The Rising Threat of Industrial Espionage

When asked what comes to mind when the word “espionage” is mentioned, most people would think of the CIA, the Cold War era KGB, or James Bond.  The present reality is that espionage is taking on a new form, evolving into more than just the practice of stealing countries’ security secrets, and into the practice of stealing business secrets.  Today’s most dangerous spies might not arrive in a helicopter or know how to disarm a bomb, but could be sitting in the next cubicle and drive a Prius.

Espionage, a topic whose actions are usually hidden in the shadows, has been brought into the light recently by various news stories.  The story of the three American hikers being held in Iran on charges of spying has caught the attention of many.  Industrial espionage also poses a great risk as companies all around the world strive to protect their competitive advantage.  This is increasingly becoming more concerning to nations’ as they assess the potential risk of industrial espionage to national prosperity and growth.

In October, Lan Lee, an American citizen, and Yuefei Ge, a Chinese national were charged with industrial espionage and will be the first defendants in America, charged with this form of espionage, to have a jury trial.  Officially the charge of industrial espionage refers to the theft of trade secrets with the intent to benefit a foreign government.  In this case, it was the Chinese government.

Lee and Ge are former employees of a Silicon Valley company called NetLogic Microsystems Inc., which makes chips for computer-networking equipment. They are accused of downloading top-secret technical descriptions of a developing chip in 2003, and then trying to secure venture funding from China to start a company based on the stolen designs.

Prosecutors say they have evidence of the theft and contacts with the “863 program,” which they say is a funding plan run by the Chinese government to support the creation of Chinese military technologies. There is no mention in court documents about whether any Chinese officials knew the information was stolen.  If convicted, both men face up to 65 years in prison.

The risks are not localized to U.S. companies.  And sometimes, governments are directly involved in efforts to reduce global competition for their own national companies.

In January 2005, Russian Prime Minister Fradkov requested Russia’s internal security service (FSB), the successor of the KGB, to increase its efforts to assist Russian commercial enterprises. This was order was viewed as a public declaration that the Russian government’s intelligence and security services are engaged in collection and reporting activities in support of Russian commercial enterprises.

This week Denmark released a warning to all of its companies to be alert and aware of industrial espionage attempts.

Jakob Scharf, head of the Danish Security and Intelligence Service (PET), warned that industrial espionage has been growing steadily in the past few years and Danish companies are not impervious to it.

‘The fall of the [Berlin] wall did not lead to a fall in espionage activities – almost the opposite. The activities have changed in nature but spies are still a real threat to Denmark’s safety and competitiveness,’ Scharf told Politiken newspaper.

PET has partnered with the Confederation of Danish Industry (DI), a private sector industry organization, to help companies protect themselves from the threat of domestic and international spies. Industrial espionage is traditionally handled by the national police. But if the case involves foreign states, then it comes under the control of the counter-espionage unit at PET.

Tom Togsverd, head of DI’s IT division, said, “There is clearly an increasing problem of gangs in Asia and Eastern Europe trying to gain access to confidential information,’ citing an increase in cyber crimes.  Industrial espionage cases often include cyber crimes as well, due to their use to achieve various levels of theft from a corporation.

Reportedly, both PET and DI believe the pharmaceutical and information technology industries are at the most risk.

“The pharmaceutical industry has always had problems with espionage and we have experienced a number of Danish examples in the field. But the problem affects everyone working with patented products, whether you install pumps, thermometers or radio and TV equipment,” Togsverd said.

TheAmericano/Agencies

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