understanding the legal boundaries for competitive intelligence in india 9th july 2009...

UNDERSTANDING THE LEGAL UNDERSTANDING THE LEGAL

BOUNDARIES FOR COMPETITIVE

INTELLIGENCE IN INDIAINTELLIGENCE IN INDIA

“Competitive Intelligence India”

Marcus Evans: July, 2009 (Mumbai, India)

Presented By:

Harsh Sinha, Partner – Kaden Boriss Partners

Kaden Boriss Partners, Lawyers

Gathering Information about competitors

• Effective Competitive Intelligence (CI) plays a major role in determining whatyour business rivals WILL DO before they do it.

• Effective gathering of information under CI can be helpful to gainforeknowledge of the competitor's plans and to plan one’s business strategyto countervail their plans.

• Some common tools/methods for gathering competitor’s information:o Online Databases

o Surveys and Interviews

o Reverse Engineering of competitor's products

o On-site Observations

• While some methods/tools are ethical others may strictly not be so!• While some methods/tools are ethical, others may strictly not be so!


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CONTD.

• No “standard” tool for all CI activities: choose the “tool” depending on factors liketime, finance, priority of data, likelihood of obtaining data etc.

• A competitor can foil CI of a rival: fake interviews as potential employer/job-A competitor can foil CI of a rival: fake interviews as potential employer/jobseeker to gather information about the rival

• Counter-intelligence is vital- you are being watched too!- defending one’si ti ’ t i it l S i t t fid ti lit /organization’s secrets is vital. Securing computer systems, confidentiality/non-

disclosure obligations on employees can be useful.

• Requisites to be followed by Competitive Intelligence:-q y p g

o Must abide by all applicable laws - whether domestic or internationalo Must accurately disclose all relevant information

M t id h t d li ti d ti d l i i th tio Must provide honest and realistic recommendations and conclusions in the executionof one's duties etc


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MAKING THE ORGANIZATION MORE COMPETITIVE

A nexus between CI activities & corporate performance?o not always a direct cause-effect relation

benefits need not always be tangible & explicit; but there are benefits (often gradual)!o benefits need not always be tangible & explicit; but there are benefits (often gradual)!o International studies have shown a link between CI & corporate performance (companies

practicing higher levels of CI were able to increase their business performance)

Quantitative relation of CI & Corporate Performance {study by Jawaorski & Wee,1993; McGonagle & Vella 1996}o High level of intelligence practiced →37 percent higher level of product quality and 68

percent increase in business performance.p p

o High level of intelligence practiced → 36 percent higher level of strategic planning qualityand 48 percent increase in business performance.

o High level of intelligence practiced → 50 percent higher level of market knowledge and36 percent increase in business performance36 percent increase in business performance.


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CONTD.

• Some tangible benefits of CI

o Identification of new opportunities - e.g. identify new trends before our markets and competitors

Early warning of competitor moves enable counter measureso Early warning of competitor moves - enable counter measures

o Minimizing investment risks - detect threats and trends early on

B tt t i t ti i h it i t ifi d t k t io Better customer interaction - inherit intensified customer market view

o Better market selection & positioning - understand where your offer fits and discover untapped or under-served potential


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COMPETITIVE INTELLIGENCE VS CORPORATE ESPIONAGE

Espionage is ‘spying’ and Corporate Espionage (CE) is espionageconducted for “commercial purposes”.

CE is the "theft of trade secrets through illegal means such as wiretaps,bribery and cyber intrusions.“ (as per definition by Business Week Online)

Going beyond browsing websites, corporate publications, market survey etc.into theft of trade secrets, bribery, blackmail, and technological surveillance.CE done to obtain information ‘outside’ publicdomain/’restricted’/’confidential’.

CE: usage of illegal, unethical or deceptive means to obtainrestricted/confidential/secret information of the rival (CI : use of ethical &restricted/confidential/secret information of the rival (CI : use of ethical &legal means of obtaining information)


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CONTD. CI is completely ethical and legal; CE is exactly the opposite i eCI is completely ethical and legal; CE is exactly the opposite, i.e.unethical and illegal.

