Obtaining and Using Proprietary and Confidential Information without Proper Authorization

Obtaining and Using Proprietary and Confidential Information without Proper Authorization

Section I

Ethical Implications of Using a Competitor’s Confidential Information

The increase in competition in the 21^st century has forced some organizations to consider using a competitor’s confidential information to gain a competitive advantage. However, using a competitor’s confidential information can have major ethical implications that can affect the company’s reputation and how it relates with stakeholders. One of the ethical implications is the infringement of intellectual property rights. Companies have an ethical responsibility to respect other companies’ intellectual property rights, such as trade secrets, copyrights, trademarks, and patents. Therefore, using a competitor’s confidential information violates intellectual property rights because it includes unauthorized use of a company’s trade secrets.

The second ethical implication is creating unfair competition. Companies must refrain from any actions that create unfair competition to create a conducive environment for all players in the market. Using a competitor’s confidential information creates unfair competition because it includes the use of dishonest and deceptive strategies to gain a competitive advantage. Unfair competition is also linked to the third ethical implication, which is the violation of industry ethical codes and conduct. Most industries prohibit the use of unfair competition to create a competitive advantage, such as the use of a competitor’s confidential information. Therefore, using a competitor’s confidential information violates industry ethical codes and standards and could significantly impact a company’s reputation in the industry.

Using a competitor’s confidential information can create a bad reputation for a company by portraying the company as an unfair competitor that prioritizes profits over ethics and moral standards. It can also create a perception that the company is engaging in illegal behavior, leading to the loss of customers and business partners such as suppliers. Using a competitor’s confidential information also affects the company’s relationships with its employees. According to Hassan et al. (2022), unethical business conduct negatively impacts employee work attitudes and behaviors. For example, employees with a moral conscience may develop a negative attitude toward the company and show less commitment to the organization.

Legal Consequences of Obtaining and Using Proprietary and Confidential Information Without Proper Authorization

Obtaining and using proprietary and confidential information without proper authorization can have major legal consequences for a company. One of them is civil lawsuits. A company that acquires and uses proprietary and confidential information without proper authorization can lead to lawsuits for misappropriation of trade secrets, which is a tort that can lead to fines and damages for the accused company or individual. According to Yeh (2016), misappropriation of trade secrets occurs when a person or company acquires another company’s trade secrets through illegal means such as bribery, theft, espionage, or misrepresentation. Yeh (2016) adds that misappropriation of a trade secret may also occur if it is disclosed or used with the knowledge that it was acquired by mistake or improperly. Therefore, the company whose information has been obtained and used without proper authorization is entitled to monetary damages for the misappropriation of their trade secrets.

Another legal consequence for obtaining and using proprietary and confidential information without proper authorization is criminal and civil liability for the employees responsible for the action. According to Sandberg (2015), civil litigation focuses on compensating the victims of a crime and returning them to their preexisting position. Therefore, the company accused of obtaining and using proprietary and confidential information without proper authorization may be required to compensate the victim, leading to losses and other financial setbacks. Criminal litigation, on the other hand, focuses on discouraging illegal acts such as stealing trade secrets (Sandberg, 2015). Therefore, under criminal litigation, the person responsible for obtaining and using proprietary and confidential information without proper authorization may be charged a heavy fine or receive a sentence to discourage others from committing the crime.

In the current case study, obtaining and using proprietary and confidential information without proper authorization might impact Juan’s career and future job prospects based on how he responds. For instance, if he covers up the issue and it is later discovered and reported to relevant authorities, he may be accused of misappropriating trade secrets, thus ruining his chances of getting employed in another company and advancing his career within the same field of practice. However, if he refuses to use the illegally obtained company information and discusses his concerns with the boss, he will not have a bad employment record and can secure another job and advance his career within the same or another field of practice.

How Juan Can Address His Boss’s Actions Ethically and Professionally

Juan could address his boss’s actions professionally and ethically by considering various actions. One of the actions is discussing the issue with the boss and explaining to him the risk of using the competitor’s information. Juan could present facts demonstrating how the action may be interpreted as a misappropriation of trade secrets and its legal and ethical implications to help the boss understand the risks of using information accessed without a competitor’s authorization and its impact on the organization. However, it is vital for Juan to first get clarification from someone with expertise on the implications of the action and whether the company can legally defend its actions if the competitor files charges for misappropriation of trade secrets.

The second action that Juan can take is becoming a whistleblower and reporting the matter to relevant authorities. Whistleblowing would effectively ensure that similar situations are avoided in the future because it will instill fear among other employees and management in the company, thus determining the action. However, it is important for Juan to first review the whistleblower protections in his region. According to Rogal (2021), whistleblowers are protected under federal and state laws. Federal and state laws prohibit employee retaliation against employees who expose a company’s illegal actions. Therefore, a whistleblower cannot be demoted or terminated for whistleblowing.

