Industrial espionage
Industrial espionage, also known as economic espionage, corporate spying, or corporate espionage, refers to the systematic and unauthorized acquisition of sensitive business information. This practice typically targets trade secrets, proprietary operational data, and intellectual property belonging to competitors or other organizations. The information is gathered with the intent to gain a competitive advantage, facilitate business decision-making, or for commercial sale to interested parties. Industrial espionage is conducted by various actors, including current or former employees, contractors, corporate competitors, foreign governments, and criminal organizations, and is universally recognized as both illegal and unethical.
While political espionage is conducted or orchestrated by governments and is international in scope, industrial or corporate espionage is more often national and occurs between companies or corporations.
Forms of economic and industrial espionage
In short, the purpose of espionage is to gather knowledge about one or more organizations. Economic or industrial espionage takes place in two main forms. It may include the acquisition of intellectual property, such as information on industrial manufacture, ideas, techniques and processes, recipes and formulas. Or it could include sequestration of proprietary or operational information, such as that on customer datasets, pricing, sales, marketing, research and development, policies, prospective bids, planning or marketing strategies or the changing compositions and locations of production. It may describe activities such as theft of trade secrets, bribery, blackmail and technological surveillance. As well as orchestrating espionage on commercial organizations, governments can also be targets – for example, to determine the terms of a tender for a government contract.Target industries
Economic and industrial espionage is most commonly associated with technology-heavy industries, including computer software and hardware, biotechnology, aerospace, telecommunications, transportation and engine technology, automobiles, machine tools, energy, materials and coatings and so on. Silicon Valley is known to be one of the world's most targeted areas for espionage, though any industry with information of use to competitors may be a target.Information theft and sabotage
Information can make the difference between success and failure; if a trade secret is stolen, the competitive playing field is leveled or even tipped in favor of a competitor. Although a lot of information-gathering is accomplished legally through competitive intelligence, at times corporations feel the best way to get information is to take it. Economic or industrial espionage is a threat to any business whose livelihood depends on information.In recent years, economic or industrial espionage has taken on an expanded definition. For instance, attempts to sabotage a corporation may be considered industrial espionage; in this sense, the term takes on the wider connotations of its parent word. That espionage and sabotage have become more clearly associated with each other is also demonstrated by a number of profiling studies, some government, some corporate. The United States government currently has a polygraph examination entitled the "Test of Espionage and Sabotage", contributing to the notion of the interrelationship between espionage and sabotage countermeasures. In practice, particularly by "trusted insiders", they are generally considered functionally identical for the purpose of informing countermeasures.
Agents and the process of collection
Economic or industrial espionage commonly occurs in one of two ways. Firstly, a dissatisfied employee appropriates information to advance interests or to damage the company. Secondly, a competitor or foreign government seeks information to advance its own technological or financial interest. "Moles", or trusted insiders, are generally considered the best sources for economic or industrial espionage. Historically known as a "patsy", an insider can be induced, willingly or under duress, to provide information. A patsy may be initially asked to hand over inconsequential information and, once compromised by committing a crime, blackmailed into handing over more sensitive material. Individuals may leave one company to take up employment with another and take sensitive information with them. Such apparent behavior has been the focus of numerous industrial espionage cases that have resulted in legal battles. Some countries hire individuals to do spying rather than the use of their own intelligence agencies. Academics, business delegates, and students are often sought to be used by governments in gathering information. Some countries, such as Japan, have been reported to expect students to be debriefed on returning home. A spy may follow a guided tour of a factory and then get "lost". A spy could be an engineer, a maintenance man, a cleaner, an insurance salesman, or an inspector: anyone who has legitimate access to the premises.A spy may break into the premises to steal data and may search through waste paper and refuse, known as "dumpster diving". Information may be compromised via unsolicited requests for information, marketing surveys, or use of technical support or research or software facilities. Outsourced industrial producers may ask for information outside the agreed-upon contract.
Computers have facilitated the process of collecting information because of the ease of access to large amounts of information through physical contact or the Internet.
History
Origins
Economic and industrial espionage has a long history. Father Francois Xavier d'Entrecolles, who visited Jingdezhen, China in 1712 and later used this visit to reveal the manufacturing methods of Chinese porcelain to Europe, is sometimes considered to have conducted an early case of industrial espionage.Historical accounts have been written of industrial espionage between Britain and France. Attributed to Britain's emergence as an "industrial creditor", the second decade of the 18th century saw the emergence of a large-scale state-sponsored effort to surreptitiously take British industrial technology to France. Witnesses confirmed both the inveigling of tradespersons abroad and the placing of apprentices in England. Protests by those such as ironworkers in Sheffield and steelworkers in Newcastle, about skilled industrial workers being enticed abroad, led to the first English legislation aimed at preventing this method of economic and industrial espionage. This did not prevent Samuel Slater from bringing British textile technology to the United States in 1789. In order to catch up with technological advances of European powers, the US government in the eighteenth and nineteenth centuries actively encouraged intellectual piracy.
American founding father and first U.S. Treasury Secretary Alexander Hamilton advocated rewarding those bringing "improvements and secrets of extraordinary value" into the United States. This was instrumental in making the United States a haven for industrial spies.
20th century
East-West commercial development opportunities after World War I saw a rise in Soviet interest in American and European manufacturing know-how, exploited by Amtorg Corporation. Later, with Western restrictions on the export of items thought likely to increase military capabilities to the USSR, Soviet industrial espionage was a well known adjunct to other spying activities up until the 1980s. BYTE reported in April 1984, for example, that although the Soviets sought to develop their own microelectronics, their technology appeared to be several years behind the West's. Soviet CPUs required multiple chips and appeared to be close or exact copies of American products such as the Intel 3000 and DEC LSI-11/2."Operation Brunnhilde"
Some of these activities were directed via the East German Stasi. One such operation, "Operation Brunnhilde," operated from the mid-1950s until early 1966 and made use of spies from many Communist Bloc countries. Through at least 20 forays, many western European industrial secrets were compromised. One member of the "Brunnhilde" ring was a Swiss chemical engineer, Dr. Jean Paul Soupert, living in Brussels. He was described by Peter Wright in Spycatcher as having been "doubled" by the Belgian Sûreté de l'État. He revealed information about industrial espionage conducted by the ring, including the fact that Russian agents had obtained details of Concorde's advanced electronics system. He testified against two Kodak employees, living and working in Britain, during a trial in which they were accused of passing information on industrial processes to him, though they were eventually acquitted.According to a 2020 American Economic Review study, East German industrial espionage in West Germany significantly reduced the gap in total factor productivity between the two countries.
Soviet system
A secret report from the Military-Industrial Commission of the USSR, from 1979 to 1980, detailed how could be utilised in twelve different military industrial areas. Writing in the Bulletin of the Atomic Scientists, Philip Hanson detailed a system in which 12 industrial branch ministries formulated requests for information to aid technological development in their military programs. Acquisition plans were described as operating on 2-year and 5-year cycles with about 3000 tasks underway each year. Efforts were aimed at civilian and military industrial targets, such as in the petrochemical industries. Some information was gathered to compare Soviet technological advancement with that of their competitors. Much unclassified information was also gathered, blurring the boundary with "competitive intelligence".The Soviet military was recognised as making much better use of acquired information than civilian industries, where their record in replicating and developing industrial technology was poor.