Magazine Article | May 16, 2012

Corporate Espionage Is Real — Even In The Pharma Industry

Source: Life Science Leader

Imagine you spent the past 15 years of your life passionate about finding a cure for Alzheimer’s. You stayed up nights struggling to continue your research, yet you were running out of funding. Knowing your competitors were years behind your research, you finally found your angel investor who provided the seed capital you needed  — but with the time-sensitive precondition that you must provide a return on investment within two years or they would pull your financing.

A year later, your team made incredible headway into your research. Passionate about his work, one of your most seasoned research scientists innocently had taken his research home on his laptop. While he was traveling home for the weekend via the airlines, he logged on to the free airport Wi-Fi to check his emails. Sounds innocent enough, right?  Six months later, though,  a competitor that the industry previously discounted as unworthy of concern, starts to announce eerily familiar breakthroughs in Alzheimer’s research. You scratch your head, wondering how they could have made the same advancements as you in such record speed. In six more months, they received a patent for the drug and went public with the cure for Alzheimer’s, not to mention reaping recognition and profit for the work your team created. Fifteen years of your life’s work is in someone else’s hands, and your company’s investors and employees bail. Now what?  This story may sound far-fetched to you, but it is much closer to the truth than you know.

A Risk That Can Affect Any Sized Company
Espionage is as prevalent today as the flow of the ocean tides 1,000 years ago. The FBI estimates from $2 billion to $400 billion in technologies, inventions, and intellectual property are stolen every year through an invisible network of corporate espionage by a multitude of actors that come in every shape and size and from various geographic regions and economic capabilities.

Corporate espionage is real, with real players and real impact on the future of any company and, in some cases, the domestic product of countries. When there is major investment at stake that will change the tides of economic prosperity, political capacity, military prowess, or a competitor’s reputation, you can surely bet that an organization will be targeted by illicit eyes.

Some of the greatest and most recent examples of espionage have brought together industry behemoths into a web of deceit, betrayal, and major competitive loss.

In 2009, Starwood Hotels accused Hilton Hotels of corporate espionage. Hilton baited 10 Starwood executives and managers to steal the intellectual property of a new brand idea of Starwood Hotels and then bring the truckload of competitive documents to their new employer at Hilton. After a well-planned infiltration hiring process, the former Starwood executives began secretly transferring competitive information back to Hilton headquarters. The espionage was so well-played and detrimental to Starwood’s business that Hilton was ordered to pay Starwood millions and also forbidden from developing a competitive brand until 2013. In further recognition of their intentional espionage, federal regulators were assigned to monitor the business activities of Hilton’s empire.

The Pharma Industry Is At Risk
The formidable espionage challenges facing the pharma industry have become a growing concern internationally. The issue has become so mainstream, global insurance underwriters such as Lloyds of London and Heath Lambert and Samian have created an entire pharma-related department dedicated to protecting their clients against corporate espionage. With the targeting of intellectual property and corporate secrets and the industry’s growing reliance on outsourcing, pharma has earned its place in the spotlight of espionage.

In 1997, Bristol-Myers Squibb (BMS) got to experience espionage firsthand when Hsu Kai-Lo and Chester Ho were arrested and pleaded guilty to stealing certain plant cell culture technology specific to the drug Taxol (pacilitaxel), a product of BMS.

In the last decade, technology has been a game changer in the espionage realm, which has dramatically increased the pharma industry’s loss of secrets — and revenue.  The use of technology by corporate spies is so effective that pharma has earned second position to financial institutions in cyber theft incidents.

The pharma industry has many reasons to be concerned about espionage. Based on the industry’s need to conduct research and clinical trials on exploratory drugs, there is the issue of animal testing, which has exposed the industry to alternative espionage threats, such as physical threats that include catastrophic violence from subversive wings of animal activist groups.  

