The Rising Threat of Corporate Espionage – It’s Electric

By Lauren M. Tozzi *

In early January, Renault, the second-largest automaker in France, suspended three of its managers for allegedly selling information related to the company’s electric car program.  Corporate espionage has been on the rise in recent years, but this case is particularly shocking because the breach occurred at such a high level of corporate management.  The Independent in London reported that the stolen information was shipped to China by way of a French-based operation that specializes in economic spying.  Although Renault claims that the stolen information only pertains to the economic model for its electric car program, other sources report that the executives sold completed patents that were not yet registered.  These patents relate to the batteries and engines in new electric car models that Renault intends to release in the next few years.  Renault and its subsidiary, Nissan, have invested over five billion dollars in the development of their electric car program.  Renault has made this investment with the expectation that electric cars will account for ten percent of worldwide auto sales in the next ten years.

With such high stakes, Renault is not the only one concerned about the recent theft.  The French government owns fifteen percent of Renault, and one government official declared, “We cannot accept that an innovation financed by the French taxpayer ends up in the hands of the Chinese.”  French law provides less protection against the theft of intellectual property than U.S. law, so French officials are proposing stricter penalties in response to the Renault scandal.  One proposed change to French legislation is that the theft of industrial secrets would result in punishments similar to those administered for defense espionage.  For now, Renault is taking private legal action against the three executives for industrial espionage, corruption, theft, receipt of stolen goods and conspiracy.  The accused have responded with counter-actions for defamation and calumny.

Public and private sectors worldwide will be watching closely to see how France and Renault respond to this high profile case of corporate espionage.  General Motors CEO Dan Akerson expressed sympathy regarding the Renault incident and noted that he worries about intellectual property theft from GM everyday.  GM experienced its own betrayal in 1999 when one of its executives passed secrets to Volkswagen.  And GM is not the only American company that has faced the rising threat of corporate espionage.  In 2010, the U.S. prosecuted ten cases similar to the Renault scandal in that they involved Chinese theft of proprietary technology, such as mobile-phone technology, aerospace-related technology, and hybrid vehicle technology.  Affected companies included BAE Systems, Dow Chemical Company, and Ford.  Rather than charging suspected spies with the capital crime of stealing state secrets, most of these cases involved lesser charges of stealing trade secrets or violating export restrictions.  As corporate espionage becomes more widespread, the public and private response will – indeed, must – continue to evolve.

Although one obvious response to these crimes is to increase penalties, there are preventive strategies that companies can employ as well.  Corporate culture seems like a good starting point.  In response to the Renault theft, one auto industry researcher noted that the company had experienced a rash of suicides in recent years.  Certainly, low worker morale could coincide with reduced loyalty.  And cultivating a positive work environment could have many benefits, in addition to making workers feel invested in the success of their companies.   Of course, workers may be induced to disclose secrets regardless of morale, so companies should take additional precautions.  As GM CEO Akerson noted, a single defecting employee can cause a lot of harm, so companies need to exercise damage control.  By fragmenting knowledge, companies can limit the amount of information a spy can divulge.  Finally, companies can implement internal measures to monitor the flow of information via security clearances and employee surveillance.  However, a company that over-implements these precautionary measures may convey a lack of trust to its employees and damage morale as a result.  Although corporate espionage is a relatively new threat, defensive strategies will likely evolve quickly in this high stakes battle.

* Lauren M. Tozzi is a third-year law student at Wake Forest University School of Law.  She holds a Bachelor of Arts in International Relations and Spanish, as well as a minor in Bioethics, from the University of Virginia.  Her work experience includes interning at Qorvis Communications (a D.C. public relations firm), serving as a legal assistant at Kirkland & Ellis, LLP, externing for the Honorable Richard A. Paez in the Ninth Circuit Court of Appeals, and serving as the Martin Luther King intern for Legal Aid of North Carolina.  Upon graduation in May 2011, Ms. Tozzi hopes to practice law in the Washington, D.C. area.

**Image sources: Renault electric car; spies.