10 Of The Most Infamous Cases Of Industrial Espionage

Sophisticated hackers seldom generate enough incriminating evidence to get caught. Mark Lanterman, C.T.O. of Computer Forensic Services, estimates it’s less than one percent. Over the past few years, there have been several high-profile cyber attacks against companies, including Target, Home Depot, and Sony.

Beginning in 2006, 70 companies, governments, and non-profit organizations were hacked, and spies continued to take information for two years. These ongoing cyber attacks were first reported by Dmitri Alperovitch, and have since been nicknamed “Operation Shady RAT.”

In 2009, hackers stole proprietary information from U.S. and European Energy Companies. Exxon Mobil, Royal Dutch Shell, and BP had their topographical maps hacked. These computerized maps locate potential oil reserves, and according to investigators the attack resulted in the loss of “project financing information with regard to oil and gas field bids and operations.” The hack was dubbed “Night Dragon.”

Both Operation Shady Rat and Night Dragon are said to have originated “primarily” in China, but information is vague.

Before copyright and patent protection, corporate espionage was just another nine-to-five way of doing business. However, some companies still attempt to acquire trade secrets. Data security is so tight that corporations rarely attempt to hack one another. Besides, businesses like to take an Us against Them stand against hackers. It is, as they say...good for business. At the same time, if there’s really a less than one percent chance of hackers getting caught, then companies may want to change their tactics. With these 10 cases of industrial espionage, the perpetrators weren’t so lucky.

10 Oracle Monitors Microsoft


Silicon Valley is no stranger to covert corporate maneuvering and espionage. In 2000, Larry Ellison, the head of Oracle, sought to expose rival Microsoft’s funding of various public interest groups. Oracle called its decision to hire a detective agency a “public service.” In its attempt to uncover financial links between Microsoft and its alleged independent allies, the detective agency –Investigative Group International -is said to have bribed the cleaning staff to get their hands on documents. It also attempted to buy the office trash of a pro-Microsoft advocacy group. While these tactics crossed an ethical line, most executives at other investigative firms said no legal lines were crossed.

9 Hewlett-Packard Steals from Itself


Big Brother is watching. And apparently so is Hewlett-Packard. In 2006, in an attempt to ferret out the source of boardroom leaks, Hewlett-Packard went Tinker, Tailor, Soldier, Spy and snooped on its directors, reporters, and employees. The company, the largest U.S. personal computer and printer manufacturer at the time, sifted through garbage, set up surveillance, planted spies, and hired investigators who posed as company directors and reporters in order to obtain phone records.

HP board Chairwoman Patricia Dunn, who is believed to have approved the spying, and a dozen top officials were fired. In the end, HP paid $14.5 million to settle an investigation by California’s attorney general, $6.3 million to settle shareholder’s lawsuits, as well as an undisclosed amount to journalists at The New York Times.

8 Steven Louis Davis Thieves Gillette’s Razor Design


Steven Louis Davis was an engineer at Wright Industries, a company Gillette contracted to assist with the development of its next generation shaver system. In 1997, Davis faxed and emailed drawings of Gillette’s new razor to rival companies –Warner Lambert, Bic, and American Safety Razor. As faxes and emails are not the most sophisticatedly covert ways to divulge trade secrets, Davis pled guilty to theft and wire fraud and, in 1998, was sentenced to 27 months in prison. Davis admitted that he stole the information because he was angry with his boss.

7  7. Four Pillars Enterprise Company Sticks It to Avery Dennison


In 1997, Pin Yen Yang, President of Four Pillars Enterprise Company in Taiwan, was charged with mail fraud, wire fraud, money laundering, receipt of stolen property, and theft of trade secrets from Avery Dennison Corp., one of the largest U.S. manufacturers of adhesive products. From 1989 to 1997, Yang paid an Avery Dennison employee, Dr. Ten Hong Lee, between $150,000 and $160,000 for research data and highly sensitive manufacturing information. Avery Dennison Corp. estimates the stolen adhesive technology cost it tens of millions of dollars in revenue.