Illegal/unethical means of obtaining ‘secret’/’restricted’/’confidential’i f tiinformation:

o Stealing information;o Misrepresenting one’s identity to gather information;p g y g ;o Offering bribes for obtaining confidential information;o cyber crimes like ‘hacking’;o “Dumpster diving”;o Programs like “Trojan Horse”

CI & CE co-exist (there is a thin, often blurred line!)CI practitioners (in general) abide by all laws & regulations; not so in CECI practitioners (in general) abide by all laws & regulations; not so in CECE: Internal (by rogue/disgruntled employees) & External (by hackers)


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CORPORATE ESPIONAGE IN INDIA

● Corporate espionage (CE) is relatively new in India, though first reportedcase (international) in 1943 ( a P & G employee bribed a Lever Brotherworker to steal soap).

● CE per se is not defined as an offence under any statute in India.

Use of illegal means for obtaining ‘CI’ information may constitute offences● Use of illegal means for obtaining CI’ information may constitute offencesunder various laws.

● Most victims of CE do not formally lodge a complaint with authorities- fearingy g p gloss of reputation {only 20% cases get reported due to sensitivity involved-KPMG study}

It t h t it l h t th ! i t k b li f● It cannot happen to us, it only happens to others! – a mistaken belief


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ANALYZING LEGAL ASPECTS RELATING TO COMPETITIVE INTELLIGENCE

Gathering ‘information’ about the competitor- ‘Yes’; use of illegal means togather such information- ‘No’g

The activity/process of gathering information through illegal means (CI, hadthe means been legal/ethical) not per se defined as an offence; the illegal

d f th tit t ff d lmeans used for the purpose may constitute an offence under some law.

‘tool’ used for gathering information could be in contravention of a law of theland; such contraventions are dealt with under different statutesland; such contraventions are dealt with under different statutes


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C INTELLIGENCE & I TCOMPETITIVE INTELLIGENCE & INFORMATION TECHNOLOGY

I f ti T h l (IT) i i t l t f th titi● Information Technology (IT) is an integral part of the competitiveintelligence process- it is the basic technological support system forcompetitive intelligence.

● networks, information systems, databases, search machines, internet:IT as a tool of CI process.

IT: invaluable tool profound potential for abuse!!!● IT: invaluable tool- profound potential for abuse!!!

● Some provisions of Information Technology Act, 2000 (“ITA”) seek tocurb misuse/abuse of IT tools for illegal collection of information


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CONTD

● Some key features of ITA:

o defining ‘data’, ‘computer database’, ‘information’, ‘computer resource’,‘electronic form’ ‘originator’ ‘addressee’ etc {Sec 2}electronic form , originator , addressee etc. {Sec. 2}

o creating civil liability if any person accesses or secures access to computer,computer system or computer network {Sec. 43 & 66}

o creating criminal liability if any person accesses or secures access tocomputer, computer system or computer network {Sec. 66}

o punishment for dishonestly receiving stolen computer resource oro punishment for dishonestly receiving stolen computer resource orcommunication device {Sec. 66B}

o punishment for cheating by personation by using computer resource {Sec66D}

o setting up of hierarchy of regulatory authorities, namely adjudicating officers,the Cyber Regulations Appellate Tribunal etc {Chapter X}.


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KEY PROVISIONS OF THE INFORMATION TECHNOLOGY ACT, 2000

The Act provides a complete Chapter (Chapter IX) on cyber contraventions,i.e., Section 43 (a) – (j) which cover a wide range of cyber contraventionsrelated to unauthorized access to computer computer system computerrelated to unauthorized access to computer, computer system, computernetwork or resources.

