Industrial Espionage: A Definition

Industrial espionage is spying for commercial rather than political or military gain. It differs from acquiring competitive intelligence legally (such as monitoring a rival’s activity in the marketplace, reverse engineering a commercially available product, or examining publicly filed patents) as the methods used are unethical or illegal.

Industrial espionage takes a variety of forms, including theft, bribery, blackmail, surveillance, spyware and occasionally violence. The aim of industrial espionage is to gain competitive advantage through the use of rival’s property, including technology, tender prices, client lists, supplier agreements, research and prototypes.

In recent years the definition of industrial espionage has grown to encompass sabotage, whether through computer data being corrupted by a disgruntled employee to viruses unleashed by malware writers with no direct knowledge of the companies damaged by their work.

The spy network was formed after a secret treaty between the nations in 1947, and its existence was not officially acknowledged for more than 50 years. Communications are thought to be intercepted from ground stations including the GCHQ listening post at Morwenstow in Cornwall and the US base at Menwith Hill in North Yorkshire.

The EU report urged all individuals and companies to encode their messages, as Echelon is designed to “intercept private and commercial communications and not military communications,” although the committee found no evidence to support the claims of some French MEPs that the network was systematically used by the US to steal sensitive data from European competitors.

The MEPs had claimed Echelon was used to deprive French firm Airbus of an $8bn contract with Saudi Arabia in 1994 after communications were intercepted between the Saudi Royals in Riyadh and the Airbus headquarters in Toulouse.

British intelligence sources claim Echelon is in fact used to counter industrial espionage and to detect corruption, in addition to intercepting communications between terrorist groups and criminal gangs.

Joya Williams was found guilty by a jury in Atlanta where Coca-Cola is based after three days of deliberation.

Williams was caught by CC-TV cameras sneaking documents and containers of liquid into her handbag. She then enlisted two ex-convicts who wrote to Pepsi offering a sample of Coke’s latest beverage for £50,000 using the name “Dirk”.

Unfortunately for the three plotters PepsiCo informed the FBI, which then set-up a sting operation resulting in an armed ambush which Williams told the court had “scared the crap out of me.”

Tools of the Trade

The iPod – The hugely popular music player also serves as a mobile hard disk, with storage capabilities of up to 80GB. Ideal for plugging into a company network and downloading vast amounts of sensitive data.

Wi-Fi – Some corporate Wi-Fi networks are still not protected, which explains the presence of parked cars with foil aerials hanging out their windows outside corporate headquarters.

Trojan horse – Like the secret weapon of Greek mythology, Trojan horse software usually arrives via an innocent looking email attachment, before attempting to embed itself in the recipient’s computer, find value documents, and transmit them back to the unknown sender.

Bugs – Listening devices take many forms and use many methods, from radio transmitters within buildings to scanners used to pick-up cordless phone conversations. Bugs can be designed to blend in with almost any environment, and examples have included pens, calculators, wall plugs, light fittings and shirt buttons. The most effective bugs do not transmit a signal (which makes them susceptible to being discovered during anti-bugging sweeps) but instead simply record for collection later.

Infiltration – Despite the many technological advances the most effective form of espionage remains human contact, and this is best achieved by recruiting a current employee or putting someone forward for a job in the organisation – even a cleaner may have access to sensitive information.

Journey to the East

Whenever the future of industrial espionage is discussed it is never long before someone will point accusingly eastwards and mutter dark things about a Chinese conspiracy.

The real threat to western businesses, they will claim, is not American companies spying on other American companies to gain a (usually small) commercial advantage, but companies in China, whose commitment to intellectual property rights is questionable at the best of times.

Historically certain Chinese manufacturers operating beyond the reach of western laws have specialised in producing cheap counterfeit and bootleg branded goods, occasionally passing them off as originals, but more commonly sold to complicit consumers who want a Prada label without a Prada price tag.

Now some experts fear Chinese companies are evolving from copying existing products to systematically stealing product designs at the research stage and brazenly incorporating the findings into new ‘original’ independently branded goods.

The evidence doesn’t yet match the hype emanating from the more hysterical commentators, although there have been a number of isolated examples to keeps the fires of paranoia burning.

In New Jersey a Chinese firm admitted it stole trade secrets from telecoms producers Lucent Technologies; in California a visiting Chinese employee of 3DGeo, a seismic imaging software firm, were recently given a two year jail term for downloading the source code; and two Chinese Americans are currently standing trial after they allegedly tried to fly out the US with stolen technology from leading companies.

The accusations have been given further weight by two recent defectors from the Chinese government, who claimed that were 1,000 spies at work just in Canada.

The Chinese government have denied there is any conspiracy at work, pointing to the lack of any evidence of state involvement and blaming xenophobia for the suspicions clouding east-west relations. The Metropolitan Police confirm they have never received a complaint, in confidence or otherwise, of any information being stolen by a Chinese employee on placement.

The purchase of the IBM’s personal computer business by Lenovo and MG Rover by Nanjing Automobile Group would appear to show Chinese businesses are taking a tried and tested route to market entry.

Denials and legitimate deals will not be enough, however, to persuade those convinced of the threat of Chinese spies desperate to steal the west’s secrets.