Introduction
“To get ahead” is an aspiration of many a young entrepreneur, a dream, bordering on obsession for countless startups the world over. “To stay ahead” is the objective for all large business houses, multinational companies and corporate giants; those who have made it and wish to enjoy the fruits of their labour. Much of western civilisation and the modern world it inspired is based on this notion of perpetual competition, technological innovation and just rewards for the meritorious. However, idealising this to the point infallibility would be an act of gross naiveté as, much like the other aspects of life, there exists a downside. This is especially true in the present day corporate sector where cut-throat competition has resulted in some questionable practices, ranging from unethical to downright criminal, becoming commonplace.
The incorporation of western style professional management practices the world over has brought with it that age old western spirit of unrelenting competition. The result is that we now live in a time where the distinction between what is acceptable and what is not has become so obscure that it escapes the comprehension of the common man. The advent of technology and the unpreparedness of legislation have combined to place corporate ethics on a razor’s edge; finely poised but ever vulnerable.
The following is an attempt to illustrate how thin a line it is that separates two much discussed practices in the world of business: Competitive Intelligence and Corporate Espionage. Both represent specialised fields, with active professionals who provide access to priceless information useful for business and strategy development.
Competitive Intelligence
Previously limited to military and diplomatic purposes, ‘Intelligence’ became the new buzzword in the boardroom soon after the World War II. It became synonymous with information useful for anticipating future government policies, global trade scenarios, competitor’s market motives and operations etc., all gathered in a diligent manner without the use of fraud or misrepresentation. The Merriam-Webster dictionary defines“Intelligence” as “the ability to acquire and apply knowledge and skills”.1 The term ‘Competitive’ is associated with the “strong desire to be more successful than others”.2
Considering both definitions, one can sum up an explanation for competitive intelligence as the process through which one acquires and applies knowledge to gain an advantage over others in a similar field. It is a logical process of testing and validating assumptions and is organized around certain specific steps that relate to the following actions: identifying the intelligence needs of the company, collecting information, analyzing and synthesizing collected information and disseminating results.3 Competitive Intelligence should therefore, ideally, provide insights on future opportunities, contingencies and mitigation strategies; the goal being to stay one step ahead of the competition.
Though not as prevalent in India as in the west, certain firms have begun offering competitive intelligence services. These mainly operate by identifying areas of improvement, risks and opportunities while also isolating ‘best practices’, allowing the client company to formulate strategies based on knowledge and experience instead of crude and generic bench-marking of data.4 It concerns itself with creating the right perception of the marketplace in the company boardroom; formulating business models with multiple variables and keeping tabs on rivals, all of course, ethically. In fact, Strategic and Competitive Intelligence Professionals (SCIP) 5, the nodal international organisation for professionals in this field, has gone to the extent of laying down a comprehensive code of ethics to be adhered to by all member firms.
Information of any sort, obtained through deceit, misrepresentation, bribery or any other offence, depending on the jurisdiction, is deemed to be ultra vires to competitive intelligence. Professionals offering competitive intelligence services have strict rules and policies against such practices.
Corporate Espionage
On the other side of the coin lies Corporate Espionage, not wholly dissimilar to Competitive Intelligence but worlds apart when it comes to legality and acceptability. Corporate Espionage is usually associated with stealing trade secrets, blackmail and bribery with the purpose to gain and maintain an advantage over competition. It is considered inherently dangerous to the healthy functioning of an organisation and can even lead to criminal liability. Though this concept is not unfamiliar to India, it must be mentioned that the current means by which it is carried out has undergone a paradigm shift from earlier days.
The favorite targets of spies today are trade secrets, business plans, consumer data, contact information lists, biometric data and pricing data.6 Information thieves are spoilt for choice when it comes to intrusion methods: Phishing, malware attacks, Penetration of online cloud networks, eavesdropping by bugging offices, wiretapping, capturing telephone conversations are so common that any news of such attacks no longer elicit the slightest surprise. Even in this technologically sophisticated environment, the more old fashioned among spies typically send in attractive men or women to form close relationship with an employee of the target company who has access to company’s secrets.
