I spy with my cyber eye

Industrial espionage is as old as industry itself. No sooner had the blast furnaces of Coalbrookdale ignited the industrial revolution 300 years ago than the spies of foreign interests were snooping around Shropshire taking notes and making detailed drawings.

Spies’ methods may have changed since then, but their motives remain the same: to make money and secure competitive advantage for their unscrupulous clients.

That’s why the recent scandal involving French car maker Renault, which filed a criminal complaint "against persons unknown", accusing them of industrial espionage, corruption, breach of trust, theft and concealment, is unsurprising to many.

Investment at risk

Renault and its partner Nissan have invested $4bn to develop electric cars and now the company fears that important technical details about its battery power technology have

been leaked.

The loss of trade secrets is a continual worry for all kinds of companies that invest a lot in R&D for potentially revolutionary products. A recent survey by insurer Chubb found that executives at life sciences companies are concerned that their firms can be targeted by intellectual property thieves. Of all the executives surveyed, 42% put IP theft at the top of their list of worries.

They know that the loss of intellectual property assets could mean missed milestones, lost venture capital funding, disrupted trials, and, ultimately, substantial financial losses.

The problem for all companies is that industrial espionage has become increasingly attractive in the 21st century digital age, says Neal Ysart, senior manager with consultant PricewaterhouseCoopers’ forensic services practice. “In ‘e-espionage’ cases, you could almost argue that it is a perfect crime for risk-conscious criminals, as they do not have to visit the crime scene; they don’t even have to be in the same jurisdiction or country,” he explains. “It is very easy to disguise yourself electronically and in many cases the victim may never know that the information has been stolen - it is often just copied.”

Luke Ford-Kelcey, head of Lloyd’s broker JLT’s UK CommTech & Media practice, agrees. “Yes, it is an attractive proposition to the criminal - but digital media also has the ability to make a criminal out of someone who wouldn’t normally consider themselves a criminal,” he adds. “Because they are not actually ‘breaking and entering’ they might not fully appreciate that they are still stealing an asset that is potentially worth a lot of money.”

Businesses with a high reliance on electronic data should consider themselves to be at higher risk from attack by external or internal industrial spies, Ysart says, citing the electronic games sector, films and entertainment and pharmaceuticals as examples. “However, there have also been cases of publicly traded companies having results or market sensitive information leaked and allowing people to exploit that inside information through stock trades,” he says.

Globalisation increasing risk

Globalisation only adds to businesses’ risks around their hard earned and valuable trade secrets. And some countries are more risky than others, as Neal Ysart points out. “There are a number of countries where corruption is generally acknowledged to be higher so it could be argued that if you were seeking to bribe corrupt employees to provide unauthorised access to confidential or sensitive information, there may be a greater propensity for success in these higher risk countries,” he says.

Luke Foord-Kelcey adds that in terms of security, it doesn’t really matter where you are if the spy is operating in cyber space. “You’re equally vulnerable to a breach in any territory with digital media. What matters is where stolen trade secrets can be exploited and the speed to market with the products that those stolen secrets have been used for,” he says “Where a country has scant IP law there is little to prevent a company in that country putting trade secrets they’ve acquired (by whatever means) into use.”

The risks posed by determined industrial spies can be managed - but the first step is for the risk to be properly recognised, assessed and captured in a formal risk register, experts say.
 
“Whilst this often requires specialist input, it does mean the risk is given appropriate management attention,” according to Neal Ysart. “And those organisations that do not recognise espionage to be a realistic threat are definitely missing a trick.”

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