merck and Schering-Plough employee was recently sentenced to nine years in prison for attempting to sell the formulas for Ivermectin and Interferon (3). Theft and attempted theft of proprietary information is a reality of our information age. Unless a company adopts a formidable defensive posture, its ability to compete in the global marketplace will be significantly eroded. STEALING TRADE SECRETS The need to protect one's technical advantage is not new. The Celts stole the secrets for making superior chariot wheels from the Romans, and the Persians stole the secrets for silk production from the Chinese, despite their making such disclosure a capital offense (4). Incidents of trade secret theft increased after World War II. 3M's secrets for making cellophane tape were misappropriated by Technical Tape Company (a situation corrected by litigation) (5). A chemistry professor, Robert Aries, and a former student of his working for Merck, stole Merck's process for making Amprolium. Aries successfully sought sanctuary in France--the Merck employee forfeited a promising career (6). A research chemist at American Cyanamid's Lederle laboratories stole the organisms and process data to make Aureomycin, Tetracycline and Declomycin, and attempted to sell them to an Italian pharmaceutical firm (7). As early as 1962, the Japanese were reported to have opened an Institute for Industrial Protection with the avowed purpose of training spies and counterspies for Japanese corporations (8). The 1980s saw a substantial growth in trade secret theft. The proliferation of personal computers and computer workstations provided more employees with information of a highly sensitive nature. In many cases, access controls to such information were inadequate. The Freedom of Information Act became routinely used to obtain information that competitors were submitting to the government. Some companies, like Monsanto, learned the hard way the importance of placing proprietary markings on their information before submitting it to government agencies (9). Employees were becoming more aware of the value of the information with which they were working. The incident receiving the most attention by media during the 1980s was the FBI sting operation in 1982 in which representatives of Hitachi and Mitsubishi Electric were arrested and charged with soliciting and purchasing IBM's trade secrets. Studies showed that increasingly business executives were taking action to acquire a competitor's information that were previously considered unethical and rarely done (10). The primary legal text on trade secrets expanded from a single volume in 1980 to three volumes in 1989 (11)! Without a doubt, the two most serious threats to competitive information to emerge during this period were: the no holds barred approach to acquiring sensitive information adopted by business writers and journalists, and the growth in competitive intelligence gathering. Interest in acquiring internal information on the performance of companies grew as investment in new companies grew. People wanted to know about company plans, research activities, product development and key personnel changes. Newspapers expanded their coverage of business affairs. Many new publications came into being or expanded, creating a demand for hot information. Business journalists are often the most aggressive and resourceful people seeking to obtain competitive information; they are also the most dangerous. …