Economic Espionage and Industrial Spying

By Hedieh Nasheri
Cambridge, U.K.: Cambridge University Press, 2005.

The data for this book are from Nasheri’s “years of interaction with practitioners, industry representatives, and government officials prosecuting and investigating these types of crimes” (p.4). As a result, the book is a collection of numerous examples of espionage. Chapter 1 discusses three different types of espionage: traditional (government spies acquiring military secrets of their enemies), economic, and industrial. Although this would have been the place to define and refine such terms, Nasheri does not do this. Some writers use economic espionage (as opposed to industrial espionage) to indicate that the government is involved in the collection of information, whereas others include governments in industrial espionage. Nasheri uses the terms along with phrase “trade secret theft” interchangeably, and so perhaps there really is no distinction in her mind. This conclusion is supported by her constant linking of “the need to protect the interests of the state [with] the need to protect commercial interests” (p. 2).

Nasheri suggests that continuing information wars in the international communities will cause massive loss to business and critical information infrastructures. Although she recognizes that other countries do not necessarily agree with the U.S. on some of these issues,“some countries do not value protecting IPRs as much as the United States does” (p.35) and “not all affected nations recognize the threat that computer crime poses to public safety” (p.42), she never stops to think about whether these contra-nations have a valid position. Importers of trade secrets have little interest in paying large sums to U.S. companies.

Although Nasheri believes that the U.S. government should do more to prosecute espionage, she also acknowledges a number of times the corporations are hesitant to report these crimes “because of concern over loss of public trust and public image” (p. 52). She provides the example of Citibank which reported $10 million stolen from its “secure” computer network. Rival banks were able to woo away its top 20 customers on the promise of better security. Since it is “clear . . . that intelligence agencies spend billions of dollars each year in their espionage efforts, and counterintelligence agencies spend billions of dollars each year trying to thwart those efforts” (p.62), it is unclear why the author thinks the government should step in and try to police this multi-billion dollar game/industry. In fact, as discussed in Chapter 5, there is a fine line between espionage and acceptable competitive intelligence, which corporations indulge in extensively through professionals such as those who belong to the Society of Competitive Intelligence Professionals (SCIP). The website of SCIP claims to have over 50 chapters around the world, with members in more than 50 nations claims to uphold the “highest ethical standards” (http://www.scip.org/about/; accessed February 21, 2005). Competitive intelligence is big business.

Chapter 5 focusses on the vulnerability of U.S. internet and other computer information systems through computer and cybercrime, and reviews the confusion surrounding their definitions. She provides numerous examples of computer viruses and other “weapons of mass disruption” (p. 110). We learn that some companies are reluctant to report hackers because they would rather employ them and direct their talents to their own purposes (p.120). This must be one of those few areas in which criminal conduct or a criminal record increases one’s legitimate (or perhaps also illegitimate) employment opportunities.

Chapter 6 sets out a number of historical cases, laws, resolutions, and agreements that preceded the U.S. Economic Espionage Act of 1996, “the first federal criminal law . . . designed to protect trade secrets” (p. 129). Although later we discover that there was “one very limited federal statute [unnamed] that prohibited theft of trade secrets” (p.131) and that the Economic Espionage Act simply “tightened a seam in the existing patchwork of federal criminal laws that help safeguard intellectual property” (p. 179). Still later, we learn that the government sometimes prosecuted trade secret theft under the National Stolen Property Act (p. 132). It is unclear if this is the same statute that the author refers to earlier. This is just one example of the confusion and repetition that occurs throughout the book.

Nasheri discusses the background, contents, and enforcement of the Economic Espionage Act, and summarizes 23 prosecutions under the legislation. According to Nasheri, there have been 40 cases prosecuted in the first eight years of the legislation. Not surprisingly, the indicted individuals were “usually outside agents, independent contractors, or temporary employees, not full-time regular employees” (p. 168). Perhaps this lack of loyalty is one of those unintended consequences of corporate downsizing and contracting out.

Despite foreign espionage being “the single most important reason” behind the passing of the legislation, most of the cases related to domestic, not foreign, activity. However, Nasheri concludes that the legislation “has filled a significant gap in the protection of trade secrets in the global information age” (p. 169).

In examining some of the historical antecedents of the Economic Espionage Act, Nasheri explains that these laws were designed to protect employers from their employees. There is little recognition that the employee might have some legitimate claim to this so-called property, except for the statement “the incongruent interests of employees and employers are well understood” (p. 179).

In two of the last four pages of the book we finally hear from a few critics of the protection of intellectual property rights. For example, Peter Drahos and John Braithwaite, in Information Feudalism: Who Owns the Knowledge Economy?, argue that intellectual property rights entrench new inequalities and that knowledge should be shared more readily. Nasheri dismisses these criticisms as applying to patents (which involve the public dissemination of knowledge in the patent document) not to economic espionage which involves “nonpublic, secret information” (p. 183). She provides no explanation as to why these should be treated differently.

If this book set out to convince other nations that they should step up to the plate and protect U.S. companies’ trade secrets for some economic, social or moral reasons, it was unsuccessful. Throughout the book there is a constant reference to former communist states using their “leftover spy apparatus” and personnel to conduct economic espionage in order to catch up to more modernized states (for example, pp.8, 14, 52, 54, 92, 180). Nasheri also links this discussion to the war on the technological front and suggests that “economic espionage is the front line of a new world economic war” (p.55). People live in fear of economic espionage because “in an age where power stems from wealth, there is an ever-increasing fear that acquisition of economic information will lead to the breakdown of international security, with economic foes of today becoming military foes of tomorrow” (p.62).

Throughout the book, we hear the mantra that “economic security affects our national security.” A reference to September 11, 2001 is added to illustrate that today “security is everybody’s business” (p.57). Although there is no direct reference to the U.S. war on Iraq, it is what comes to mind throughout the book. Perhaps this threat might be what moves countries to assist the U.S. in protecting its trade secrets, although some might wonder why every country needs to figure out for itself the magic of how ballbearings (p.54) work.

What is most interesting about this book is that an academic can write as if the U.S. government and its corporate comrades are one and the same. There is a constant convergence of state and corporations: “any country that competes in the world market has a motivation to spy on its foreign competitors” (p. 55). A discussion of economic espionage directed at the U.S. government comes under the heading “Who is Spying on American Industry?” (p.89). This, in part, is seen as an attribute of globalization where the war zone is now one of economic theft by one country/government/its corporations against another. But the author also laments that it’s no longer possible to tell if a multinational corporate in a U.S. company or not. This should ring some alarm bells for the future of world order, but none are rung.