Industrial Spy, Moi?:
An Opposing View
By Richard Horowitz
commotion, the Economic Espionage Act hasn't negatively impacted legitimate
competitive intelligence gathering.
While the prospect of federal criminal charges is an unpleasant thought, American corporations and their executives should not allow a misplaced fear of the Economic Espionage Act (EEA) to diminish their legitimate competitive intelligence activities.
Passed in October of 1996, the EEA made trade secret theft a federal crime. This new law gave the federal government, for the first time in U.S. history, a direct role to play in trade secret cases, just as it does in patents, trademarks, and copyrights. The EEA brought with it, however, a torrent of articles exhorting American corporations to beware of the added risks and severe penalties posed by this new law. These articles warned that American corporations and their competitive intelligence professionals (those who seek business intelligence on competitors) now operated in a perilous business and legal environment. According to the warnings, if a company did not have an "EEA Compliance Plan," multimillion-dollar penalties and long jail terms could ensue.
Timothy O'Hearn and Stephen Sozio's Oct. 4, 2001 column, "Industrial Spy? Moi?," is just one example of this approach. Similarly, in February 1997, I participated in the Society of Competitive Intelligence Professionals' (SCIP) Washington, D.C., symposium, which analyzed the EEA's implications for competitive intelligence. Several presenters claimed that the EEA posed grave new risks and threats. One thought it appropriate to publish in the symposium's proceedings that "Your industry is crawling with criminals and you may be one of them. So might your company . . . [the EEA] will surely lead to greater interest in federal jurisdiction over civil trade secret disputes."
I take the opposite position. As I stated that day — and in a subsequent policy analysis on the EEA that I authored and SCIP adopted — the EEA does not change the rules of the game; it only changes the consequences of violating them. Thus companies who have been practicing competitive intelligence in a legal and ethical manner all along should not be affected by the EEA nor should they be distracted by the EEA debate.
A March 29, 2000 National Law Journal article supported this stance, quoting a U.S. Department of Justice trial attorney stating that none of DOJ's EEA cases involved competitive intelligence professionals. Indeed, events of the past few years have demonstrated that rather than creating impediments to the practice of competitive intelligence, the EEA gave the industry the opportunity to further understand trade secret law and hence the legal validity of competitive intelligence.
Why the EEA
Doesn't Impact Legitimate Competitive Intelligence
There were three main reasons why it was clear in 1997 that legitimate competitive intelligence would not be affected by the EEA.
First, Congress enacted the EEA in order to give federal authorities jurisdiction to investigate and prosecute cases of trade secret theft — not to change the fundamentals of trade secret law or corporate behavior. In other words, the activities that competitive intelligence professionals understood to be legal or illegal did not fundamentally change; they were already legal or illegal under state trade secret law predating the EEA. Hence, adding federal criminal penalties to activities that were already illegal under state civil law (and under state criminal law in certain states) would not affect the legal and accepted practice of competitive intelligence.
Second, competitive intelligence incorporated accepted legal principles into its practice over the years of its development, while the "new risks" imposed by the EEA were federal criminal penalties on activities that were already illegal under state trade secret law. Competitive intelligence professionals therefore knew to avoid these activities as state trade secret law under which they practiced had made them "risky enough."
Third, not every trade secret misappropriation case is a criminal matter; many trade secret issues arise in the general course of business. There were clear indications that the EEA would not transform business torts or contract claims into federal crimes such that the Justice Department and the FBI would become entangled in general business disputes.
These reasons all help put into perspective the "EEA Compliance Plan" issue. It's the responsible and accepted practice for companies to have compliance plans, though no law formally requires one. Calls for an "EEA Compliance Plan," however, imply that not having one puts the competitive intelligence professional and his company at even more risk. But since the EEA did not fundamentally change the practice of competitive intelligence, an "EEA Compliance Plan" should be no different than the existing corporate guidelines that competitive intelligence professionals have always followed.
I believe the EEA has had two major implications regarding competitive intelligence. First, if a company feels compelled to overhaul its competitive intelligence program in direct response to the EEA, that company's activities prior to October 1996 may not have been legal in the first place (though I am not aware of any company to have done this). And second, companies that have curtailed their competitive intelligence efforts out of a misplaced fear of the EEA have awarded a competitive advantage to companies whose competitive intelligence activities continue unimpeded. In short, rather than present risks and threats to corporate America, the EEA has enhanced the practice of competitive intelligence. By highlighting illegal activity, the EEA has emphasized the legality of accepted competitive intelligence techniques.
Richard Horowitz is an attorney in New York and holds a private
investigator's license. He can be reached at
firstname.lastname@example.org. For more of
Horowitz's writings on the Economic Espionage Act, visit his website at