In 2001, Unilever was targeted by Proctor & Gamble. P&G described the situation as an “unfortunate incident,” yet admitted no wrongdoing. P&G did agree to abstain from using the information in its future product development and eventually settled the case out of court to avoid possible criminal consequences to its executives. The incident went on record as one of the most obvious cases of espionage in recent corporate history. The blatant arrogance and complicity of their staff was revealed during an examination by investigators of their facility trash bins. While going through the discarded material, multiple letters were identified wherein P&G executives put in writing what they had done and how their plan would crush Unilever forever.

A Global Threat
In modern times, China is the number-one perpetrator of corporate espionage from both a commercialized and military perspective. With a historically turbulent political system and an economy based on unfair governmental practices, currency manipulation, and abuse of the labor force, China has somehow still been able to gain substantial ground-breaking advancements in the scientific and technological industries — mostly in part due to their insidious appetite to steal the research and technologies of others.

What makes the outright theft and production of pharmaceutical breakthroughs attractive to China?  The Chinese have a major problem — almost 1.4 billion people, and of those, 167 million are considered part of the aged population.  With a lack of medical capacity and the high costs of pharma, China has taken to stealing the very technology their manufacturing facilities benefit from.  In addition to China, countries such as Russia, Iran, Israel, and certain South American countries all are in the running to identify game-changing data and technology that will give their country competitive superiority.

Even worse than the thought of a major transnational conspiracy involving state-sponsored espionage is number-one culprit of corporate espionage — the threat from “insiders.” It is true that espionage actually sounds sexier and more intriguing when you think that some country such as Russia has its eyes set on you, but the reality is that employees at all levels of the corporate structure are the main perpetrators of malicious threats, which cost corporations billions of dollars annually.

Steps To Take To Prevent Corporate Espionage
Rather than focus on the myriad of potential corporate espionage dangers, the bioscientific community should be more concerned with learning how to stop — or at least significantly mitigate — the threat or action of stolen commodities and ideas that are the lifeblood of their organizations. There are ways to make it more difficult for corporate espionage to succeed within the walls of your company, but it takes serious planning and a strong commitment to the concept and implementation of threat mitigation/counter-intelligence tactics to keep your company ahead of the curve. Companies first need to understand that if what they do, create, or sell has admirable value, then someone, somewhere, will consider how to obtain it illegally for their own benefit — whether based on a financial, political, or military need. Denial or complacency is the first stepping stone to placing your organization on the easy-target list.

Second, understanding corporate espionage and the tricks of the trade are not learned skills which every security director, risk manager, or general counsel may have knowledge of in depth. I have witnessed very smart executives who believe their internal general counsel can protect them from espionage, as well as the belief that their security director, who has been a police officer for 20 years, would be the right candidate to protect their secrets. The practice of this philosophy is shortsighted and naïve.

Giving proper kudos to those professionals who may bring significant experience in other disciplines to the corporate table, it still bears the billion-dollar question, “How can you keep your secrets just that — secret — especially in this world of data expediency and information overload, where there is a plethora of ‘trained’ professionals who make their living in the low-profile, high-risk, high-reward world of corporate espionage?”

In reality, corporate espionage is a relevant fact of commercial activities which must be dealt with in a proactive manner. There is a circulating quote in the industry that states: “It took 20 years to develop and only 15 minutes to steal.” This has never been truer than it is today.

With the goal of eye-popping profiteering as the main catalyst to corporate espionage, the problem will not just go away. It is not unusual for pharmaceutical companies to introduce a single drug to the market which generates billions in profits. This is more than a motivator for all types of espionage-laden activities.

As a key decision maker who is charged with generating profits and protecting the umbrella of people and investment that is the lifeblood of your company, it is imperative you give proper consideration and attention to the real world of corporate espionage and how it may affect your organization — before it is too late.

Jonathan Snyder, CGC, CHS,  is a 20-year veteran of the security and intelligence community and serves as the president & CEO of Argus International Risk Services, Inc., a global provider of security, intelligence/counter-intelligence, specialized training and risk management solutions to the Fortune 500, federal agencies, and the Department of Defense.