Reginald Mitchell's List: Digital Literacy Scenario

• Is there a chance that someone could be stealing your most profitable business secrets? Competitive intelligence isn’t new, but it certainly has gotten easier with the introduction of ubiquitous high resolution cameras (smartphones), miniature storage devices that hold massive amounts of data (USB drives) and advanced tools of human manipulation (social networking).

   
• Dyson, the British engineering firm behind the popular bagless vacuum cleaners and Airblade hand dryers, accused their German counterpart, Bosch, of planting a mole, or corporate spy, inside their headquarters for two years to steal vital research and development information. Bosch has denied any wrongdoing and refuses to return the technology or intellectual property. In an odd twist, Bosch hasn’t publicly denied planting an inside spy to siphon competitive intelligence from their rival.

• On a Thursday evening three Junes ago, Dejan Karabasevic desperately needed to contact his former wife. Karabasevic, a top engineer in American Superconductor Corp.’s offices in Klagenfurt, Austria, had been summoned to work, then confronted by police, who suspected him of selling his company’s proprietary software to a Chinese wind turbine maker.
• The e-mails proved the basis for Karabasevic’s subsequent arrest and conviction in an Austrian court on charges of revealing trade secrets. His case marked what would be the opening round of a two-year fight by the Devens-based technology firm known as AMSC to defend its intellectual property rights — even as it lost millions of dollars and laid off hundreds of workers as the result of the software theft.
• The saga — pieced together with court records, financial filings, and interviews — took private and federal investigators from a wind farm in China to corporate offices in Austria and Middleton, Wis., and ultimately back to Massachusetts. Here, less than 40 miles from the headquarters of AMSC, FBI agents found a key piece of evidence that helped persuade a federal grand jury recently to indict Sinovel Wind Group Co. of Beijing, two of its employees, and Karabasevic on charges of conspiracy, wire fraud, and the theft of trade secrets.
• The giveaway: a bit of pirated software found in a Sinovel-made turbine in Charlestown. Authorities believe the Chinese manufacturer stole the software from the Devens company, installed it in Sinovel turbines, and then sold the illegally equipped turbines in the United States at a profit.
• Sinovel was founded less than a decade ago, initially financed by a Chinese government that has aggressively pursued alternative energy to satisfy the nation’s hunger for power and establish China’s leadership in an emerging technology. As with many businesses in strategic industries targeted by Chinese planners, Sinovel sought the know-how of a foreign partner.
• AMSC’s revenues soared, and by 2011 Sinovel accounted for nearly 80 percent of its sales. AMSC opened offices around the world, adding jobs and expanding its global workforce. The company’s stock price climbed, too, during this period, more than doubling to about $25 a share.

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• HP is far from alone. The company is just one of many willing to go to extraordinary lengths to protect itself and, some say, to throw a spanner into the spokes of opponents. Details have emerged that Wal-Mart operates a massive employee surveillance program, sends out undercover operatives to infiltrate activist groups, and has a threat analysis team that regularly sifts through customer records. Steve Jobs, the CEO of Apple, is believed to have planted evidence of a fake product in order to ferret out a mole operating within the company. And at least two Canadian companies, Air Canada and drug maker Biovail, have paid private investigators to rifle through others' garbage for evidence of wrongdoing. Last fall, lawyers for Toronto-based insurer Fairfax Financial reportedly tailed employees of a New York hedge fund that Fairfax accuses of trying to do it harm.
• All these cases have raised a furor in the press, but the courts give companies plenty of leeway to snoop. And for good reason. In the post 9/11 environment, the world is focused on security intelligence. But the world of protecting corporate and trade secrets is just as big, and the stakes, arguably, just as high -- especially if you believe that the health of a national economy is fundamental to a nation's ability to defend itself. Companies are duty bound to their shareholders to do everything legally possible to protect their assets, especially with corporate espionage on the rise. As a result, a huge private security industry, drawing from the ranks of retired police and intelligence officers, is growing to serve the needs of suspicious executives.

• The question is, just where is the line between competitive intelligence and espionage? At what point does vigilance against spies and leakers -- even practising aggressive defence against rivals in the name of cementing market share -- become a threat in itself? The law is proving to be of little help in the matter, since technological advances have fast outpaced the courts. As recent history shows, corporate codes of ethics represent constantly shifting ground, where principles and guidelines are easily lost in the heat of battle, and where the line between smart business and malfeasance is defined by whether or not you get caught. "Some overzealous people are getting into areas that are unethical, and when the legal system catches up, will be illegal," says William Johnson, founder of the Business Espionage Controls & Countermeasures Association. "For the moment, there are a lot of grey areas out there." As technology gets more sophisticated, and with billions of dollars on the line, the temptations and ethical questions are only going to get more troubling.

• To the average consumer, it all might seem like overkill, but companies are under increasing pressure to take security of all kinds seriously. Almost monthly there are reports of yet another case of corporate espionage, and the stakes are getting higher.

• Back in 1965 Time magazine, in a story titled "Corporate Spies" that could have been ripped from today's headlines, described how companies regularly hired professional sleuths, tapped telephones and sorted through rubbish to steal rivals' trade secrets. The difference today is a matter of scale. Because of globalization and outsourcing, corporations are now just as likely to be operating in Tianjin and Tamil Nadu as they are in Toronto and Toledo, exposing them to a wider range of threats.
• That's easy for an academic to say. But the reality is, companies are increasingly faced with a lose-lose proposition when it comes to defending themselves: fail to effectively counter spies and thieves, and they risk the loss of invaluable trade secrets. But employ excessive tactics, and they risk their spy games appearing in the headlines, and landing executives in court. Judging by the steady flow of corporate spy cases, companies are having a hard time striking that balance.

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• A Silicon Valley software publisher discovered that an overseas company was duplicating its products, translating its own marketing and sales data, and selling the products in other countries under a different name. When dealing in intellectual property and information products, that kind of theft and duplication is surprisingly easy to do, corporate security experts warn.

• Still, experts agree that corporate espionage is a real and growing problem. While Brill maintained she did not know whether NutraSweet had ever been an espionage target, she admitted that a senior company executive on a recent visit to China was astonished by his Chinese hosts wealth of information

  about his Nutrasweet's pricing structure. In fact, China relies on bald-faced capitalist incentives to motivate its corporate spies to the highest levels of productivity. Agents are aged to set up small firms in sensitive industries in the U.S., steal secrets and sell them to the Chinese government at a hefty mark-up.
• Despite the every real danger international corporate espionage represents to marketers, the biggest threat in this arena still exists on the domestic front. Doug Hageman, a computer and leasing consultant based in Middletown, Conn., offered this account of R.J. Reynolds Tobacco Co.'s introduction of Century cigarettes in the mid-1980s as an illustration. Hageman was an RJR sales representative at the time.

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