In Depth

Industrial Espionage: Secrets Stolen, Fortunes Lost

How industrial espionage and intellectual property theft destroy businesses and endanger the global economy.

By Richard Power and Christopher Burgess

Lightwave Microsystems

The company IT director stole and sold trade secrets of the company as it was going out of business.

America Online (AOL)

An AOL software engineer used a colleague's access codes to acquire information on 30 million AOL customers and sold it to spammers.

Casiano Communications Inc.

CCI alleges that a former employee stole and sold proprietary databases.

Corning Inc.

An employee found blueprints containing trade secrets within a container of material awaiting destruction. Instead of destroying them, he sold them to an Asian competitor.

Avery Dennison

A former employee of a Taiwanese competitor revealed that an Avery Dennison employee had been supplying the competitor with Avery Dennison's adhesive formulas for the preceding eight years.

Toshiba and Lexar Media

Toshiba and Lexar entered into a partnership to compete in the flash memory market. Then Toshiba entered into a partnership with Lexar's main competitor.

Citroen and SigmaTel

Both firms allege that patented methodologies were misappropriated by Chinese competitors and used in products marketed in China, so that, in effect, Citroen and SigmaTel ended up competing against their own product designs.

Part II: When State Entities Target Intellectual Property

State-sponsored economic espionage and intellectual property theft are the most sophisticated and formidable threats.

Why do nation states engage in economic espionage and intellectual property theft? Primarily, to acquire technology to advance a military program, or to advance the economic competitiveness of the nation's industrial base, or simply to ensure that the major companies and contributors to the nation's GDP continue to make that contribution. How do nation states affect the acquisition of coveted intellectual property? In some instances, they engage their own law enforcement or intelligence services to surreptitiously acquire it, while in other instances, they publicly engage the owners of the intellectual property with a demand, which it believes is in the best interest of their citizens.

State-sponsored economic espionage and intellectual property theft are global issues. The threat is not unique to U.S. businesses or researchers. Many nations conduct such activities, and the interests of many nations are targeted.

When an insider is co-opted by an intelligence service, the activity becomes more sophisticated, and the ability to detect and/or defend against it is beyond the means of most corporate security mechanisms.

Ironically, sometimes the target is a company that was itself found guilty by the legal system as having instigated instances of industrial espionage, and to have stolen a competitor's intellectual property. Here are some examples.

French Intelligence

Airbus attempted to muscle its way into the 1994 Saudi Arabian Airlines fleet modernization effort by offering bribes to individuals from both the Saudi airlines and government.

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• Nation States' Espionage and Counterespionage
• Corporate Spying: Snooping, by Hook or by Crook
• Spy Repellent
• Intellectual Property Theft: How to Stay Out of the Penalty Box
• Counterfeiting: Faked in China
• Bill Boni and Ira Winkler on Insider Threats and the Death by 1,000 Cuts