Industrial Espionage

Industrial espionage is the theft of trade secrets from a corporation for use by a rival. Trade secrets are designs, plans, or techniques that a company has trademarked as its original creations, which help the company to succeed commercially. Competitors who steal these secrets can be other corporations or foreign governments.

One prominent example of industrial espionage in the twenty-first century is the theft of Western corporate trade secrets by Chinese agents. This intelligence allowed China to develop and sell technology it otherwise would have taken years to acquire for itself. Despite companies' increasingly high-tech efforts to protect themselves from this kind of theft, industrial espionage continues to threaten modern businesses and economies.

Classifying Industrial Espionage

The goal of industrial espionage is to gain an economic advantage. This differs from traditional espionage, which is usually conducted for purposes of national security. Industrial espionage refers to the stealing of information a corporation intends to keep secret. The term competitive intelligence describes the legal observation of a company's strengths and weaknesses by a rival to enhance the performance of its own business. Though the theft of trade secrets sometimes involves human agents operating in restricted settings, other methods, such as blackmail, bribery, and clandestine surveillance, can also be used.

The Federal Bureau of Investigation (FBI) outlines several methods by which trade secrets can be stolen and classified as industrial espionage. One involves the acquisition of protected information by deception or fraud. Another consists of any type of transmission or replication—including sketching, photographing, or downloading—of the information. A person or an entity that buys or receives the information after it has been stolen is considered an accomplice to the theft.

History of Industrial Espionage

Industrial espionage is not unique to modern times. One of the first recorded instances of the practice occurred in the 1680s when a French Jesuit priest named Pere d’Entrecolles traveled to Jingdezhen, China. He meticulously recorded the Chinese method of making hard-paste porcelain, at that time a highly valued product in Europe. Within decades after d’Entrecolles returned home, French porcelain factories began making exact copies of the Chinese porcelain. Great Britain later stole the process from France and started manufacturing the porcelain as well.

Britain and France continued to steal trade secrets from each other throughout the 1700s. French agents routinely stole British blueprints and other plans to aid French industries. French recruiters even attempted to lure skilled British laborers into defecting to work in France. Britain later decreed that any British citizens who took up these offers would be fined. Another British law of the era prohibited the exporting of machinery from certain industries for fear its designs would be stolen.

The United States engaged in industrial espionage throughout the 1800s, gleaning numerous business secrets from other countries. The information was one of many factors that led the United States to become the world's largest economy by the 1870s. Since that time, the country's industrial and technological advancements have become a target for much of the still-developing world. During the Cold War period of the twentieth century, the communist Soviet Union attempted to steal American trade secrets to improve its own economy. The end of the Cold War in the 1990s, however, brought free-market economies to much of the modern world, leaving the communist giant China as the main perpetrator of industrial espionage.

Industrial Espionage Today

Exact details of modern industrial espionage are difficult to identify. This type of theft frequently takes place through computer technology and can go unnoticed. In the twenty-first century, China has often been accused of stealing trade secrets by more technologically advanced Western governments. Computers and automobiles are two of the most targeted markets for Chinese industrial espionage. The amount of funding devoted to research and development of these technologies makes their secrets especially valuable.

In 2009, for example, Germany estimated that it lost about 50 billion euros annually to industrial espionage by foreign nations. China, it claimed, was the primary culprit, using spies, phone taps, and computer hacking to steal sensitive business secrets. Germany also accused Russia of stealing its industrial information, claiming the thefts saved the Russian economy billions of dollars on performing its own technological research and development.

Chinese industrial espionage has also plagued the American economy for many years. Much of it is carried out by individuals or organizations supported by the Chinese government. A 2015 FBI survey found that half of 165 private companies claimed to have been victims of industrial espionage, with most cases being orchestrated from China. Since 2016, the United States has seen a surge in instances of industrial espionage and reports show China to be the main perpetrator.

In May 2015, the US Justice Department indicted six Chinese citizens on charges of stealing confidential wireless technology from American companies Avago Technologies and Skyworks Solutions Inc., which manufacture components for the Apple iPhone. The individuals had established a market through the Chinese government-controlled Tianjin University to manufacture and sell the technology to Chinese businesses and military contractors. By the time of the indictment, the six individuals had returned to China and could not be easily extradited to the United States. One, however, was later arrested upon arriving in Los Angeles from China.

In another case in March 2017, US citizen Xiaorong You and Chinese national Liu Xiangchen conspired to steal trade secrets related to the development of BPA-free coatings. The information was worth more than $100 million. You stole trade secrets from the two American companies that employed her and provided them to Liu, whose company used them to create products to compete with the American company's products.

Industrial espionage extends to military secrets as well. In 2023, two US Navy sailors were charged with espionage after it was discovered they took pictures and provided other classified information to a Chinese agent.

Bibliography

Bruer, Wesley. "FBI Sees Chinese Involvement amid Sharp Rise in Economic Espionage Cases." CNN. Turner Broadcasting System, Inc. 24 July 2015. Web. 22 Jan. 2025. www.cnn.com/2015/07/24/politics/fbi-economic-espionage/

Connolly, Kate. "Germany Accuses China of Industrial Espionage." Guardian. Guardian News and Media Limited. 22 July 2009. Web. 22 Jan. 2025. www.theguardian.com/world/2009/jul/22/germany-china-industrial-espionage

Grossman, Andrew. "U.S. Charges Six Chinese Citizens with Economic Espionage." The Wall Street Journal. Dow Jones & Company, Inc. 19 May 2015. Web. 22 Jan. 2025. www.wsj.com/articles/u-s-charges-six-chinese-citizens-with-economic-espionage-1432046527

"Industrial Espionage." Investopedia. Investopedia, LLC. Web. 22 Jan. 2025. www.investopedia.com/terms/i/industrial-espionage.asp

"Survey of Chinese Espionage in the United States Since 2000." Center for Strategic and International Studies, 2022, www.csis.org/programs/strategic-technologies-program/survey-chinese-espionage-united-states-2000. Accessed 22 Jan. 2025.

"Two US Navy Sailors Charged With Spying For China." BBC, 3 Aug. 2023, www.bbc.com/news/world-us-canada-66365641. Accessed 22 Jan. 2025.