Have you ever thought about what could be truly threatening your business right now? In an increasingly competitive and interconnected world, there is an often underestimated danger that can strike at the heart of your company: industrial espionage.

Industrial espionage can take many forms, from cyber espionage conducted through cyberattacks to the disloyalty of employees or internal collaborators. The consequences of these illegal activities are severe and far-reaching, negatively impacting the finances, reputation, and competitiveness of the companies involved.

In this article, we will delve into what industrial espionage is, how it is perpetrated, and the strategies companies can adopt to protect themselves. We will also examine some famous cases that have marked recent history, providing a comprehensive overview of a phenomenon that represents one of the most critical challenges for the contemporary business world.

What is Industrial Espionage?

Industrial espionage, also known as corporate espionage, is an illegal activity that involves the theft of confidential information owned by a company. The ultimate goal of those committing this type of crime is to harm the victim company and gain an unfair advantage from the illicitly acquired information. In our legal system, it constitutes a criminal offense.

Discover our service: Unfair Competition and Industrial Espionage

Industrial Espionage in the Penal Code

Articles 622 and 623 of the Italian Penal Code provide that the offended party (i.e., the victim) can, within three months of discovering the crime, file a complaint to protect their rights before the judicial authorities. The first of these articles punishes the violation of professional secrecy, while the second punishes the violation of scientific and industrial secrecy, i.e., the knowledge assets of a company, its know-how.

The main element characterizing this type of crime is the conduct of the person committing the offense, aimed at ensuring a profit or advantage for themselves or others while simultaneously causing harm to the company from which the information was stolen. Various types of information can be the object of this unjustified appropriation: for example, software, patents, designs or models, client and supplier lists, pricing lists with related discounts, strategic business plans, business models, and marketing strategies.

Unfortunately, this type of crime can only be detected after it has been committed. In addition to Articles 622 and 623 of the Italian Penal Code, there are international regulations such as the Defend Trade Secrets Act (DTSA) in the United States, which protects trade secrets at the federal level.

How Industrial Espionage Occurs

There are two main ways this type of crime is committed:

  1. Internal Method: In this case, industrial espionage is carried out by an insider, i.e., someone who is or has been part of the organizational structure of the victim company.
  2. External Method: This involves actions carried out from the outside through a series of computer activities (a criminal offense punished by Article 615 – ter of the Italian Penal Code: “Unauthorized access to a computer or telecommunications system”) or by placing bugs in strategic locations within the company.

Often, the company that suffers from this type of crime tends not to make the news public.

There are two main reasons for this:

  1. To avoid the publicity that comes from the dissemination of the news, which can severely damage the company’s reputation.
  2. To prevent giving an additional advantage to the unfair competitor.

Economic Impact

Industrial espionage can cause significant financial losses, erosion of competitive advantage, reputational damage, and high legal costs. According to some estimates, global companies lose billions of dollars every year due to this phenomenon.

Financial Losses

The financial losses resulting from industrial espionage are enormous. Companies can suffer a revenue reduction due to the loss of critical trade secrets, which competitors can use to develop similar or superior products. For example, the theft of intellectual property can result in an immediate loss of revenue and a decrease in market share.

Erosion of Competitive Advantage

A company’s competitive advantage is often based on unique innovations and proprietary technologies. When this information is stolen, the company can lose its market leadership position. This is particularly devastating in high-tech sectors, where innovation is a key success factor. The dissemination of industrial secrets can allow competitors to save years of research and development, reducing costs and accelerating the launch of new products.

Reputational Damage

Industrial espionage can severely damage a company’s reputation. The loss of trust from customers, business partners, and investors can have long-term effects. Additionally, if news of the espionage becomes public, the company may be seen as vulnerable, which can negatively affect its market image.

High Legal Costs

The legal consequences of industrial espionage can include costly lawsuits, significant fines, and expenses for internal investigations. Companies often have to invest substantial resources to pursue those responsible for the theft and to protect their intellectual property rights. These legal costs can quickly accumulate, further aggravating financial losses.

Global Estimates

According to a report by the Center for Strategic and International Studies, global losses due to industrial espionage and intellectual property theft exceed $600 billion annually. Moreover, a study by the Ponemon Institute found that the average cost of an industrial espionage incident for U.S. companies is approximately $5.5 million.

Affected Sectors

Sectors such as technology, biotechnology, automotive, and advanced manufacturing are particularly vulnerable. Companies in these sectors invest billions of dollars in research and development, making them attractive targets for industrial spies. For example, the Google vs. Uber case demonstrated how the theft of industrial secrets can significantly impact the self-driving car sector.

Famous Cases of Industrial Espionage

Ferrari vs. McLaren

In 2007, a Ferrari employee, Nigel Stepney, was discovered passing confidential information to McLaren. The case, known as “Spygate,” led to Stepney’s disqualification and a $100 million fine for McLaren by the FIA. Ferrari subsequently strengthened its internal security measures to prevent future information leaks.

Eni

In 2010, Eni was the victim of industrial espionage when a former employee stole sensitive information to sell to foreign competitors. The former employee was arrested and convicted, while Eni invested significantly in cybersecurity technologies to protect its corporate data from future breaches.

Google vs. Uber

In 2017, Google sued Uber for stealing industrial secrets related to self-driving car technology. Anthony Levandowski, a former Google employee, was accused of stealing thousands of confidential files before founding a startup later acquired by Uber. The case resulted in Levandowski’s conviction, receiving an 18-month prison sentence, and Uber reaching a settlement with Google.

These cases illustrate the severity of the violations and the actions taken to resolve the issues and prevent further incidents.

What a Private Investigator Does

Once the case is accepted, the investigative agency will begin counter-industrial espionage investigations. The private investigator’s task will be to:

  • Verify that the crime has actually been committed.
  • Identify the perpetrator.
  • Preserve the collected evidence and consolidate it into a dossier so that the victim company’s lawyers can present it to a judge.

Sometimes, the investigative agency is hired by the client to prevent potential cases of industrial espionage. In this case, they will deploy all their skills to identify vulnerabilities in the IT system, analyze improper behavior by partners or employees, and conduct telephone sweeps for spyware or preventive environmental surveillance to find any bugs.

Read more: What a Private Investigator Does

Tools of the Private Investigator

To combat external industrial espionage, the private investigator, in addition to analyses to identify weaknesses in the company’s IT structure, increasingly relies on forensic computer science to find evidence of the crime, catalog it, and consolidate it into an expert report to be provided to the company’s lawyers.

To combat internal corporate espionage, the company can request the investigative agency to conduct classic investigations on partners, employees, or collaborators, disgruntled former employees, and pre-employment investigations to determine if the candidate the company wants to hire was forced to leave their previous job or was fired for this type of crime.

Conclusion

Industrial espionage is one of the most severe threats to the existence of a company today. As we have seen, this illegal act is punished by the penal code but must be reported within three months, or the possibility of appealing to the judge will be forfeited.

There are two ways in which this type of crime develops, involving the theft of sensitive information belonging to a company:

  1. External Method: It is carried out through cyberattacks or bugs.
  2. Internal Method: The classic disloyal employee or disgruntled partner who, in exchange for money or other personal benefits, steals the information to give an advantage to a competitor.

For this reason, an investigative agency can be hired both to prevent corporate espionage and to ascertain the facts so that the company can protect itself by appealing to a judge.