Market for corporate espionage reaches $2 billion

BOSTON -- When Schick-Wilkinson Sword officially announced its four-bladed shaving product Quattro in August, rival Gillette already knew all about it -- enough, in fact, to slap Schick with a patent infringement lawsuit hours after the press release came out.

Two weeks later, Gillette filed court papers in which a company engineer shared the results of scientific tests conducted on 10 Quattro cartridges obtained by the company.

Solid, shoe-leather research, or unsavory espionage? Gillette won't say exactly how it acquired the cartridges, and an attorney for Schick indicated last week he planned to raise the question in court. But hardly anyone else batted an eye -- after all, practically every major company runs some kind of "competitive intelligence" operation.

'To be expected'

The only surprise would have been if a huge company like Gillette, which spent $1 billion developing the Mach3 Turbo razor it claims is being ripped off, had been caught off guard.

"It really is to be expected," said Jan Herring, a Cambridge consultant who advises companies on competitive intelligence.

According to figures cited by the Society of Competitive Intelligence Professionals, an industry group, the market for business intelligence amounts to about $2 billion annually. A 1997 survey found that 82 percent of companies with revenue over $10 billion had some kind of intelligence organization.

Experts in the field insist they are engaged in legitimate market research, not spying, although their work often has the feel of espionage as they scour everything from permit applications for plant expansions to commercial satellite photos -- anything to learn something about a competitor.

Many companies say they adhere to strict guidelines. Generally, research through the Internet, patent applications and interviews with former employees are fair game, but bugging, misrepresentation and bribery are no-nos.

Still, experts say there are ethical gray areas, and sometimes those disputes spill out into the public. In 2001, Unilever and Procter & Gamble settled a complaint about P&G's intelligence-gathering operations, after, according to published reports, an outside firm hired by P&G went digging through its rival's garbage for the secret to a new shampoo.

P&G didn't discuss specifics but said it notified Unilever and called the episode "an unfortunate incident" that was "not in keeping with P&G principles and policies."

"There are really clever analysts (who) do a lot of research, do a lot of reading and draw a lot of clever inferences," said Craig Ehrlich, a Babson College professor who has written about ethical issues in competitive intelligence gathering. "Good for them. Then there are people who are not as bright and not as capable who do really sleazy stuff like pretending to be somebody else."

Many sources

But Herring said there are numerous legitimate ways to acquire competitive intelligence, from attending trade shows to reviewing scientific literature to interviewing customers and former employees.

"It would be very difficult to keep that kind of developmental activity away from potential customers, from their own patent filings, just the employees in the company who've left and talk," he said. "There are a lot of sources."

When rumors circulated about the Quattro last May, Schick-Wilkinson Sword confirmed it would sell a four-bladed razor in the fall but provided no details. Jacqueline Burwitz, a spokeswoman for St. Louis-based Energizer Holdings, Schick-Wilkinson Sword's parent company, said some samples were passed to prospective customers, under confidentiality agreements, and reporters.

So how did Gillette get its hands on the 10 Quattros?

"I'd love to know," Burwitz said. "I'd love to ask them that. Interesting that they can get 10 of a product that hasn't hit the stands yet."

In court last week, Gillette attorney James Nathan said the company obtained one sample in June and the others "practically on the eve of filing the papers" but did not say how they were acquired.

Gillette spokesman Eric Kraus said competitive intelligence is common and accepted, and that Gillette has often seen its own new products end up in rivals' hands.