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JULIA TAYLOR KENNEDY: Welcome to Just Business. I'm Julia Taylor Kennedy.

Thomas Jefferson once said, "I consider ethics, as well as religion, as supplements to law in the government of man."

One field that really illustrates the distinction we all draw in our professional lives between ethics and law is competitive intelligence. Today on the show I'll talk to two competitive intelligence specialists to unpack the legal and ethical lines they draw each day.

First, a primer on competitive intelligence, known as CI for short. When the renowned Harvard Business School professor Michael Porter broke types of business competition into five categories in the 1970s, he established his legacy. Nearly every first-year MBA student now must internalize Porter's five forces. They are competitive threats, like substitute products, long-time industry rivals, and others.

Porter's forces also spawned a new industry, competitive intelligence. It's a service that some companies develop internally. Others hire a consulting firm. The main goal is to keep tabs on the competition and to project what competitive threats lie ahead.

This is a vital resource, but it's also one that businesses don't like to talk about because it seems kind of shadowy.

Richard Horowitz is an attorney who specializes in competitive intelligence law, and he has no problem talking about his work. Horowitz has a background as a private investigator and spent six years in the Israel Defense Forces. He says that while it's illegal to gather trade secrets, there's still a lot of information available that can give companies a clear view of their competition.

RICHARD HOROWITZ: There are plenty of examples of people who are trained in competitive intelligence who will take open sources or publicly available material, read between the lines, and figure out things that the information holder didn't want to be exposed. But if it's out there, you're able to acquire it. It's legal to read in between the lines and figure something out that your competitor didn't foresee you figuring out.

One famous example is a company that wanted to know what its competitor's manufacturing output was. The competitor considered the manufacturing output to be a trade secret.

JULIA TAYLOR KENNEDY: The volume of output?

RICHARD HOROWITZ: Yes, tonnage of output. They considered it to be a trade secret, or at least confidential information they didn't want published. The goods were shipped from the manufacturing plant through railroad lines leading in and out of the factory.

What the competitor figured out was—he hired a metallurgist to measure the amount of rust that was displaced on the train tracks after the train went over those tracks. He knew the weight of the empty train, because that's a public record, and from the amount of rust that was displaced, he could extrapolate the weight of the cargo because he knew the weight of the empty train.

That's something the owner of those goods didn't want to be known, but the competitor used some technique and figured it out, and nothing they did in the process was illegal.

JULIA TAYLOR KENNEDY: Right. That's different from something that would be illegal, like . . . ?

RICHARD HOROWITZ: The simple examples are, you can't break into a company's office and steal its documents; you can't bribe someone and get information that way; you can't wiretap their phones. Those are easy examples. The tricky examples are things like, I approach you, not telling you who I am, and we get into a discussion and then you tell me things you didn't want me to know or things that maybe you shouldn't have said. That's where the confusion comes in.

JULIA TAYLOR KENNEDY: Because it's not like you force me to give that information or you really spied on my correspondence or anything. I've told you.

RICHARD HOROWITZ: Right, if I just say, "Hello. I'm interested in your product. What do you have to say about it?" and you talk and tell me what you would have told anyone, and then later on you find out that I'm a competitor, that I'm not just anyone, and you say, "Gee, if I knew you were a competitor, I never would have talked to you." That's not a legal case.

What you told me you would have told anyone, and had you told anyone, then you didn't have any confidentiality with that person that he couldn't tell me. What you told me or anyone else presumably is not confidential because you just told it without any reason for me to think it's confidential. You didn't ask me to keep it confidential.

The next level is, what if I misrepresent who I am? Instead of saying, "Hello. What can you tell me?" I say, "Hello. I'm a student," or, "My name is George. I'm retired. What can you tell me?" and I'm really a competitor.

If you tell me things that you would have told anyone, the fact that I misrepresented my name or who I am alone doesn't make it an illegal act. In order for it to be an illegal act, the misrepresentation has to induce a breach of confidentiality of the information holder. That's where you draw the legal line. If my saying "George" didn't induce you to tell me things you shouldn't have— if I say, "I'm calling you from the CEO's office and he wants you to put confidential document X in an envelope and mail it to this address," the misrepresentation that I used has induced you to breach your duty of confidentiality, because if you get a call from the CEO's office, you're going to comply right away.

Generally, when it comes to trade secrets, the kind of misrepresentation that crosses the line is one that induces a breach of confidentiality in the information holder.

JULIA TAYLOR KENNEDY: We're talking about pretty bright legal lines here. I'm wondering if you find among clients that they draw different lines when they talk about ethics. There's legality and there's ethics, and they are not always the same thing.

