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

June 08, 2006 — CSO —

Christopher Burgess worked in the clandestine service of the U.S. Central Intelligence Agency (CIA) for 30 years. In the course of his career, he served both as Chief of Station and senior operations officer. Richard Power, as editorial director for Computer Security Institute (CSI) and then as director of global security intelligence for Deloitte Touche Tohmatsu (DTT), researched cybercrime and economic espionage for more than a decade.

We have found two profound misconceptions common among CEOs. One of the great misconceptions is that the threat of economic espionage or trade secret theft is a limited concern-that it is only an issue if you are holding on to something like the formula for Coca-Cola or the design of the next Intel microprocessor. The case studies included here illustrate the fallacy of thinking that this threat is someone else's problem.

The other great misconception, held by many business leaders who do acknowledge the danger to their trade secrets and other intellectual property, is that the nature of this threat is sufficiently understood and adequately addressed. Often, on closer inspection, the information-protection programs these business leaders rely on are mired in Industrial Age thinking; they have not been adapted to the dynamic and dangerous new environment forged by globalization and the rise of the Information Age.

This article is based on open-source (i.e., not classified) intelligence. There is a compelling lesson in this fact. A decade ago, such stories rarely made it onto the news wire or into the courts. Today, they are commonplace. Unfortunately, the awareness and defenses required to thwart such damaging activities, although economical and effective, are far from commonplace. Our hope is to change that.

To provide a comprehensive overview of the diverse vectors of attack, and how to evaluate whether your enterprise has the necessary defenses in place, we will look at actual cases organized into three broad categories:

  • When insiders and competitors target businesses

  • When state-sponsored trade secret theft targets businesses

  • When counterfeiters, pirates and organized crime target products

And in our conclusion, we have provided some analysis of the economic and geopolitical impact, and a comprehensive checklist of proactive security and intelligence measures.

Part I: When Insiders and Competitors Target Businesses

Economic espionage or intellectual property theft conducted by insiders, competitors or combinations of the two are the most tangible, most common and most destructive threats.

Such an attack can take many forms, like an employee, a member of the management team, a corporate board member, a third-party contract manufacturer or a collaborative partner in a joint venture. Here are several recent examples, ranging from the sordid to the spectacular:

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