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Understanding the World of Competitive Intelligence

By: Victoria L. Rayner
Posted: July 22, 2008, from the March 2007 issue of Skin Inc. magazine.

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Most employers in the beauty field just assume they eventually will encounter some competitive surveillance or sabotage that is carried out from inside their operations. If it is not committed by a revenge-seeking ex-employee, then perhaps it will be committed by a passive-aggressive individual who may be harboring resentments from previously unresolved conflicts and who is still active on payroll.

Regardless of the reasons, anyone who is reading this article and considering revealing your employer’s trade secrets should know that espionage is illegal. If it is detected, perpetrators can be severely punished. If prospective spies get caught and are found guilty of industrial espionage, they may incur jail time, be ordered to pay monetary penalties or both.

Industrial espionage legislation

In 1996, a law against industrial espionage was passed. It is called the Economic Espionage Act (EEA). This legislation originally was inspired by the ease with which competitive information could be obtained on the Internet and since it was signed into law more than a decade ago, Web sites, chat rooms, newsgroups and other public gathering spots have exemplified the need for its existence. The EEA is intended to implicate all those responsible for competitive intelligence gathering, with employers and their associates viewed as equally responsible for their parts in obtaining misappropriated information. Even those who do not succeed or who cannot personally be tied to the actual act—but who were involved in the overall scheme to obtain privileged information—can be prosecuted. It has been reported that two-thirds of all EEA cases filed to date involve the theft or sale of trade secrets by inside sources.

The EEA broadly defines the term “trade secrets” as business, financial, scientific, technical and economic information in any form, and protects the rights of American citizens involved in business endeavors with two specific provisions: Section 1831 (which mainly applies to individuals and entities sponsored by foreign governments) and Section 1832 (which holds individuals accountable for their participation in industrial espionage, regardless of who benefits). Anyone found guilty of violating Section 1831 can be sentenced to up to 15 years in prison and/or fined up to $500,000, while those convicted of defying Section 1832 can be punished with a prison term of up to 10 years and/or a fine of up to $500,000. For more information on this act, visit www.cybercrime.gov/usamay2001_6.htm.

Without knowledge of competitive intelligence and the appropriate safeguards that are in place to protect your business, privileged information and trade secrets can fall into the wrong hands. This can jeopardize not only the immediate profit potential of a business entity and the jobs and incomes of all who work to support said business, but also the overall financial stability of the entire operation for years to come.