Strategic Thought Transformation - The IIPM Think Tank

S T R A T E G I C I N S I G H T
agement unable to maintain security.
These estimates are substantial, but
more than anything, they indicate two
important facts:
1. Industrial espionage is a serious problem
and by professionals is recognized as
being such,
2. It is very difficult to determine what the
actual damage is.
Who is responsible In some cases,
these losses are the result of activities by
governments, in other cases, the result of
activities by competitors, or by state-sponsored
organizations.
1. The World’s Second Oldest
Profession
Countries long have recognized the dangers
of trade secrets escaping to other countries.
Jeremy [10] reviews the history of 18th
Century Britain where it was illegal for a
skilled person to exit the country:
“In the early 1780s no skilled artisan
or manufacturer was legally free to leave
Britain or Ireland and enter any foreign
country outside the Crown’s dominions for
the purpose of carrying on his trade. ... It
became illegal to export or to prepare to
export... any pre-industrial or industrial
textile, metal-working, clock-making,
leather-working, paper-making or glass
manufacturing equipment.”
It may well be that some of the earliest
industrial espionage had its origins in the
United States, during its earliest years after
gaining independence from the British
Crown. According to Cooke [4], Alexander
Hamilton (1755-1804), a delegate to the
U.S. Constitutional Convention, and the first
Secretary of the Treasury, was an earlier
supporter of activities to “encourage” manufacturing.
“To Hamilton ... the encouragement
of manufactures was a prerequisite of
national security and defense.”
Hamilton was the author of the famous
Report on Manufactures that was
submitted to Congress on December 5th,
1791. 4 The Report is an extensive analysis
of the balance of power in manufacturing
Industrial
espionage also
leads to wide-scale
counterfeiting of
products,
particularly related
to ones in IT
between the United States and Europe.
Hamilton argued for a wide variety of
measures to encourage business, including
the acceleration of ways in which U.S.
companies could acquire the technologies
found overseas, and he argued that the U.S.
Congress should work to provide incentives
for development of industry across the U.S.
landscape. Even though some of the earliest
industrial espionage on record originated
from the United States, the practice has
by no means passed away. Instead, there
appears to be today a regular stream of
U.S. industrial espionage, some of which it
is argued is supported by the U.S. government.
These include: 5
1. Supposedly U.S. intelligence agents were
forced to leave France after stealing
various “economic and political secrets”.
2. At the U.S.-Japan automobile trade
talks in Geneva in 1995, there was
eavesdropping on the Japanese delegation.
3. It has been charged that the EU Parliament
and Commission email has been
hacked into [by U.S. operatives] in order
to collect information during the
GATT [trade] negotiations.
A review of how the U.S. Intelligence
Community has helped in conducting economic
espionage is found in Clark [3]. According
to Wright & Roy [17],
“Industrial espionage has different
names: corporate espionage, economic
espionage, industrial intelligence.” 6
What is the difference between “espionage”
and “industrial espionage” According
to Answers.com, they are quite
different: “Espionage. The act of obtaining
information clandestinely. The term
applies particularly to the act of collecting
military, industrial, and political data
about one nation for the benefit of another.
Industrial espionage—the theft of patents
and processes from business firms—is not
properly espionage at all.”
1.1 What is its definition
“Industrial espionage . Espionage conducted
for commercial purposes instead
of the usual national security purposes. It
is conducted both by governments and by
private organisations. At the most innocuous
level, the term is applied to the legal
and mundane methods of examining corporate
publications, web sites, patent filings,
and the like to determine the activities of
a corporation (though this is normally referred
to as business intelligence), through
to bribery, blackmail, technological surveillance
and even occasional violence.
As well as spying on commercial organisations,
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 under-bid.”
The critical difference appears to be
the type of information that is being obtained
and the type of organization that is
obtaining it or is the ultimate consumer.
Governments can commit industrial espionage
against enterprises in other countries,
and foreign corporations can do the same.
Industrial espionage also leads to wide-scale
counterfeiting of products, particularly information
technology. According to Morrison
[11], as much as $100bn is lost annually by
IT companies due to fake products. 7
4
For an analysis of the policies in Hamilton’s report, see Irwin [9].
5
This information is reported by Van Arnam [16].
6
They quote the definition of Industrial Espionage given by the Canadian Security Intelligence service: [Economic Espionage is any action] ... “which can be described as illegal, clandestine
or coercive ... by a foreign government in order to gain unauthorized access to economic intelligence, such as proprietary information or technology, for economic advantage.”
7
The estimate was based on survey of 15 leading IT companies. The survey was conducted by KPMG.
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