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How to Navigate the Ethical Gray Zones of Competitive Intelligence

Assuming that your organization is committed to gaining competitive intelligence above reproach, you shouldn’t have much of a gray zone to worry about. You shouldn’t have to fear landing in court as the target of a lawsuit or on the front page of The Wall Street Journal as a company that cheats.

However, your organization will still find itself facing circumstances in which the law and your own ethical standards are uncertain as they pertain to CI.

When a competitive intelligence firm worked for a competitor

CI consulting firms commonly work for companies in the same industry. Hiring a firm that has worked for your competitors isn’t necessarily a conflict as long as no proprietary information is shared and the scopes of the two projects don’t overlap. Problems may arise, however, if your outside consultants try to cut corners by simply repurposing the work they did for a different client and selling it to you.

Here are a few guidelines to help you steer clear of potential pitfalls when hiring a CI consulting firm:

  1. Always prepare a written agreement that prohibits the CI firm from disclosing proprietary or confidential information from former clients.

  2. Obtain the firm’s agreement that it will not provide you with information that has already been paid for by a competing firm.

  3. Make sure that the statement of work provided by the expert is not in conflict with work performed for any competitors.

  4. Have the consulting firm sign a nondisclosure agreement that prohibits it from sharing any information about your organization or information obtained for this particular CI project with other clients.

When potential employees worked for competitors

If you’re ever in the market to hire a former employee of a competing business, do it for the right reason — that is, because the individual is the best person qualified for the job. Don’t hire the person to get inside information. Furthermore, before you offer the person the job, take the following precautions:

  • Make sure that the person doesn’t have a contractual relationship with the competitor that contains unacceptably restrictive conditions related to employment with your company. Consult with your organization’s legal counsel before offering the person a position.

  • Get any new hires, especially those who’ve worked for a competitor, to contractually agree that they will not provide any information from a prior employer that was confidential or proprietary. Most important, that agreement must clearly specify that no trade secrets will be shared.

  • Have the employee sign a contract as a condition related to employment, confirming that she had no contractual agreement with her former employer that prohibits her from working for a competitor (such contracts normally provide for a specific period of time).

  • Prohibit the person from bringing any confidential files or other information from the competitor.

Protect your organization’s confidential information. Companies have been known to hire former employees of competing firms and keep them on the payroll just long enough to extract valuable information and insight. If a key employee who has had access to critical information is about to leave the company, especially if the employee is disgruntled, take the following precautions to keep sensitive information from being leaked:

  • Make the individual aware of the legal liability related to disclosing trade secrets.

  • Make sure that all access to proprietary information is ceased at the moment the employee indicates that she is leaving the company.

  • Have security or the employee’s supervisor pack up the employee’s belongings to ensure that the employee doesn’t walk out with any confidential documents or other information.

When you take photos or video

When you have the opportunity to take photos or video of a competitor’s operation, you may feel as though you’re on a reconnaissance mission, sneaking behind enemy lines to steal trade secrets. But snapping photos or shooting video may be perfectly acceptable as long as it passes the plain-view test.

Here are some scenarios that challenge your ability to determine whether the activity crosses the line:

Question: Is it acceptable to hire a private investigator to sit outside a competitor’s office and take pictures of all the delivery trucks and shipments that arrive or leave the premises?
Answer: Yes. The competitor is knowingly making this information available in a public setting. It’s no different from driving down a road and seeing a truck leaving a competitor’s premises.
Question: You have the opportunity to lease an office space that overlooks a competitor’s warehouse, which would allow you to photograph and identify customer names and products being shipped. Would this be ethical?
Answer: Yes. Again, the information is in plain view, and the company hasn’t taken any precautions to hide it. However, some people still have trouble with this practice; you sure wouldn’t want the local newspaper running an article about you doing this.
Question: You get a call from your human resources director, who tells you that an applicant for a sales position is interested in leaving her position with a competitor. When you contact the applicant, she reveals that she has information about all the products the competitor plans on introducing over the next five years.
She has been mistreated by the competitor and says she would have no problem in revealing all that information if your company hires her. Should you accept the information if you hire her?
Answer: No. In this case, your ethics may protect you from bigger issues. A standard of integrity above reproach prohibits you from accepting the information. Additionally, your decision to reject the information will also protect you legally as related to the theft of trade secrets.
You should consider going even farther and not hiring this applicant; after all, if she’s willing to pass along trade secrets, do you really want her working for you?

One rule governs how to approach gray area situations: When in doubt, don’t do it.

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