Some of the activities under Sec. 43 (contravention, if done dishonestly,fraudulently & without permission of the owner) are:fraudulently & without permission of the owner) are:

accessing or securing access to such computer, computer system or computernetwork; or computer resource -[43(a)]

downloading, copying or extracting any data, computer data base or informationfrom such computer, computer system or computer network including information ordata held or stored in any removable storage medium- [43(b)]

introducing or causing to be introduced any computer contaminant or computer virusintroducing or causing to be introduced any computer contaminant or computer virusinto any computer, computer system or computer network- [43(c)]


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CONTD.

d i i t b d d t t t tdamaging or causing to be damaged any computer, computer system or computernetwork, data, computer data base or any other programs residing in such computer,computer system or computer network – [43(d)]

disrupts or causes disruption of any computer, computer system or computernetwork – [43 (e)]

providing any assistance to any person to facilitate access to a computer, computersystem or computer network in contravention of the provisions of the ITA- [43(g)]

destroying, deleting or altering any information residing in a computer resource ordiminishing its value or utility or affecting it injuriously by any means- [43(i)]

o Penalty (Civil): liability to pay damages by way of compensation toth ff t d t INR 500 000 {S 66}the person so affected- up to INR 500,000 {Sec. 66}

o Punishment (Criminal): imprisonment extending up to three (3) years{Sec. 66}


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CONTD.

o Dishonestly receiving stolen computer resource or communicationdevice {Sec. 66 B}

the offence- dishonestly receiving or retaining any stolen computer(i l d d t ) i ti d i k i h iresource (includes data) or communication device knowing or having

reason to believe the same to be stolen computer resource orcommunication device

the punishment- imprisonment (up to 3 years) or fine (up to INRthe punishment- imprisonment (up to 3 years), or fine (up to INR100,000) or both

o Cheating by personation by using computer resource {Sec 66D}

the punishment- imprisonment (up to 3 years) and fine (up to INR100,000)

o ITA applies to offences committed outside India, if: the act or conductconstituting the offence or contravention involves a computer, computersystem or computer network located in India {Sec 75}


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INDIAN PENAL CODE, 1860 (IPC) & COMPETITIVE INTELLIGENCE

The method adopted to obtain information may constitute an offence underIPC. IPC prescribes the criminal liability/punishment for various illegal meansthat are often used to obtain informationthat are often used to obtain information.

“Theft “: Whoever, intending to take dishonestly any movable property out ofthe possession of any person without that person’s consent, moves thatproperty in order to such taking is said to commit theft {Sec 378 IPC}property in order to such taking, is said to commit theft. {Sec. 378 IPC}

o “The words “movable property” are intended to include corporeal property of everydescription, except land and things attached to the earth or permanently fastened toanything which is attached to the earth.” {Sec. 22 IPC}anything which is attached to the earth. {Sec. 22 IPC}

o Data can be stored on some storage device (CD, Floppy, USB etc.)- theft of suchCD/Floppy etc. can be committed.

o Punishment for theft- imprisonment up to 3 years or fine or both {Sec 379}o Punishment for theft- imprisonment up to 3 years, or fine ,or both {Sec 379}


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CONTD.

“Dishonestly receiving stolen property”- Whoever dishonestly receives or retainsany stolen property, knowing or having reason to believe the same to be stolenproperty, shall be punished with imprisonment of either description for a term whichmay extend to three years, or with fine, or with both. {Sec 411}

“Criminal breach of trust”- Whoever, being in any manner entrusted withproperty, or with any dominion over property, dishonestly misappropriates orconverts to his own use that property, or dishonestly uses or disposes off thatproperty in violation of any direction of law prescribing the mode in which suchp p y y p gtrust is to be discharged, or of any legal contract, express or implied, which he hasmade touching the discharge of such trust, or willfully suffers any other person so todo, commits ‘criminal breach of trust’ ”. {Sec 405}

t t t f to entrustment of propertyo dishonest misappropriation or own use or disposal of propertyo in contravention of direction of law or legal contracto Punishment: imprisonment up to 3 years, or fine, or both {Sec. 406}


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CONTD.

