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The Dude
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Did spies steal GM secrets for rival?
2 men charged with giving info to Russian automaker

This could be the script to a spy movie, but it is actually playing out in the real world in South Korea.

Authorities there have accused three former GM-Daewoo employees of stealing critical General Motors Co. technological information to give to a Russian competitor, TagAZ.

One of the men has committed suicide; the other two face charges they've denied.

Meanwhile, GM says that TagAZ's new C-100 sedan looks an awful lot like its Chevrolet Lacetti sold in Russia and elsewhere.

The development underscores the intensifying competition in Russia. It also shows the difficulties U.S. companies face trying to protect their intellectual property in the global marketplace.

GM's ability to protect its intellectual property for use in Russia played a major part in gumming up talks to sell GM's Opel brand to Magna International this summer.

What's more, the U.S. Attorney's Office recently announced charges against a Chinese man, alleging he stole trade secrets while working as a product engineer at Ford Motor Co. before leaving for a job at a Chinese company.

"It's a huge threat," Scott Stewart, an expert in corporate security with Stratfor, a global intelligence company, said of the espionage. "It's just a bad nightmare."

TagAZ denies accusations

GM has asked a South Korean court to block Russian automaker TagAZ from developing, manufacturing and exporting information allegedly stolen from GM-Daewoo's offices.

At issue is TagAZ's new C-100, introduced earlier this year, and its similarities to a GM compact car code-named J-200 -- the predecessor to the Chevrolet Cruze.

"It's pretty close, if not dead on," Jay Cooney, vice president of communications and public policy for GM-Daewoo, told the Free Press.

GM has sold 2 million versions of the J-200 globally since 2002. Russia is considered a major market for the vehicle, which is known there as the Chevrolet Lacetti.

"The J-200 may not be a new vehicle for a lot of developing countries, but for a lot of emerging markets, it's a very aspirational vehicle," he said.

TagAZ denied to the Moscow Times that the Russian automaker stole the GM designs.

"We are absolutely certain that it is a unique, original model," TagAZ spokeswoman Yelena Larina told the newspaper. "We can't rule out, however, that this may be an attempt by our competitors to slow down the sales of our new car."

She said the company spent four years and $250 million to design its car.

Tim Urquhart, a Russian auto industry analyst with IHS Global Insight in London, said it typically costs an automaker such as GM $1 billion or more to fully launch a new vehicle.

TagAZ has traditionally been a contract assembler for automakers such as Hyundai.

"They're obviously trying to get into becoming a full-fledged" automaker, Urquhart said. The C-100 "is the first thing they've ever done."

According to Korean news media reports, two men, identified only by their surnames of Hwang and Jeong, were arrested in September on charges of giving information on GM's Lacetti compact car to the local offices of TagAZ.

Both men had worked at GM-Daewoo before leaving for jobs at TagAZ.

Jeong supposedly copied more than 6,000 files detailing engine and parts designs to build the Lacetti, investigators told the Korea Times.

"The prosecutor and GM-Daewoo believe that they took files ... that we owned and used the files in the development of their vehicle," GM's Cooney told the Free Press.

GM said it is hoping the Korean court will make a decision on the preliminary injunction soon.

Cooney confirmed that "quite a few" Daewoo engineers have left for jobs at TagAZ.

"Investigators are also looking into whether TagAZ Korea masterminded the plot, considering a large number of former GM-Daewoo employees were recruited by the Russian automaker," the Korea Times reported in September.

This is not the first time GM has seen this kind of trouble.

Chery, a Chinese automaker, settled a legal claim in 2005 by GM that it had pirated the design of its Chevrolet Spark minicar, which looks like the Chery QQ.

Speaking in general, Thomas Moga, a lawyer at Shook, Hardy & Bacon in Washington who specializes in intellectual property and international business transactions, said recovering from corporate espionage is nearly impossible.

"Once that technology is out of the bag, it can either be used intact completely wrongfully or it can be varied so some clever company can get around patents. ... It gives the competitor a huge unfair advantage," he said.

As much as 75% of the market value of a typical U.S. company resides in its intellectual property, according to ASIS International, a nonprofit industrial security organization.

Its most recent Trends in Proprietary Information Loss report identified China, Russia and India as the top three foreign countries as the intended recipients for compromised information.

"Deliberate actions of current and former employees are a primary threat to proprietary information," the 2007 report said.

Previous surveys by the group have found U.S. companies reporting losses as high as $59 billion in one year.

"Anything that you take to these countries is compromised. Anything you are doing as far as design, anything you are doing as far as IT/engineer, any data you have in China, or Russia for that matter, you can assume it's compromised and it's going to be taken," said Scott Stewart, an expert in corporate security with STRATFOR, a global intelligence company.

Tom Stephens, GM vice chairman of global product development, said GM is protective of its intellectual property.

"Developing the IP these days is very expensive and, as such, you want to make sure you can take full use of it," he said.
 
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