6 Procter & Gamble Dumpster Dives Unilever


It was only 14 years ago, but technology moves fast and P&G’s attempt to spy on hair care rival Unilever seems quaint by today’s standards. Procter & Gamble didn’t tap, bug, or set up equipment to record 10 different phone lines. This was no Cyber-Pearl Harbor. In 2001, P&G “operatives ” went undercover as dumpster divers and went through Unilever’s trash in search of intel that might enable the company to gain an edge over their rival. The spying operation was carried out over six months, and agents acquired almost 80 pages of confidential documents from the dumpster outside Unilever’s Chicago office.

According to The New York Times, Proctor & Gamble paid Unilever $10 million and agreed to a third-party audit to settle the espionage case. “This was an unfortunate incident,” said John E. Pepper, the company’s chairman. “The activities were not in keeping with P&G principles and policies.”

5 Starwood Lodges a Complaint Against Hilton


In April 2009, Starwood Hotels & Resorts Worldwide filed a corporate espionage suit against Hilton, forcing the hotel chain to stop the development of its Denizen brand. The lawsuit claimed that two former Starwood executives hired by Hilton stole more than 100,000 confidential documents. The documents had information about Starwood’s W chain, and according to the lawsuit they were going to be used to assist Hilton in replicating Starwood’s niche of "lifestyle hotels." Starwood said the “truckload” of documents contained “competitively sensitive information.”

The hotel chains reached a settlement in 2010. Hilton agreed to make a $75 million dollar cash payment to Starwood, and a federal judge prohibited the hotel chain from opening any "lifestyle hotels" for two years.

4 Volkswagen Drives Away with General Motors’ Secrets


When Jose Ignacio Lopez, chief of production for GM’s Opel division, left for a job with rival Volkswagen, he allegedly he took a bundle of confidential documents with him. He also took seven of Opel’s top executives, which means the Detroit manufacturer was no doubt angry and embarrassed. But was it looking for revenge?

GM claimed its trade secrets were used at Volkswagen. The ugly, four-year legal battle was resolved in 1997. The companies agreed on a settlement when GM said it would drop the lawsuits if the German automaker agreed to pay $100 million and pledge to buy $1 billion of GM car parts over seven years.

3 Japscam


It was 1981. Arcades were hot. MTV launched…and so did the first Columbia Space Shuttle. The Osborne 1, the first portable computer, was unveiled at a computer fair on the West Coast. Things were technologically simpler in the pre-Internet era, but corporations were still stealing secrets.

In a corporate espionage case the press dubbed “Japscam,” Hitachi somehow came into possession of several of IBM’s workbooks. The documents contained designs and technical secrets. FBI and IBM counterintelligence arrested several high-ranking IBM officials. The intellectual property dispute was settled out of court when IBM agreed to pay Hitachi $300 million.

2 Avant! Corporation Steals Code from Cadence Design Systems


In 1995, Cadence Design Systems sued Avant!, accusing the software rival of stealing code, copyright infringement, conspiracy, and other improprieties. The Avant! case is considered one of the most notorious white-collar crimes in the history of Silicon Valley. “What makes the case unique,” according to Santa Clara County Deputy District Attorney Julius Finkelstein, “is that you have a large, publicly traded company that was built on stolen property.”

How did Avant! Corp. steal the code? Simple. Four Cadence engineers struck out on their own and formed Avant! in 1991. They brought the purloined code with them.

In 2001, a judge ruled Avant! pay $182 million in restitution. Cadence also filed a civil suit, which resulted in Avant! paying a further $265 million.

1 Britain Pinches China’s Tea Secrets


Britain’s thirst for tea has waned. The volume of tea consumed in the last decade has fallen by 20%. However, in the 1800s, Britain loved tea. Tea and cakes, according to Anna, seventh Duchess of Bedford, was the best antidote to a late afternoon “sinking feeling.”

Before the British East India Company dominated the tea trade, the brew was monopolized by China. Robert Fortune, a Scottish botanist and adventurer, was hired by the British East India Company to smuggle tea’s secrets –plants, seeds, etc. –out of China and into British-ruled India. Allegedly, Robert Fortune disguised himself as a Chinese merchant. According to Sarah Rose, author of For All the Tea in China, Robert Fortune’s smuggling operation was the greatest act of corporate espionage in history.”

More in Extreme