WIPO1.espionnage.en

Committee: WIPO1 Competition

Issue: Preventing and sanctioning corporate espionage

Chair: Ecegül Aytaç

Introduction

Economic espionage, in other words corporate espionage, is the form of espionage which concerns commerce and business. It can be conducted by either governments or private enterprises. The act of corporate espionage violates the right to privacy of individuals. In the 21st century, the current global economic system tends to promote free markets. Even though they are considered to be “free”, the need regulations. These regulations may differ from state to state. It should be highlighted that one of the primary functions of each state is to regulate its own economy. On the other hand, there is an undeniable rivalry between companies, both nationally and internationally. In order to obtain additional profit, they are obliged to know and understand the current situation as well as current affairs. As a reminder, the 21st century is considered to be the “age of information”. However, up-to-dateness isn’t always enough for a company. What a company needs is further information on its rivals in order to develop itself; this may lead to economic espionage. Thus, there is a correlation between information and competition.

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Corporate espionage hasn’t always been a common threat; it started to appear as a result of improving technologies, which are used to maintain cyber security. The rising prices of these technologies involuntarily encourages the diffusion of economic espionage. This particular type of espionage is undertaken by individuals --activists, hackers, militants etc.-- nevertheless there could be mafia organizations behind the operation, rendering the situation a lot more complex. There are also bellicose states which can promote aggressive, warlike actions against their opponents. It should be mentioned that states with the aforementioned qualifications would do anything in their power to achieve their goals. For example, this is one of the reasons why blackmailing, corruption, coercion etc. exist.

Key Terms

Economic Intelligence: “Today, information must be considered a source of energy, like oil and gas, albeit an immaterial form of energy. The easy access to economic intelligence creates opportunities as well as threats. Economic intelligence (EI) means smart information management in order to know, understand and anticipate the outside environment, (key competitors, rules, stakes, trends...) to prevent risks, particularly in immaterial fields, and to exert ethical influence.

EI is closely linked to knowledge management and to human resources, because people have explicit and implicit knowledge that will be revealed only if reliable processes and real motivation exist in the organisation. For all international players, be they states, big firms, or non-state organisations, EI is a tool for competition as well as a tool for governance and national security.”

-http://lexicon.ft.com/Term?term=economic-intelligence-(EI)

EI serves as a strategy of interaction between different levels of activity. EI includes operations of surveillance of work environment. It helps to establish a manner of information management. Its conduct varies from state to state. It should be noted that economic intelligence is not the same as economic espionage; however, the line between these two is quite subtle.

Technological Intelligence: Technological intelligence, one of the most important subsystems of corporations, is the ensemble of technologies that aims to organize the collect of information in a systematic manner. According to this technique, recollected information is analyzed and then divided into 3 subcategories: scientific, technical, and technological. While planning such a sub-body, organizations must take into consideration its possible impacts and current affairs in terms of finance, commerce and economy. Technological intelligence constitutes a rather blurred juridical field which makes it difficult to determine whether the committed action can be considered as espionage or not.

History

Since the Second World War, economics have become more and more complex and controversial. Globalization, in economic terms, happened concurrently with the polarization of world powers, which defines the effects of the Cold War on the global economy. The general attitude in the workplace became more competitive, and from there appeared a certain rivalry between companies. Companies, facing the threat of consolidation, adopted more anticipatory policies. According to investopedia.com, the definition of consolidation is as follows: “To consolidate is to combine assets, liabilities and other financial items of two or more entities into one. In the context of financial accounting, the term consolidate often refers to the consolidation of financial statements, where all subsidiaries report under the umbrella of a parent company. Consolidation also refers to the merger and acquisition of smaller companies into larger companies.” In a non-regulated corporate environment, companies strive to preserve themselves, which they do by trying to keep a strict control on the circulation of information.

The liberalization and deregulation of financial markets in the new world economy has created new financial circuits. Information is widely spread due to the interrelation of markets and can increasingly be found online, which complicates its maintenance and secrecy. As technology develops, everyone will face the transition to the Age of Information.

Nowadays, the “poles” of the world continue to exist: the East remains the opponent of the West. Due to the current economic rivalry, the bipolar nature of industrial espionage has fractioned, leading to the appearance of different actors. The origin of threats remain vague, and it is difficult to determine where they come from.

Practices of espionage are divided into two different groups. The first one is called “public espionage”, in other words “internal espionage”. Mostly, it is practiced under the control of a state. It is launched by the national services and considers all types of information that can be useful to economics or industry. Due to these kind of actions, states have adopted this policy. Certain intelligence services are broadly known; such as the KGB of the USSR, MI6 of the UK, CIA of the USA, Mossad of Israel and DGSE of France.

The secondary practice of espionage is called “private espionage”, in other words “external espionage”. Unfortunately, it is extremely effective in business world, at both local and global levels. An expert has made the following statement: “… this so-called “private espionage” constitutes an indispensable part of today’s business world.” Chinese and American companies are notorious for their practices of external espionage.