Though legal remedies are available, methods such as the above present largely ambiguous legal questions often with irregular results.7 Questions such as jurisdiction, the corporate veil, incidence of liability, etc. have dogged investigation agencies for ages. However, India has reformed its cyber security apparatus through the Information Technology Act, 2008, in an attempt to keep with technology. Chapter IX of the Act refers to provisions relating to penalties, compensation and adjudication and Section 43 covers a wide range of cyber contraventions related to unauthorized access to computer, computer system, computer network or resources.
At this juncture, we return to the focus of this article: the fine line that separates what is legal and what is not in the corporate world. And perhaps no concept highlights the threadbare nature of this distinction better than Reverse Engineering. However, since case law and technical information regarding reverse engineering in India is in its incipient stage, developments from the USA have been used to illustrate the point.
Reverse Engineering – A Razor’s Edge
Reverse engineering is accomplished “by starting with the known product and working backward to divine the process which aided in its development or manufacture.”8 In simpler terms, reverse engineering is taking something apart to find out what it is made of and how it is made. The novelty of this as a legal phenomenon and the nascent stage of trade secret laws have turned it into a slippery slope in terms of its legality, with a fine line being drawn between intelligence gathering and spying. A seminal point to be noted is that reverse engineering is applicable only to unpatented products or processes and usually involves the cumbersome legal issue of trade secrets. The fine line here, concerns itself with whether the acquisition of the product was lawful. Theft of trade secrets, deceit in acquisition of products, misrepresentation, misappropriation etc. fall on the wrong side of this line.
In terms of the legal position on reverse engineering, there are primarily two arguments. Some US courts have held that so long as a product or trade secret can theoretically be reverse engineered, it cannot be a trade secret and thus cannot be protected by law. The question being: is the technology behind the product or process “readily ascertainable”.
In Midland-Ross Corp. v. Sunbeam Equipment Corp.9, the Western District of Pennsylvania held that, “the sale of a product containing trade secrets constitutes a public disclosure which defeats acclaim founded upon those trade secrets where the nature of the trade secrets is ascertainable by inspection of the product.” The Court reasoned that, “even though a marketed product would have to be rendered inoperative and examined by a skilled engineer in order for a discovery to be made of the trade secrets contained therein. The sale of such a product nevertheless constitutes a public disclosure which will defeat a claim founded upon the trade secret contained in the product.”
Carson Products v. Califano 10 too was decided on an almost identical basis. These cases suggest that regardless of the time, expense, and effort to reverse engineer a product sold to the public, so long as it can theoretically be reverse engineered, the trade secret of the technology underlying that product loses its protection. Put another way, if a product can theoretically be reverse engineered, then that technology underlying the product is “readily ascertainable.”
ln contrast, other courts have suggested that information does not lose its trade secret protection where discovery through lawful means would require significant time, expense, or effort. In Barr-Mullin, Inc. v. Browning 11, the North Carolina Court of Appeals determined that certain software was a protectable trade secret even though it could be reverse engineered because it was very difficult to reverse engineer the software using only the object code that was publicly available. According to the Court, “a party asserting the existence of a trade secret does not have to establish the impossibility of reverse engineering.” Plaintiff must merely show the alleged trade secret was not “readily ascertainable through…reverse engineering.” Other courts have agreed.
The Indiana Supreme Court held in Amoco v. Laird 12, that where the duplication or acquisition of alleged trade secret information requires a substantial investment of time, expense, or effort, such information may be found ‘not being readily ascertainable’ so as to qualify for protection under the Indiana Uniform Trade Secrets Act.
In all of the listed cases, what decided the final outcome was not a well crafted legislative rule or established principle of law. It was a court developing its own jurisprudence on a challenge the judicial and legislative organs of government are hopelessly unprepared to meet. The situation, needless to say, is worse in developing countries like India. The problem of reverse engineering is not alone in posing a serious challenge to legislatures. Issues such as individual liability in the corporate structure, adherence to environmental regulation, financing of pressure groups and NGOs have long troubled lawmakers’ eager to reign in an increasingly competitive business environment. Though what happens in the future is anyone’s guess, it is clear that much confusion lies ahead.
By Rohit Jacob, Rajiv Gandhi National University of Law, Punjab
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