RICHARD HOROWITZ: Absolutely. In fact, a company's corporate policy or ethical policy, whatever it may be called, is invariably stricter than what the law allows people to do. That's because, even though certain things could be legal, it doesn't mean that they are wise to do. You can do a lot of things in life that are utterly immoral but perfectly legal. The same thing can hold true in business. There are a lot of things that are legal, but your company does not want you to do them, for all sorts of policy considerations. It just looks bad or you may get sued, and even if you win, it's not worth the headache.

JULIA TAYLOR KENNEDY: You might risk retaliation.

RICHARD HOROWITZ: You might risk retaliation. Or there are companies that just want to be good corporate citizens and don't want to do these things.

Generally speaking, even though there's a lot more that can be done legally, corporate policies are almost invariably stricter than what the law allows. I have been to companies where the lawyers will tell their people, "If it's legal, do it, and if you get into trouble, we'll handle it." It's not that common, but I have seen it among companies. But generally speaking, the ethical standard is higher than the legal standard.

JULIA TAYLOR KENNEDY: Your background is in political intelligence and security, initially. You spent six years in the Israel Defense Forces, working on security policy.

RICHARD HOROWITZ: Working on national security issues, I would say, yes.

JULIA TAYLOR KENNEDY: National security. Do you think that background whetted your appetite for this kind of private intelligence security?

RICHARD HOROWITZ: Sure, in general it did, because you have a sense of what security means. Things on the national security level are different than security in the private sector. National security has different rules. But you still know certain techniques and skills from that period of your employment.

JULIA TAYLOR KENNEDY: What was it like to be a private investigator?

RICHARD HOROWITZ: That was a lot of fun. I did some very interesting things. I still enjoy that kind of work. I still have the license. But I don't do PI work per se anymore. If I have a case, I'll hire the appropriate people. There are about half-a-dozen general subdivisions of techniques that are used in investigations, and no one is an expert in all of them. If I have a case, having been in the industry—I still am in the industry—I'll know who to call on, whether it's undercover work or surveillance work or public records work or computer research and so forth, other techniques as well.

Most private investigators enjoy what they are doing. They're figuring things out, which is fun. If you like doing that, it's a lot of fun.

JULIA TAYLOR KENNEDY: Is there undercover work related to competitive intelligence or is that a completely different field?

RICHARD HOROWITZ: Undercover work could be divided into several types of undercover work. Competitive intelligence people don't do the traditional undercover work, where you're doing surveillance on people or you're talking to someone, developing your relationship, and they don't really know who you are. Private investigators do that all the time, for two reasons. First, it's legal; second, it works.

But because competitive intelligence people don't do that, because the industry was established, not by private investigators and not by former CIA retirees—the industry was established by librarians and computer database people, who not only weren't involved with these techniques, they found them of questionable ethical standards. Because they stayed away from these techniques, competitive intelligence professionals have developed other techniques that other people don't know how to use.

There are times when companies will call on private investigators, particularly in litigation. Things get a little rougher there. When it comes to what my competitor is up to, they'll often call on competitive intelligence firms because they have certain techniques that others don't. You have people just combing public records and putting things together and being smart, and not doing surveillance and undercover and those sorts of techniques, which have their place, but are usually not done by competitive intelligence people—for example, collecting garbage. If it's on public grounds, private investigators will not hesitate to do it. Competitive intelligence people frown upon it.

A sociology professor, a college professor, assigned to his students to collect garbage—on public grounds, of course—from different neighborhoods and compare them and see what they could learn, from a sociological perspective, from the garbage they collected. There's nothing illegal about that. That doesn't sound like it's espionage or spooky work. That was a college assignment in a sociology class.

JULIA TAYLOR KENNEDY: When you were doing private investigation work, were there certain ethical lines that you drew for yourself or did you really go by the licensing requirements?

RICHARD HOROWITZ: Every private investigator has ethical lines. As I said before, there are a lot of things in life, in business, in all kinds of situations that are legal, but everyone will agree that they are immoral. These kinds of questions can go back to Aristotle's time, even Plato. I can give you an example.

Plato asks a question: If I borrow a weapon from someone—normally, if you borrow something, you have to return it—and in the interim, the person I borrowed it from loses his mind and is not in control of himself, am I ethically required to return the weapon to him? It belongs to him. But, on the other hand, if I give it to him, who knows what he might do with it? So do I have an ethical obligation to return it?

This was discussed and analyzed 2,500 years ago. I'm sure people today aren't going to agree. But this question is in Plato's work. It's in The Republic, from 2,500 years ago. There are a lot of questions that we discuss today that you can find in the classics from those days.

