Industrial Espionage

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Industrial Espionage
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Industrial Espionage

• The discreet gathering of intellectual and
  sensitive data in an unethical and/or unlawful
  manner in order for the gatherer of such
  information or someone else to get the edge in
  the market place in unlawful competition.

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Methods

• Stealing information
• Computer hacking
• Tapping telephones
• Violation of trade secrets law

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Definition

• Trade Secrets any secret formula, pattern,
  device or compilation of information which is
  used in one's business, and which gives him an
  opportunity to obtain an advantage over
  competitors who do not know or use it.

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Case Study

• Intellectual property dispute between Cadence and
  Avant!

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About Cadence

• Worlds largest provider of electronic design
  automation (EDA) products and services
• 1.3 billion in revenues in 2000
• Established in 1988

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About Avant!

• Formed in 1995 by the merger of ArcSys,
  Integrated Silicon Systems, and several other
  companies
• ArcSys was founded in 1991 by four Cadence
  ex-employees
• Has been a rival of Cadence

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Case Outline

• March 1994 Gerry Hsu, a senior Cadence
  executive, reportedly told CEO Joe Costello that
  he would leave high tech altogether. A few days
  later Hsu emerges as CEO at ArcSys, Avant!s
  predecessor
• September 1994 Key Cadence engineer Mitch Igusa
  quits. Later investigation reveals that Igusa
  emailed 4 crucial files containing trade secrets
  to this home PC before leaving

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Case Outline, continued

• May 1995 ArcSys, allegedly using stolen Cadence
  technology, goes public. Its market value quickly
  surpasses 1 billion
• August 1995 Igusa is charged for stealing code.
  Private investigators for Cadence discover an
  alleged slush funds set up by Avant! To pay him
  for his efforts
• Dec 1995 FBI officers raid Avant!s offices

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Case Outline, continued

• May 1996 Cadence files for a preliminary
  injuction to prevent Avant! From selling possible
  tainted software. It was denied, but there was
  evidence of stolen code from Cadence
• April 1997 Six Avant! Managers are charged with
  trade-secret theft and conspiracy
• May 2001 Avant! Is ordered to pay 27 million
  fine and 200 million in restitution

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Professional Issues

• Selling someone elses product for their own gain
• Can we use our knowledge gained at previous job?
• When does competitive intelligence become
  industrial espionage?

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Legal Issues

• Is it right to quit and join a competitor?
• Stealing information
• How do we classify trade secrets?

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Ethical Issues

• If you invent a new algorithm on your previous
  job, can you use it for your current company?
• Claiming the work as their own
• Stealing from big company doesnt hurt anybody

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Stakeholders

• Both companies
• Employees of both companies
• Stockholders and consumers

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Possible Action

• Competitive intelligence A process by which the
  management team assesses the evolution of its
  industry and the capabilities and behavior of its
  competitors to assist in maintaining or
  developing a competitive advantage
• Social engineering A social technique to gain
  information from other companies
• Reverse engineering
• Create own product

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Consequences

• Industrial espionage promotes competition, which
  leads to rapid advancement in technology
• If a trade secret is kept inside a company, the
  technology may never get advanced
• Advancement in technology is very important,
  especially when it deals with human life

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Individuals Rights

• Everyone has a right to their own properties,
  including intellectual property
• A company has the right to its trade secrets
• A person has the right to their own ideas

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Common Good

• Society will be better off when technology is not
  kept secret
• Competition brings prices down, which is good for
  everyone

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Final Decision

• Industrial espionage is illegal and unfair to
  personal rights, but could promote competition
  and advancement in technology
• Reverse engineering is a legal way to learn about
  a product, instead of stealing the source code
• They should create the product on their own with
  their own efforts
• Technological trade secrets should have time
  limitation, like patents