Corporate Spies

Chicago's Abbott Laboratories, like most firms in the aggressively competitive drug industry, observes the most stringent plant security: work areas are grilled off and guarded, gates open only briefly for shift changes and deliveries, employee parcels are scrutinized. It is impossible, however, to police minds and memories. Abbott is seeking an injunction against two former employees, claiming that they memorized the formula for its highly successful Sucaryl, an artificial sweetener, and duplicated it in a competing product.

Abbott is only one of a growing number of companies with such security problems. Last week, at an American Management Association conference in Manhattan, businessmen were startled to hear statistics showing that industrial espionage has risen 50% in recent years. Corporate losses through spying and the theft of goods and processes now run to $2 billion yearly.

Telltale Carbons. The rise is due partly to increased job mobility; workers unavoidably take knowledge with them from company to company. Another cause is the fierce competition built up by an avalanche of new products. No fewer than 26,000 are introduced every year, at a cost of more than $6 billion in research and development expenditures. Under such costly pressures, many companies find it valuable to learn surreptitiously what new competitive products lie ahead or where another company does its test-marketing.

Espionage is heaviest in the electronics, chemical, drug, petroleum and toy industries, but some of it goes on almost everywhere. In a Harvard business-school survey of executives, 25% replied that "spying or other types of undercover information collection had recently been discovered" in their industry; the survey also found that executives under 50 are less concerned than their elders about the ethics of pirating and spying. Some firms go so far as to hire professional spies, plant informers inside other companies, bribe or blackmail employees for information, tap telephones, even sort rubbish. "I'm picking up a couple of barrels of trash a night now," a California private detective admitted last week. "The way they use these carbons only once now, it's a cinch." Not all of the espionage work is underhand, of course: many companies regularly instruct salesmen and other fieldworkers to report back any news and gossip, also sift trade journals, advertisements and Government reports for additional wisps of information.

Two-Way Mirror. The rise in spies, along with increasing theft and embezzlements, has produced stronger counterespionage as well as more frequent lawsuits. In what has become a benchmark decision, B.F. Goodrich Co. recently won an injunction forbidding a Goodrich space-suit engineer who had gone over to International Latex to use knowledge gained at Goodrich on his new space-suit work. So far, Du Pont has legally gagged a chemical engineer who knew its chloride process for making titanium dioxide paints when he left for American Potash & Chemical; a court order prohibits him from working on titanium dioxide processes.

Spy-workers are sometimes trapped by counterspy-workers sent into plants by such protective agencies as Willmark or the Merit Protective Service. Companies on the defensive are also using closed-circuit television, two-way mirrors, lie-detector tests, and telephone taps of their own. But the very best preventive, businessmen decided at the A.M.A. meeting, is none of these things: it is for companies to keep their employees so content that they will not stoop to snoop for others, and will not be tempted to take their secrets to another company.

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