So ethical questions don't always have a right answer or any right answer.

JULIA TAYLOR KENNEDY: Absolutely not.

RICHARD HOROWITZ: I think everyone who deals with these issues has their own ethical boundaries.

JULIA TAYLOR KENNEDY: Standards vary across the globe. This is decided by nations. There's no sort of supranational organization that's talking about competitive intelligence.

RICHARD HOROWITZ: That's correct.

JULIA TAYLOR KENNEDY: How do firms deal with that, if they are curious about what their competitors in a developing nation are doing or what their competitors in the United States are doing in a third country?

RICHARD HOROWITZ: Whoever is doing the work has to beware of the laws of the country that he's going to be active in, because they are not identical. The laws in the United States are a good guideline and model, but they are not identical all over the world. There is no one book or resource that will give you a detailed analysis of laws that may affect competitive intelligence in countries all over the world. That doesn't exist. There are some books that will give you a short overview of trade secret law in different countries, but that's not the same thing as what's relevant to competitive intelligence.

The most important thing is, what are you allowed to acquire? What constitutes improper means? You can't acquire something through improper means.

There is no one resource or book that you can go to. What I do with clients is, if they want to deal in particular countries, I advise them, "You need to get lawyers in that country who are familiar with this kind of work." We can coordinate and come up with guidelines.

But there are also a lot of companies, transnational companies, that have offices in dozens of countries, sometimes over 100 countries, and they need global guidelines. They have them. What they invariably are, are a set of ethical guidelines which are more conservative than any law might be, which is one way of dealing with it.

JULIA TAYLOR KENNEDY: Are there firms out there who say, "I don't want to use competitive intelligence techniques"? How common is this?

RICHARD HOROWITZ: There are companies out there that won't, which I think is foolish, and then there are companies that will only if they give the competitive intelligence firm certain guidelines that they want that firm to abide by.

JULIA TAYLOR KENNEDY: How common is it to have some sort of competitive intelligence litigation?

RICHARD HOROWITZ: It's rare to nonexistent, basically. If you look for litigation among competitive intelligence firms, you probably won't find anything.

There's a history of companies sending threatening letters: "We understand you're trying to get our trade secrets. We're telling you to stop or we'll use all legal methods available to us." Those letters are often bluffs, but not necessarily. The company that sends the letter might try to do some legal measure. But the experience is that usually, when they try, they don't get very far, because they realize that what they are trying to stop isn't illegal, and their company is probably doing the same thing.

JULIA TAYLOR KENNEDY: Richard Horowitz, this has been fascinating. Thank you so much for sitting down with me on Just Business.

RICHARD HOROWITZ: Thank you very much.

JULIA TAYLOR KENNEDY: Richard Horowitz is a New York City-based attorney specializing in competitive intelligence.

As Richard Horowitz indicated, the ethical bar of competitive intelligence varies from company to company and can be set far higher than the laws that govern the field. My next guest, Cynthia Cheng Correia, agrees. She says that many CI professionals hold themselves to a really high bar.

Coming from a library and information science background, Correia has a range of experience in the field. She has worked with one of the industry's biggest firms and then opened her own competitive intelligence consultancy called Knowledge inForm. She also teaches a graduate-level course on CI and has been quoted in The New York Times and other publications on industry trends.

One misconception that Correia often addresses is that everyone in competitive intelligence is a former government spy.

CYNTHIA CHENG CORREIA: One of the beautiful things about CI is that, while there are former military and government intelligence professionals working within CI, there are also many other professions represented. My background is in library and information science. I have colleagues who are former journalists and other colleagues who are attorneys. You bring that together and you have a wonderful mix of expertise and perspectives that I think strengthens the intelligence function.

JULIA TAYLOR KENNEDY: What are some of the ethical no-no's within the competitive intelligence field? What's off limits?

CYNTHIA CHENG CORREIA: You can't misrepresent yourself when you're going after information. To use pretext, to pretend that you're a journalist or a graduate student conducting research, is something that we should not engage in.

JULIA TAYLOR KENNEDY: It's something that's technically legal but considered unethical in the profession? Or is it considered illegal?

CYNTHIA CHENG CORREIA: That varies according to geography. One of the things that we have to recognize nowadays is that we have to abide by domestic laws wherever we are and international laws if we're looking at other markets. We need to be mindful of that. I think we need to understand where our behavior is acceptable. That's where, I think, a good grounding of ethics and devoting time and energy to the ethical considerations of this practice is very important for managers and organizations.

