With more and more companies operating in foreign countries, it is becoming increasingly difficult to protect intellectual property and other sensitive information.  In this last of a three-part series on business intelligence, FP explores with Mr. Rustmann why counterintelligence concerns every company that has intellectual property that can be stolen.

   Counterintelligence And Counterfeit Ray Bans

   The third category of business intelligence, counterintelligence, is the flip side of the intelligence coin.  It is a huge subject and concerns every company with intellectual property that can be stolen.  As I mentioned earlier, it is a $100 billion dollar-a-year industry. 

   Counterfeiting and product rip-offs, for example, are a growing, nasty industry.  Microsoft alone loses hundreds of millions of dollars each year through the illegal manufacture and sale of rip-off copies of its software.  For many years Taiwan has been a major source of illegal copies of books, video and audiocassettes, software and everything else imaginable all the way to Polo shirts and Levis Jeans.

   How can this all be stopped?  Not easily.  But I will give you an example of an operation that sought to shut down the illegal sale of counterfeit Bausch & Lomb products in Ecuador.

   In mid-1994, Bausch & Lomb became aware that cheap knock-offs of its Ray-Ban Wayfarer, Aviator and other models of sunglasses were appearing in market kiosks near the Hotel Intercontinental in Quito.

   We were asked to determine if counterfeits were indeed being sold; next, find the source of the supply and distribution network; and finally, to urge the police to confiscate the rip-offs and arrest the criminals behind the activity.

   We began by having one of our local sources visit that kiosks and shops in the area with instructions to photograph counterfeit glasses on display, and to purchase examples from each place to be used as evidence.

   The source identified and photographed several locations, including such prominent shops as Taty, Scarlett and Sacos where he found the rip-offs being sold at an average price of $15 per pair.  Through elicitation from vendors, he learned that the frames and cases were being shipped into Ecuador via sea from Panama and overland from Columbia, and that the lenses were ground and fitted at a location in Guayaquil on the coast.

   Further investigation and surveillance revealed a warehouse in the market area  called Ipiales Martek.  The warehouse was owned by one Lenin Martinez, who belonged to a co-operative called Libertad, Paz y Justicia (Liberty, Peace and Justice), which was known to be involved in black market activities.  The source subsequently confirmed that Mr. Martinez was the largest distributor of counterfeit Ray Bans in Quito.

   Armed with this knowledge and in close co-ordination with our client, we contacted the US Embassy and urged them to make a démarche to the Ecuadorian government under the US Trademark Counterfeiting Act of 1984.  We wanted the Embassy to pressure the Ecuadorians to raid the kiosks and shops, arrest the individuals involved, confiscate the counterfeit sunglasses and destroy them.

   The US Embassy’s actions were (predictably) not very strong, and resulted in the confiscation and destruction of only a few cases of sunglasses, and no arrests.

   The fact that billions of dollars are lost each year to counterfeiters of this ilk, an amount that includes lost product sales, jobs and policing costs, is somehow lost on a government with larger problems (narcotics, etc.) on its mind.

   The burden for counterintelligence activities of this sort must therefore rest with the companies that are being hurt.

   Being Prepared

   Realizing the importance of good, solid intelligence is the first step towards being prepared.  The second step is employing experts to collect that intelligence.

   Some companies (WR Grace and AT&T, for example) have special competitive intelligence units within their organizational structure.  Others hire professional consultants from outside of the organization to handle their intelligence collection requirements or augment their efforts.  Either way, the craft of intelligence gathering and analysis is sufficiently arcane that it should be left to the experts.

   CIA case officers, for example, spend about a year at “The Farm,” the Agency’s covert training facility, attending formal intelligence training courses before being released to employ their skills abroad.  Part of what they learn is how to collect information discreetly through the use of clandestine tradecraft methods, how to evaluate the sources of that information, and how to report that information accurately, objectively and dispassionately.

   The FBI and some police departments also run intelligence collection courses for their officers.  The main difference between the CIA training and the FBI/police training is that the latter places more emphasis on techniques that utilize the power of the badge.  The CIA, on the other hand, employs a more covert approach, relying more heavily on the use of cover and deniability to assure a greater degree of discretion in its collection efforts.

   Companies employing in-house resources often have difficulty obtaining objective information because of problems with training, resources and vested interests.  They do not usually have the requisite resources (computer databases, personal contacts, etc.) to collect the information it needs.  And employees with a stake in the company’s output will almost certainly lack the objectivity to report information accurately and without bias.  The tendency is to paint pictures that support company policy or please superiors.

   This is precisely why professional intelligence consultants from outside the organization should be called in to handle the most sensitive intelligence gathering missions.

   The Urge To Wing It

   Managers who choose not to do their homework before they embark on a course of action are doomed to failure.  Successful people always do their homework.

   Years ago, when I was teaching the craft of intelligence to new CIA officers down on “The Farm” I discussed the concept of thorough preparation as the single most important key to success in the intelligence business.

   I explained that although all good operations officers certainly have the ability to “wing it” when necessary, the best officers never go into a situation with that intention.  They try to prepare for every possible eventuality in advance, and then only have to improvise when a real unexpected curve is thrown at them.

   That is good advice for any business.  To quote Sun Tzu once again, he said: “To remain in ignorance of the enemy’s condition simply because one grudges the outlay of a hundred ounces of silver…is the height of inhumanity.”  Perhaps it would be more accurate if the word stupidity were substituted for inhumanity.

   The military advice that Sun Tzu espoused so long ago applies equally to today’s business.  Know your own and your competitor’s capabilities, and know your battlefield.  Armed with this knowledge, you cannot lose—the worse thing that can happen is that you decide not to engage.