“Criminal breach of trust” committed by a public servant banker merchant“Criminal breach of trust”- committed by a public servant, banker, merchant,broker, attorney or agent {Sec 409}

o Punishment: imprisonment for life, or with up to 10 years, and also fineo Director is not only an agent of a company, but also a trustee of the assets of the companyo Director is not only an agent of a company, but also a trustee of the assets of the company

that comes to his hand {observed by SC in Shivnarayan, 1980 CrLJ 388}

“Cheating”- Whoever, by deceiving any person, fraudulently or dishonestly inducesthe person so deceived to deliver any property to any person, or to consent that any

h ll t i t i t ti ll i d th d i d t dperson shall retain any property, or intentionally induces the person so deceived to do oromit to do anything which he would not do or omit if he were not so deceived, and whichact or omission causes or is likely to cause damage or harm to that person in body, mind,reputation or property, is said to "cheat". {Sec. 415 }

deception of any person (dishonest concealment of facts is deception)o deception of any person (dishonest concealment of facts is deception)o fraudulent or dishonest inducement- to deliver any property or a person may retain property;

or,o Intentionally induce to do/omit to do something which he wouldn’t have done/omitted if not

deceivedcauses or likely to cause harmo causes or likely to cause harm

o Punishment: imprisonment up to 1 year, or fine, or both {Sec. 417}


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CONTD.

“Cheating by personation”- cheating by pretending to be some other person,or by knowingly substituting one person for another, or representing that he orany other person is a person other than he or such other person really is. {Sec416}

o Punishment: imprisonment up to 3 years, or fine, or both. {Sec 419}

“Cheating and thereby dishonestly inducing a person to deliver property” Wh h t d th b di h tl i d th d i d”- Whoever cheats and thereby dishonestly induces the person deceived anyproperty to any person, or to make, alter or destroy the whole or any part of avaluable security, or anything which is signed or sealed, and which is capable ofbeing converted into a valuable security, shall be punished with imprisonment ofeither description for a term which may extend to seven years, and shall also bep y y ,liable to fine. {Sec. 420}


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DATA PROTECTION

"data" means a representation of information, knowledge, facts, concepts orinstructions which are being prepared or have been prepared in a formalizedgmanner, and is intended to be processed, is being processed or has beenprocessed in a computer system or computer network, and may be in anyform (including computer printouts magnetic or optical storage media,punched cards, punched tapes) or stored internally in the memory of the

t {S 2( ) ITA}computer {Sec 2(o) ITA}

Data protection- no specific statute; provisions under ITA , IPC & CopyrightsAct (protection of copyrighted data) applicable.

Recent incidents involving data theft:

Software engineers of Brainvisa Technologies (Pune) arrested for allegedly cheating thecompany by stealing computer code (2009)

HSBC call center employee was arrested and booked under provisions of ITA & IPC for stealingclient’s details and then accessing the accounts to take over £230,000 [2006]-


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BREACH OF CONFIDENTIALITY

Obligation of confidentiality- legal, fiduciary, contractual obligation.

Indian Contract Act (ICA) : Section 73 - Compensation for loss or damagecaused by breach of contract: party who suffers by such breach is entitled toreceive, from the party who has broken the contract, compensation for anyy yloss or damage caused to him thereby, which naturally arose in the usualcourse of things from such breach.

Section 74 ICA: if an amount has been specified in the contract for breachSection 74 ICA: if an amount has been specified in the contract for breach,the party suffering is entitled to receive reasonable compensation notexceeding such sum.

Provisions of IPC & ITA , in addition to contractual remedies


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BREACH OF CONFIDENTIALITY

IPC provisions: Sec. 409- criminal breach of trust by banker, merchant,broker, attorney, agent {breach of fiduciary obligation}; Sec 405- criminalbreach of trust {both legal & contractual}

ITA provisions:ITA provisions:

Sec. 72 A- Punishment for disclosure of information in breach of lawful contract.–

Save as otherwise provided in this Act or any other law for the time being in force, anyp y g , yperson including an intermediary who, while providing services under the terms oflawful contract, has secured access to any material containing personal informationabout another person, with the intent to cause or knowing that he is likely to causewrongful loss or wrongful gain discloses, without the consent of the person concerned,or in breach of a lawful contract, such material to any other person, shall be punishedwith imprisonment for a term which may extend to three years, or with fine which mayextend to five lakh rupees, or with both.