Also, Juan should seek whistleblower protection before exposing his boss to protect himself from termination and any other adverse action that the boss may take, such as writing a negative review on his recommendation. Notably, this could impact his career progression and limit him from getting another job if he resigns or is fired from the current workplace. Juan could consult legal counsel when applying for whistleblower protection to effectively complete the process and have someone who can confirm that he is protected under relevant whistleblower protections.

Risks and Benefits of Using Confidential Information to Gain a Competitive Advantage

Using confidential information to gain a competitive advantage can expose companies to various risks and benefits. One of the major risks is legal issues. Companies using confidential information to gain competitive advantage can be exposed to legal issues if the company that owns the information files a lawsuit against them and can prove that the information is confidential and was acquired illegally. The second risk is damaging the company’s reputation. According to Pérez‐Cornejo et al. (2021), a company’s reputation is influenced by its actions. Therefore, if the company’s stakeholders learn that a company uses confidential information obtained from other companies to gain a competitive advantage, they may view the company as unethical, leading to a bad image and reputation. Using confidential information to gain a competitive advantage could also lead to a loss of trust between the company and its stakeholders. The main impact of lack of trust is limited collaboration, which could impact decision-making and the company’s overall performance. A lack of trust between a company and its stakeholders and a bad reputation reduce its long-term success and sustainability by limiting stakeholder support. Therefore, organizations should focus on using ethical business intelligence when looking for information that they can use to create a competitive advantage.

On the other hand, one of the benefits of using confidential information to gain a competitive advantage is that it can enable a company to stay ahead of competitors by helping the company understand the competitor’s plans. For instance, if a competitor plans to reduce prices, the company that has obtained the information may reduce its process before the competitor does, leading to a high competitive advantage. The second benefit is increasing innovation. Obtaining confidential information can give a company innovation insight, leading to the sale and production of innovative products and services that create a competitive advantage. In addition, innovation contributes to a company’s long-term success and sustainability by helping companies adapt to the changes in their customers’ needs and preferences (Pacheco, 2022). Therefore, companies can consider using confidential information when facing stiff competition despite its ethical and legal implications because the benefits may outweigh the risks.

How a Lack of Clear Company Policies and Regulations Contribute to Ethical Dilemmas

A lack of clear company policies and regulations might contribute to ethical dilemmas like the one Juan faces by creating ambiguity on how to respond to various ethical issues within the company and making it hard to determine who should be held accountable for unethical conduct. For example, in the current case study, Juan is undecided on what to do because the company does not have policies and regulations prohibiting unethical conduct and guiding employees on how to report unethical conduct. Juan is also not sure whether the boss will be held accountable for his actions because there are no company policies on ethical misconduct. The company also lacks guidelines on the procedures that should be followed to report unethical conduct. The lack of company policies and regulations may also make it hard for employees to interpret an action as ethical or unethical because the company does not define what they consider ethical or unethical, thus creating ethical dilemmas.

One of the steps that the company should take to establish ethical behavior and decision-making guidelines at the company is creating an organizational culture that promotes ethical conduct through specific values and ethical principles. According to Grigoropoulos (2019), organizational culture can promote ethical conduct through shared values such as fairness, responsibility, integrity, and honesty in operations and decision-making. Creating an organizational culture that promotes ethical conduct can also ensure that leaders are accountable for their actions and that actions are taken against all unethical employees, including leaders. Another step the company should take is training employees on ethical conduct and how to respond to unethical conduct in the organization. The company should also create policies and regulations that define ethical and unethical conduct, procedures for reporting unethical conduct, and measures that should be taken to respond to unethical conduct.

Section II

Recommended Course of Action

If I were in Juan’s position, I would talk to the company’s legal counsel and contact the Strategic and Competitive Intelligence Professionals Association in my area for guidance and then go to my boss with their opinions and facts to back me up. Strategic and Competitive Intelligence Professionals Association is a valuable source of information on what the company can do to avoid being sued for misappropriation of trade secrets because it shares information and opinions from the government, academia, and industry professionals and has experience in addressing issues relating to market research, competitive intelligence, strategic intelligence, business intelligence, and strategic analysis. However, I would present the issue as a hypothetical case to avoid exposing the company to the risk of investigation and litigation. I would also request the Strategic and Competitive Intelligence Professionals Association specialist to maintain the confidentiality of our conversation so that I can be free to share all relevant information relating to the matter.

