It isn't as straightforward as it looks
Corporate
espionage used to be rather straightforward – as the typical Coke-Pepsi
textbook example illustrates, in which each tries to steal the other’s recipe
for sugared water. It is a crime when someone steals company data/trade secrets
and passes it to a business rival.
Well,
yes -- but not quite, in the case a series of court decisions in the United
States that complicate the issue considerably. One involves a former Goldman
Sachs computer programmer, Sergey Aleynikov, a Russian who immigrated to the
United States in 1991 and who was arrested by FBI agents on July 3, 2009, at
Newark International Airport.
Aleynikov
was subsequently jailed in December 2010 for stealing code from Goldman Sachs’
high-frequency trading platform, a lucrative new segment of Wall Street that
uses complex computer algorithms to convert minute price discrepancies into
quick profits through rapid fire trades. He had served one year of his
eight-year sentence when he was freed by the Court of Appeals for the Second
Circuit in New York in mid-February.
The
court offered no explanation for overturning his conviction other than stating
an opinion would be issued “in due course,” according to The New York Times.
Aleynikov
allegedly stole the source code used in driving those high frequency trades at
his employer prior to joining a new competitor, with plans to set up a similar
trading platform – he allegedly uploaded the code onto a computer server in
Germany, encrypted and downloaded it into his home computer, laptop and memory
stick and took the data with him when he joined the new company.
Aleynikov’s
lawyers argued that he took only the source code used in parts of the trading
system but not the whole program. The prosecution lawyers argued the code was
vital in building the platform and could become instrumental in developing
competing programs at rival firms. He was convicted by a jury last March of
violating the Economic Espionage Act of 1996 and the Interstate Transportation
of Stolen Property Act.
But
Aleynikov’s recent acquittal was not only a blow to his former employer but
also the US Department of Justice. Most importantly, his case is an acid test
to the 16-year old Economic Espionage Act, which targets theft of trade
secrets.
The
Economic Espionage Act makes the theft or misappropriation of a trade secret a
federal crime, whether it is with the knowledge or intent that the theft will
benefit a foreign power or for interstate and/or international commerce with
the knowledge or intent that it will hurt the owner of the trade secret.
Coincidentally
just a week prior to Aleynikov’s acquittal, another US court acquitted
Chinese-born American software developer Hanjuan Jin on her alleged stealing of
more than 1,000 items of confidential information from her employer Motorola
Inc.
Jin
allegedly booked a one-way ticket to China in February 2007 after arming
herself with secrets stored on a laptop computer and several hard drives,
relating to a type of walkie-talkie that the government attorneys said could
benefit the Chinese military.
However,
the judge said, while the evidence showed she stole trade secrets, and she is
still subject to sentencing on that count in mid-April, it was not enough to
prove she had committed economic espionage by selling the information to a
foreign government or entity.
In the
Report to Congress on Foreign Economic Collection and Industrial Espionage,
2009-2011 released last October by the US Office of the National Counterintelligence
Executive, China was labelled a “persistent collector” of US high-tech data,
accounting for six of seven cases in 2010 that were related to the Economic
Espionage Act.
Recent
court hearings involving the DuPont chemical giant and the Pangang Group of
China, over stealing of secrets about titanium dioxide by the latter, are
another case in point. DuPont is the principal supplier of the substance, a
US$17 billion a year industry. DuPont was unwilling to sell its production
methods to the Chinese. So allegedly the Chinese government stole the process
through Pangang, a company it controlled. The case is now in a federal court in
San Francisco.
The
risk of corporate espionage, big or small, genuine or suspect, is seemingly and
inevitably commonplace in the Greater China region. Risks correlate positively
with the flow of investment and as China increasingly became the manufacturing
capital of the world over the past two decades, and the biggest growth market
for foreign companies, there is constant demand for commercial investigations,
including into the possibilities of corporate espionage.
I have
dealt with these matters in my business intelligence career, including cases
where clients need help to handle threats and mitigate risks of corporate espionage.
In one landmark case, much like the Coke versus Pepsi example, my client
eventually discovered the stark reality of a major competitor’s entire
department that was dedicated to stealing their trade secrets. To be more
precise, their employees were engaged to steal their trade secrets for the
competitor.
Separately,
a news reporter I know was approached by an individual who offered to leak
information for a potential news story. They met but the stranger offered
nothing other than praise for the reporter about a recent news story and then
asked for the identity of the sources quoted in the story, which you would
expect was promptly declined.
The
stranger then hinted the reporter would be richly rewarded by cooperating with
him, not just for that story but on other companies and individuals he put on
the table in the future. His take on the conversation progressed from
persuasion to coercion. Rightly so, the reporter abruptly ended the meeting but
soon realized both his mobile phone and internet lines at home were
compromised. And as the world becomes more sophisticated with the rapid growth
and adoption of technology, risk of corporate espionage will only become a
clear and present danger.
George
Smiley, the protagonist of John le Carre’s spy novels, once said a desk is a
dangerous place from which to view the world. Indeed.
Vanson
Soo
Asia
Sentinel
Business & Investment Opportunities
YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Consulting, Investment and Management, focusing three main economic sectors: International PR; Healthcare & Wellness;and Tourism & Hospitality. We also propose Higher Education, as a bridge between educational structures and industries, by supporting international programs. Sign up with twitter to get news updates with @SaigonBusinessC. Thanks.
No comments:
Post a Comment