JULIA TAYLOR KENNEDY: I'm interested in this question because there seems to be a wide variety of ethical codes within the field. Do you think there might be a need for there to be one standard that all of the firms sort of adhere to?

CYNTHIA CHENG CORREIA: There is one code that governs our profession, and that is the code that emanates from SCIP, the Strategic and Competitive Intelligence Professionals. However, many organizations do take that further in developing their own ethical codes, which many of us consultants recommend because then you're able to address more specific expectations than the association codes and you get to be more specific with your employees, most of all.

JULIA TAYLOR KENNEDY: I read the code of a competitive intelligence company, Fuld & Company, where you worked for a couple of years, that they have published online. I found it really interesting to read. I come from a journalism background, and so I have been indoctrinated in a certain code from a different sector than the competitive intelligence sector.

But in this code, they required that an employee, if asked on a call, must divulge their name, the name of the Fuld subsidiary they work for, that they are a consultant—again, if asked by the source, kind of putting the onus on the person that they are talking to. They can't misrepresent themselves, but there's no requirement up front to say, "This is who I am, and this is why I'm talking to you." Whereas for journalists, that ethical line is drawn differently. I was required to state my name, organization, and summarize the purpose of the interview before beginning a conversation.

What do you think about that variation in disclosure, field to field?

CYNTHIA CHENG CORREIA: In intelligence, we understand that we have to tread the line between gathering good intelligence ethically and legally and obviously abiding by ethical standards. If you are too forthright, you may, quite frankly, scare people away.

So a company like Fuld—if somebody were to say, "Hi. I'm from XYZ Company. I'm conducting this interview," and they were to see that XYZ Company conducts competitive intelligence, that may very well scare the interviewee away. So very often we might present ourselves in general terms: "I'm from XYZ Company"—you would certainly identify who you are—"and I'm conducting industry analysis about this particular question. I see that you're an expert and I'd love to talk with you," and see where it goes from there.

Now, as you can see, Fuld's ethical guidelines do go farther than SCIP's. Many organizations will have variations of that as well. Some of them will flat-out say that their internal employees cannot call competitors, for example, and that's very explicit. That would, of course, vary from journalism, too. But it's really all a matter of context and being able to achieve what you want within the boundaries as established by ethics and the law.

JULIA TAYLOR KENNEDY: Another difference, which is interesting, is that there is more protection of sources in competitive intelligence than there is in journalism. It's expected that, unless you are under dire circumstances, you're going to reveal the name of your source if you're a journalist. For competitive intelligence, they can protect their sources much more heavily. I thought that was another interesting distinction.

CYNTHIA CHENG CORREIA: Right. At this point I haven't heard of anybody in CI being subpoenaed for their sources. In CI, though, we are very careful about protecting our sources, even from our own clients very often. We don't want to expose people. We want to add a layer of protection for both sides, while maintaining integrity.

JULIA TAYLOR KENNEDY: You have written that competitive intelligence has acquired an "ick" factor for some. Why has this happened? And is the industry is doing enough to educate the public about what they do?

CYNTHIA CHENG CORREIA: I think it was more so years ago, when people didn't understand what CI was. They equated it with industrial espionage. Occasionally you still get the article in the business section that talks about the spying industry and that sort of thing. That always makes me cringe, because that is the "ick" factor for many people. It doesn't represent what CI really is.

Of course, there are people sometimes who operate under the veil of CI, who claim to be conducting CI, when they are not conducting CI in an ethical way or in a true fashion. They do cross the line into industrial espionage or they otherwise break the law. That is not CI. They are stepping outside that CI line.

I think that as CI becomes better understood, more organizations are adopting it, and they are understanding what that is and accepting and understanding that this supports decision making, supports action, and that it can provide for much better management in an organization, with the proper foresight.

So I think the "ick" factor is diminishing. I'd like to see it diminished sooner. But I think now the "ick" factor—at least for me anyway, and for many people that I work with—is focused more on the international operators, where you might have government-sponsored industrial economic espionage that's infiltrating. I think that's creating a much clearer line between CI and espionage. That distinction is very important.

JULIA TAYLOR KENNEDY: Where is most of that espionage coming from? Is that coming from China? That seems to be the most natural conclusion to draw.

CYNTHIA CHENG CORREIA: Most of us have seen that Businessweek cover story from a few months ago. We certainly get reports periodically. Relatively recently there was the case of Mike Yu, who worked for Ford Automotive. He was an engineer there. He has been convicted of industrial espionage. There are certainly other countries as well.