I would also ensure that I first create rapport with the boss before bringing up the conversation about the facts I gathered from the Strategic and Competitive Intelligence Professionals Association expert to reduce the possibility of getting fired before I convince him to reconsider his decision to use the illegally obtained information to increase competitive advantage. I would also present the facts supporting his decision and those against his decision to use the competitor’s information and try convincing him to consider not using the information because of the risks it creates for the company, such as legal and ethical issues that could impact the company’s reputation and its relationship with stakeholders.

References

Grigoropoulos, J. E. (2019). The role of ethics in 21st century organization. International Journal of Progressive Education, 15(2), 167–175. https://doi.org/10.29329/ijpe.2019.189.12

Hassan, S., Kaur, P., Muchiri, M., Ogbonnaya, C., & Dhir, A. (2022). Unethical leadership: Review, synthesis and directions for future research. Journal of Business Ethics, 183(2), 511–550. https://doi.org/10.1007/s10551-022-05081-6

Pacheco, L. (2022). Innovation and business strategy for sustainability. Innovation & Management Review, 19(3). https://doi.org/https://www.redalyc.org/journal/5375/537571682001/html/

Pérez‐Cornejo, C., de Quevedo‐Puente, E., & Wilson, A. (2021). In search of the roots of corporate reputation management: Being a consistent corporate social performer. Business Ethics, the Environment & Responsibility, 31(1), 4–16. https://doi.org/10.1111/beer.12386

Rogal, L. (2021). Secrets, lies, and lessons from the Theranos scandal. Scholarship@Vanderbilt Law. https://scholarship.law.vanderbilt.edu/faculty-publications/1224/

Sandberg, J. (2015). Human element of corporate espionage risk management – Literature review on assessment and control of outsider and insider threats. University of Tampere, Finland.

Yeh, B. (2016). Protection of trade secrets: Overview of current law and legislation. Congressional Research Service. https://doi.org/https://nsarchive.gwu.edu/document/26902-document-048-congressional-research-service-brian-t-yeh-protection-trade-secrets

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Juan Vadillo was proud of his job as a new product manager for a biotechnology start-up, and he loved the high stakes and tough decisions that went along with the job. However, as he sat in his living room after a long day, he was troubled, struggling over what had happened earlier that day and the information he now possessed.

Obtaining and Using Proprietary and Confidential Information

Just before lunch, Juan’s boss had handed him a stack of private strategic documents from the company’s closest competitor.  The information was a boundary spanner’s gold mine—product plans, pricing strategies, partnership agreements, and other documents, most clearly marked “proprietary and confidential.” When Juan asked where the documents came from, his boss proudly told him that he had taken them from the competing firm’s server. “I got into a private section of their intranet and downloaded everything that looked interesting,” he said. Later, realizing that Juan was suspicious, the boss would say only that he had obtained “electronic access” via a colleague and had not personally broken any passwords. Maybe not, Juan thought, but this situation wouldn’t pass the 60 Minutes test. If word of this acquisition of a competitor’s confidential data ever got out to the press, the company’s reputation would be ruined.

Juan didn’t feel good about using these materials. He spent the afternoon searching for answers to his dilemma but found no clear company policies or regulations that offered any guidance. His sense of fair play told him that using the information was unethical, if not illegal. What bothered him even more was the knowledge that this might happen again. Using this confidential information would undoubtedly give him and his company a competitive advantage. Still, Juan wasn’t sure he wanted to work for a firm that would stoop to such tactics. (Daft)

Answer the following five critical thinking questions:

These questions encourage you to think critically and analytically about the ethical, legal, and professional implications of using confidential information and the importance of establishing clear guidelines for ethical behavior within organizations. Please number your answers and address all parts of each question.

1. What are the ethical implications of using a competitor’s confidential information? How might this affect the company’s reputation and relationships with stakeholders?
2. What are the potential legal consequences of obtaining and using proprietary and confidential information without proper authorization? How might this impact Juan’s career and future job prospects?
3. How could Juan address his boss’s actions ethically and professionally? What steps could he take to ensure that similar situations are avoided in the future?
4. What are the risks and benefits of using confidential information to gain a competitive advantage? How might this impact the company’s long-term success and sustainability?
5. How might a lack of clear company policies and regulations contribute to ethical dilemmas like the one faced by Juan? What steps could the company take to establish ethical behavior and decision-making guidelines?

What Would You Do?

1. Use the documents to the company’s benefit, but tell your boss that you don’t want to receive confidential information If he threatens to fire you, you could threaten to leak the news to the press.
2. Confront your boss privately and let him know that you’re uncomfortable with how the documents were obtained and what their possession says about the company In addition to the legality of using the information, point out that it is a public relations nightmare waiting to happen if the documents are used.
3. Talk to the company’s legal counsel and contact the Strategic and Competitive Intelligence Professionals Association in your area Then, go to your boss with their opinions and facts to back you up.