What is 'Industrial Espionage'

Industrial espionage is the illegal and unethical theft of business trade secrets for use by a competitor to achieve a competitive advantage. Industrial espionage is conducted by companies for commercial purposes rather than governments for national security purposes. Industrial espionage may also be referred to as "corporate spying or espionage," or "economic espionage."

Breaking Down 'Industrial Espionage'

Industrial espionage describes covert activities, such as the theft of trade secrets by the removal, copying or recording of confidential or valuable information in a company for use by a competitor. It may also involve bribery, blackmail and technological surveillance. Industrial espionage is most commonly associated with technology-heavy industries, particularly the computer, biotech, aerospace, chemical, energy, and auto sectors, in which a significant amount of money is spent on research and development (R&D).

Industrial espionage should be differentiated from competitive intelligence, which is the legal gathering of public information by examining corporate publications, websites, patent filings and the like, to determine a corporation's activities.

Industrial Espionage Types

Industrial espionage can be divided into two types. The first and most common is actively seeking to gather intelligence about a company or organization. It may include the theft of intellectual property, such as manufacturing processes, chemical formulas, recipes, techniques or ideas. Industrial espionage may also entail the concealment or denial of access of key information related to pricing, bidding, planning, research and more. Such a practice is meant to create a competitive advantage for the party who has the information.

Industrial espionage tends to involve "inside jobs," in which an employee steals secrets for financial gain or to hurt the company. It may also be conducted by governments as they pursue economic or financial goals. Less frequently, individuals may break into a company facility to steal documents, computer files or pick through trash for valuable information. More likely, an industrial spy will use the internet to hack into a company's network to gain access to trade secrets on work computers and servers. A relatively new area of industrial espionage involves denying a competitor the use of their information, services, or facilities by way of computer malware, spyware, or a distributed denial of service attack (DDoS). Such industrial espionage tools are helpful in exploiting vulnerable systems.

Industrial Espionage Trends

It stands to reason that the world's biggest practitioners of industrial espionage correspond to the countries with the biggest economies. Industrial espionage has the effect of saving companies or governments time as well as huge sums of research funding. In recent years industrial espionage has grown with the help of the internet and lax cybersecurity practices, though such espionage has become easier to detect. Social media is a new frontier for industrial espionage and its full impact and utility is still being measured. Penalties for industrial espionage can be significant, as seen in 1993 when Volkswagen stole trade secrets from General Motors which led to a $100 million fine.

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