This is nothing new, I need to say. Countries have been doing this, have been keeping a competitive eye on one another, for a very long time, longer than CI has been a formal profession.

JULIA TAYLOR KENNEDY: Your background is in library and information science. How did you get into competitive intelligence? When did you decide to enter that field?

CYNTHIA CHENG CORREIA: I decided in grad school, in the program. I was very fortunate that I was in a program that had a professor who had an interest in that area. Simmons College offered a course in competitive intelligence when I was there. So I took the course. I was working for an economic development organization that was also thinking competitively about other economic regions, and so I was able to apply it there. From there, I went to Fuld and thus began my career.

JULIA TAYLOR KENNEDY: With that background in information science, you must watch with a more expert eye how technological changes have affected your field. What affect have the social media sites had? I would imagine Glassdoor and LinkedIn would be places to gather information and try to piece together strategies of competition.

CYNTHIA CHENG CORREIA: Oh, absolutely. LinkedIn has now become an essential tool in the armory of CI professionals. It's just a wonderful tool for looking at organizations, reaching out to potential sources.

But there's a lot more to this, too. As we're researching our competitors in certain companies for competitive intelligence, we can turn to other sources as well, not just LinkedIn. You can look at Yelp, for example, to understand what types of feedback people are giving about products and use that as your potential lead. You can look at Twitter and see what people are typing, again, as leads, perhaps as potential sources. As a journalist, you're probably familiar with using these types of tools to source. It's very similar in the CI space as well.

JULIA TAYLOR KENNEDY: When you have a source at a company—say you go to them a few times; say they are disgruntled with their employer and want to kind of help you out—how do you give them tips about protecting themselves from any potential payback or retribution they might undergo if their employer finds out that they have been giving an outsider information?

CYNTHIA CHENG CORREIA: I'm not an attorney and I don't play one on TV. Basically, if we're talking about people who are unauthorized and giving you trade secrets, then you can't accept it. There are many instances of companies that have been given precious information and documents that have turned it away because they understand that they are not supposed to have it. They understand the law.

When we're talking about people compromising their jobs, then I think that's an ethical aspect of this scenario. But we're also talking about the legal aspect here. You really shouldn't be putting an employee in that position and accepting the unauthorized trade secrets.

JULIA TAYLOR KENNEDY: But say it's not a trade secret. Say it's something that doesn't quite meet that bar. Maybe they can't be directly fired for it, but the employer could find another reason to reprimand them. Do you ever give sources tips about where to call you from or things like that that might help protect them?

CYNTHIA CHENG CORREIA: It's actually not as sexy as that, I have to say. There are no drop points or anything like that. Pretty much the way it's conducted is the way that many other research firms would conduct it. Somebody from Forrester would pick up the phone and call up a source and say, "Hey, I'm conducting research on XYZ. This is my topic. What can you tell me?" Of course, there might be a little bit of sugar thrown in there"Hey, you're an expert, and I love what you said about this topic in such a publication." But for the most part, those that I work with are on the up-and-up. So I think there really isn't as much of that.

When we're talking about, say, contacting former employees and so forth, we may run into things like nondisclosure agreements that are still in effect. I have had debates about this with some of my colleagues as well. There are some, particularly on the information sideI think people on the information science side tend to be a little bit more conservativethey will just tell them right up front, "If you're under a nondisclosure, then don't worry about it. We're not going to pressure you. This is just so we know where the boundaries are. This is what I need."

The risk in that, though, is that you won't have people who are as willing to talk to you, because you're basically laying out things that they need to be thinking about.

I have colleagues on the other side of the argument saying, "Look, it's really up to them. They signed this agreement. They know what the terms are. The onus is on them to decide to talk to you, and to what extent they want to talk to you."

It's not to say that just because we have a set of ethical codes within the profession, everybody is on the same page about what this means. If you look at the codes, some of them are rather broad, and so there's a lot of room for interpretation.

JULIA TAYLOR KENNEDY: It's really a fascinating industry. Thank you so much for your openness and for dealing with all these questions I've been lobbing at you. I really appreciate you coming on Just Business.

CYNTHIA CHENG CORREIA: Thank you so much, Julia. I've enjoyed it so much. You've certainly done your homework. It's a pleasure.

JULIA TAYLOR KENNEDY: And that wraps up this week's look at competitive intelligence. I'm Julia Taylor Kennedy. Thanks to Terence Hurley and Emil Chireno for their contributions to this week's podcast. Thanks to Tony Higgins and Buildings and Mountains for this week's music.

And thanks to you, our listeners, for joining us. We're happy to hear from you. Please send questions and comments to jkennedy@cceia.org.