In the 21st century, the objective of espionage acts have become increasingly complex. Due to developments in technology, the resources to operate espionage have doubled. Such offensives have grave consequences. In order to understand its massive effect, it is possible to exemplify the recent “Wikileaks” phenomenon. Despite their impact, most of the espionage acts are not brought to court. Even though national legislations condemn it, there are many juridical blank spaces left open. Despite the bad reputation associated with espionage, companies seem to prefer negotiating a compromise rather than being condemned.

“Target information” is the term to define the potential information that offenders wish to obtain through corporate espionage. According to a study run by the University of Illinois, the most frequent target information is data concerning research and technologies (86%), client files (28,8%), financial orders (21,2%) and projects (24,2%). In the graph below, we can observe the information that is most frequently stolen as well as it’s confidentiality.

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Information is an important weapon for economic war. Information gives the power to develop offensive strategies, as long as it is controlled and kept close at hand. After the weakening of the communist bloc, European and American economies were left to face the violent nature of the conflicts inherent within the new economic system. The economies having placed information as the main objective slowly but surely became the leading world powers, as did Japan.

There are different techniques to manipulate information, among which are the filtration of information, information overload and misinformation. Such strategies were first used by Soviet secret services. Today, big corporations take advantage of manipulating information.

For example, the Japanese are keen on filtering the inflow and outflow of information. They seek to sustain the security of their market by making sure that no information is leaked.

Information overload is a technique that also creates the awaited effect. It consists in leaking much more information so that the opponents get lost in complex information. Thus, their treatment becomes more difficult, and distinguishing which information is correct becomes a troublesome task. Nowadays, the quantity of useful information in the global market is estimated at 30% of the total information per year.

A similar practice is misinformation. It aims to cover the truth by creating chains of incorrect information. Consequently, companies caught in the loop of this misinformation ignore important sectors of the economy, giving the corporations responsible for the misinformation the leeway to develop aggressive strategies. As a result, rivals are eliminated. This technique is widely used nowadays. For example, the American aeronautical society had published a fake study considering the renewal of American fleets. This study was leaked to rival companies, leading them on erroneous paths.

There is another way to “influence” information, though it does not qualify as misinformation. Companies or governments can use all sorts of intermediaries in order to produce “derived” information. This transmission of information may lead to the purchasing of politicians or other important executive figures, which would be corruption as corruption, by definition, is “dishonest conduct of power”.

On 4th August 1996, an American newspaper wrote an article revealing that the CIA had pirated computers of the European Parliament and of the European Commission. In addition, information systems had been sold by American companies to the European institutions. The information contained in the stolen political and economic data allowed the american government to have the upper hand in a negotiation process. As a result, the European community asked British experts to fortify their internal security.

On 15th May 2006, Boeing was fined 615 million dollars by the Department of Justice for committing industrial espionage against Lockheed Martin. Boeing was accused of stealing billions of pages of confidential documents, in order to make a contract worth 2 billion dollars.

On 23 May 2007, Joya Williams, who had previously worked at Coca Cola, was found guilty for betraying Coca Cola by committing to sell information to Pepsi Cola. She was condemned to 8 years of prison. Her partner in crime, Ibrahim Dimson, was also condemned to 5 years of prison.

Countries and Organizations Involved

United States of America

Thanks to their power in terms of technology and commerce, US intelligence services are privileged compared to other intelligence services. Notwithstanding, it is relatively easy to spy on American companies, although the United States denies it. The CIA is the national intelligence service of the US.

France

Containing numerous laboratories and companies, 90% of information can be easily leaked to foreigners. France is therefore considered to be one of the most porous countries in terms of economic intelligence. The percentage of USA is estimated to be 70%, which demonstrates the dangerous situation France faces. Consequently, France took necessary precautions to prevent the effects of espionage.

Germany

German companies are worried about information leaks as they constitute a great part of global industry. CEOs have made a request to the government to increase security. On the other hand, the German government is trying to form a “veritable self-service supermarket”. Spatial, aeronautical, pharmaceutical, chemical industries and automobile constructors are threatened by corporate espionage.

Russia

Recently, the national russian service FSB accused the two Zaslavski brothers of espionnage, who are two employees of the russian and british oil company TNK-BP who tried to sell information to foreign corporations. The 12th of march, the FSB arrested them. Seeing as it was information under national secrecy, it was forbidden to transfer information regarding national trade to foreigners. Following this incident, the KSB took precautions to prevent this from happening again by strengthening their system.

Iran

Last summer, an Iranian nuclear scientist, Shahram Amiri, was executed for having given information on nuclear programs in Iran to the USA. In Iran, the death penalty is still used to punish certain crimes. Shahram was kidnapped by the CIA in 2009 and during that time, he was forced to publish a video to “put political pressure on Iran”. An American channel called ABC later mentioned that Shahram was collaborating with the American services. The Iranian government never accepted that kidnapping and always asked for Shahram to be brought back to his native country . Moreover, Iran accused the USA of interference with their country’s business.

Switzerland

Aggressors have conducted a cyberattack by hacking the federal department of the Swiss Defence’s website as well as the internet website for the Ruag group in January during a World Economic Forum. The Swiss Minister of Defence has expressed his suspicions of Russia. Thanks to a rapid intervention by national services, Switzerland has managed to preserve itself.