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CORPORATE GOVERNANCE & COMPETITIVE INTELLIGENCE

Companies are laying great emphasis on highest standards of ethics-transparency & accountability

Big Companies like Infosys, WIPRO, Tata Steel have adopted strictcode of ethics & conduct- discourages corporate espionage

Unlawful use by their employees of material, confidential information,y p y , ,intellectual property of competitors strictly prohibited

Transparent accounting & payment policies- payment withoutsupporting documents not encouragedsupporting documents not encouraged

Paying or offering bribes strictly prohibited

Noble policies at times not followed in letter & spirit! – Satyam scamNoble policies, at times not followed in letter & spirit! – Satyam scam


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INTELLECTUAL PROPERTY & COMPETITIVE INTELLIGENCE

The 3 main statutes: Trade Marks Act,1999 (“TMA”); Copyrights Act, 1957(“CA”) and Patents Act,1970 (“PA”).( CA ) and Patents Act,1970 ( PA ).

Information technology (computers, internet et. al.)- a major tool for stealing& misusing confidential and protected information

Vital information about products, process (protected & proprietary) can bestolen, re-engineered/modified- huge losses to companies owning suchinformation

Chemical/biological formulae/structure of a vital ingredient of a product canbe stolen using highly sophisticated IT tools.

a specific law to protect trade secrets is imperative


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SOME PROVISIONS

Section 25 PA: Opposition to Patents(1) Where an application for a patent has been published but a patent has not been granted, any

person may, in writing, represent by way of opposition to the Controller against the grant of patenton the ground-on the ground-(a) that the applicant for the patent or the person under or through whom he claims, wrongfullyobtained the invention or any part thereof from him or from a person under or through whom heclaims;(2) At any time after the grant of patent but before the expiry of a period of one year from the date( ) y g p p y p yof publication of grant of a patent, any person interested may give notice of opposition to theController in the prescribed manner on any of the following grounds, namely:-(a) that the patentee or the person under or through whom claims, wrongfully obtained theinvention or any part thereof from him or from a person under or through whom he claims;

Section 108 PA: Relief for infringement (in a suit)- injunction & damages

Section 63 CA: offence of infringement- imprisonment (6 months-3 years) & fine(R 50 000 t 200 000)(Rupees 50,000 to 200,000)


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SOME PROVISIONS

Section 55 CA: Civil remedy for infringement: injunction & damages

Section 29 TMA - Infringement of registered trade marks- a registered trade mark isinfringed by a person who, not being a registered proprietor or a person using by wayof permitted use, uses in the course of trade, a mark which is identical with, ordeceptively similar to, the trade mark in relation to goods or services in respect of

hi h th t d k i i t d d i h t d th f thwhich the trade mark is registered and in such manner as to render the use of themark likely to be taken as being used as a trade mark.

Burden of proof under TMA: the person alleging infringement must prove it {SupremeCourt ruling in 2000 -SM Dychem ltd. v. Cadbury ltd.)


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ROLE OF SOCIETY OF COMPETITIVE INTELLIGENCE PROFESSIONALS

S.C.I.P. : a non-profit global organization with a mission to develop, maintain, andpromote the body of knowledge for the competitive intelligence community throughresearch and education {formed 1986}

Promoting CI as a discipline bound by a strict code of ethics and practiced bytrained professionals

Providing education & information about CI & its significance; spreading info onlatest developments in information gathering, analysis and dissemination.

Education & training for effective CI while maintaining highest ethical standardsEducation & training for effective CI while maintaining highest ethical standards.

SCIP prescribes a strict Code of Ethics for its members- compliance with laws,abiding by company policies & guidelines, accurately disclosing one’s identity


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THANK YOU

H h Si hHarsh Sinha,Partner, Kaden Boriss Partners, Lawyers

Kaden Boriss Building, 495, Udyog Vihar, Phase – V, Gurgaon, Haryana, INDIA

Tel: +91 124 40404193

Mobile: +91 9650395326 Fax: +91 124 40404194Email: [email protected]


Note: Several statements contained in this presentation represent the personal views of the presenter and mayNote: Several statements contained in this presentation represent the personal views of the presenter and maynot necessarily reflect the position of Kaden Boriss Partners . Accordingly, Kaden Boriss Partners should not bedeemed responsible for the contents hereof.

understanding the legal boundaries for competitive intelligence in india 9th july 2009...

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