10 Most Notorious Acts of Corporate Espionage
There’s no end to the skullduggery that businesses will get involved in with the aim of making a quick buck, or trying to keep up with their competitors. Of course, their fellow companies aren’t beyond their schemes, either. There’s a war going on out there, folks, and spying is part of the game – criminal or not. Corporate espionage was a normal way of doing business back in days gone by, before copyright and patent protection brought the long arm of the law into play, but some companies still engage in the practice of acquiring trade secrets and business information by any means necessary. Here are 10 infamous cases of industrial espionage.
10. Unilever Vs Procter & Gamble
In 2001, Procter & Gamble admitted to a spying operation, alleged to have been carried out over 6 months, on its hair-care competitor Unilever. Their cunning plan, which P&G referred to as an “unfortunate incident,” included going through Unilever’s trash in search of documents, although if Unilever habitually throw away full documents entitled “Super Secret Product Information That Will Crush P&G” their days as an industry leader are numbered.
P&G denied Fortune Magazine’s allegation that their operatives pretended to be market analysts. The two companies reached an agreement, and P&G has pledged not to use any of the information it gained in product development. Dumpster pizza and shredded paper certainly doesn’t sound like the next big thing in hair care.
9. Cadence Design Systems Vs Avant!
In the early ’90s allegations came to light that Avant!, a Silicon Valley software company, had stolen code from a rival company, Cadence Design Systems. This became more than a simple case of unscrupulous business practices when prosecutors filed charges and, in 2001, Avant! was ordered to pay $182 million in restitution plus interest and fees, for a total of $200 million.
Worse still for Avant!, the closing of the criminal case meant that Cadence was finally able to proceed with its own civil case. Not content with a paltry $200 million, Cadence settled with Avant!, who’d since been bought by Synopsys, for a further $265 million. If a company could figure out a way to arrange this kind of profit, they wouldn’t be doing badly.
8. Opel Vs Volkswagen
It’s bad enough for a company when their top executives jump ship – but imagine how it must have felt for Opel when their chief of production moved to rival Volkswagen and was followed by not one, not two, but seven other executives. Opel cried industrial espionage – over an alleged missing bundle of confidential documents – in response to which Volkswagen parried with accusations of defamation.
The four-year legal battle was resolved in 1997 when Volkswagen agreed to pay General Motors, the parent company of Opel, $100 million and place an order for over $1 billion’s worth of car parts. Volkswagen still refused to apologize, though, showing that even multinational car companies can be as stubborn as 5-year-old children.
7. IBM Vs Hitachi
This case of computer company corporate espionage was dubbed “Japscam” by the press – perchance in hopes of a made for TV movie or perhaps a computer game! In 1981 Hitachi mysteriously came into possession of an almost full set of IBM’s Adirondack Workbooks. It seems that the fact that they contained IBM design documents full of IBM technical secrets and were prominently marked FOR INTERNAL IBM USE ONLY didn’t prompt Hitachi to return them.
IBM counterintelligence staff and FBI personnel worked tirelessly until the arrest of several IBM officials proved the fruits of their labor. Hitachi settled out of court, and paid IBM a sum that has been reported as US$300 million.
6. DuPont Vs Michael Mitchell (Kolon Industries)
Michael Mitchell worked on the marketing and sales of Kevlar for DuPont until he was fired in 2006. Unwilling to sign on to unemployment with his tail between his legs, instead he offered to provide his services to Kolon Industries Inc, a Korean form which just happens to be one of two companies that manufactures fibers that can tough it out with Kevlar in the toughness stakes.
After emailing his new bosses confidential information on Kevlar, he went back to old colleagues at DuPont to find out more. Unsurprisingly, DuPont executives found out about this less than cunning scheme and notified the FBI. Mitchell was sentenced to 18 months in prison and ordered to pay DuPont over $180,000.
5) Gillette Vs Steven Louis Davis
In 1998, Steven Louis Davis was sentenced to 27 months in prison and ordered to pay $1.3 million in restitution for his theft of trade secrets from Gillette. Davis worked for Wright Industries, a company which Gillette had contracted to assist with a new shaving system.
Davis was alleged to have sent confidential designs, which were presumably somewhat more complicated than adding an extra blade, to various competitors of Gillette’s. At least one of these companies actually reported the incident to Gillette so that Davis could be confronted. A close shave? Too close.
4. Microsoft Vs Oracle
It’s not all rosy at the top. Larry Ellison, the head of Oracle and at one time the second richest man in the world, has no shame about his covert monitoring of rival, Microsoft chief and one-time richest man in the world, Bill Gates. In fact, Ellison has no regrets about his 2000 efforts to expose Microsoft’s funding of various public interest groups.
His hired detective’s efforts are said to have involved bribing the cleaning staff at Microsoft’s Washington office in order to lay their hands on documents. Microsoft spokespeople referred to the admission as a “black eye for Oracle” – and with the levels of animosity between the two chiefs, it’s surprising there were no actual black eyes.
3. Kodak Vs Harold Worden
Pensioner power was something that Harold C. Worden obviously believed in. After completing 30 years with the Eastman Kodak Corporation he retired and promptly set up a consulting company, brokering the services of over 60 other retired Kodak employees. In his last five years working for Kodak, Worden was intimately involved with the development of the 401 film machine.
Not content with simply bringing with him several thousand confidential documents relating to the machine, he also convinced his successor to provide him with even more. He was sentenced to one year in prison and fined $30,000, only a little more than he had received for the stolen information, which Kodak held to be worth millions of dollars. One wonders whether Worden pawned his gold watch too…
2. Avery Dennison Corp Vs Pin Yen Yang (Four Pillars)
In 1997, Pin Yen Yang, President of Four Pillars, a Taiwanese company that makes and sells pressure-sensitive products, and his daughter Hwei Chen Yang, were arrested and charged with a smorgasbord of offenses related to industrial espionage against Avery Dennison Corp, a major US adhesives company.
In 1999 they were convicted of paying an Avery Dennison employee a reported $150,000 for proprietary information received over an eight-year stretch, causing the company tens of millions of dollars in losses. Sticky business indeed.
1. Starwood Vs Hilton
In 2009 Starwood rocked the hospitality world when they accused household name Hilton of industrial espionage based on Hilton’s employment of 10 executives and managers from Starwood. Starwood’s accusations were centered around luxury brand ideas, with the former head of Starwood’s luxury brands group alleged to have downloaded “truckloads” of documents before leaving for the bigger firm.
In 2010, the two groups reached a settlement that required the Hilton group to make payments to Starwood, as well as refrain from developing a competing luxury hotel brand until 2013. The call for federal monitors to supervise Hilton’s conduct shows that it isn’t just Paris who’s on the wrong side of the law occasionally.