The Spies Who Loved Me (And My Trade Secrets): A Brief History Of Industrial Espionage

by Orrick - Trade Secrets Group
Contact

http://blogs.orrick.com/trade-secrets-watch/files/2013/09/shutterstock_123387094-100x80.jpgWith Chinese cyber attacks, data security, and industrial espionage occupying more and more space in the headlines, companies are re-evaluating their strategies for guarding sensitive information. There is certain to be more coverage of these issues in the weeks and months ahead — and as usual, we’ll bring you the news and our take on it as it breaks. But as regular Trade Secrets Watch readers know, we also sometimes like to look back at how we got to where we are today. This post examines the historical roots of industrial espionage to offer context on a hot and ever-changing area of concern for trade secrets owners.

Interestingly, the first reported case of industrial espionage involved trade secrets stolen from China, when in 1712 a Jesuit priest discovered the Chinese secret for manufacturing porcelain. He promptly sent the manufacturing details and materials samples to Europe, where they were shared with European merchants.

Another early example of industrial espionage came about in the late eighteenth century, when France found itself attempting to compete with the emerging industrial strength of Great Britain. The French government surreptitiously placed apprentices in English iron and steel yards to abscond with production formulas. To maintain its market dominance, Britain became the first country to pass legislation aimed at preventing industrial espionage.

In the United States, American businesses employed former Pinkerton detectives to uncover employee theft after the Civil War. And during the 1920s, anxiety over Communist and unionist upheaval caused companies to hire double agents to expose internal threats. According to a report by the U.S. Senate Committee on Education and Labor, a majority of American companies had placed labor spies in their plants and unions around that time.

As labor-management tensions started to ease after World War II, American companies shifted their focus away from themselves and began spying on competitors. Industrial espionage began to follow one of two familiar patterns: (1) a former employee would misappropriate confidential information before departing for a competitor, or (2) a competitor would place a “mole” inside an organization to gain access to corporate secrets.

Industrial espionage became a global affair during the Cold War, as U.S. businesses faced threats from Soviet spies and multinational competitors alike. For example, in 1982 six executives from the Japanese firms Hitachi and Mitsubishi were arrested in Santa Clara, California, for allegedly trying to steal computer parts from IBM. Companies also became increasingly worried about executives overseas defecting to competitors. A dispute between General Motors and Volkswagen arose when a group of GM executives in Germany left GM to join VW. Upon seeing similar designs in VW’s car models, GM accused VW of using proprietary information gained from its former executives. In one of the largest industrial espionage cases ever, VW settled with GM for $100 million and agreed to buy at least $1 billion worth of car parts from the company.

Following the collapse of the Soviet Union, some companies began hiring “underemployed” government spies to extract secrets from competitors. These spies began deploying modern tactics such as wiretaps, spy satellites, and computer programs. In partial response, Congress passed the federal Economic Espionage Act of 1996 to impose stiffer sanctions for stealing corporate secrets. More recently, spies have developed forms of malware that can control employees’ mobile phone cameras and recording devices. As part of the constant interplay between infiltration and defense, companies developed new safeguarding techniques, like building Faraday cages to shield servers from electromagnetic eavesdropping.

Today, Silicon Valley is one of the most targeted areas for espionage. In addition to critical infrastructure, heavily-targeted industries include biotech, energy, and software. The U.S. government has accused sovereign rivals like China of engaging in state-sponsored espionage. In 2010, for example, Google and at least 20 other companies were targeted in a large-scale cyber attack thought to have originated in China.  And earlier this year, developing countries such as India and North Korea emerged as threats to launch cyber attacks. But it would be naïve to think that the United States is just a target of these attacks; recent reports indicate that it may well be engaged in some industrial espionage of its own. As geopolitics, economics, and technology continue to morph the face of industrial espionage, corporations must remain vigilant to defend trade secrets from prying eyes. While lawmakers continue playing catch-up in response to these developments, it is promising to see increased uniformity across the United States, and increased recognition around the world for the importance of protecting trade secrets.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Orrick - Trade Secrets Group | Attorney Advertising

Written by:

Orrick - Trade Secrets Group
Contact
more
less

Orrick - Trade Secrets Group on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!