Oracle Isn't Alone In High-Tech Spying

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June 30, 2000 (9:04 AM EDT)

Oracle's admission that it hired a detective agency to investigate Microsoft allies is just the latest of many Spy vs. Spy capers over the years by high-tech players, including Microsoft itself.

Like the Mad magazine cartoon characters, companies have historically spied and counterspied on competitors. High-tech is not immune to the trend.

When Microsoft MSFT decried Oracle's act as "hypocritical and disingenuous," some observers said it protested too much. Industry insiders have long complained privately that Microsoft is no stranger to dirty tricks.

For years, software companies, in particular, engaged in industrial espionage. Snooping was characterized as "boys-will-be-boys" exuberance sparked by the hypercompetitive business. Employees of many companies were encouraged to gain any advantage.

"People were always going through our trash," said Spencer Leyton, former senior vice president at Borland International, Scotts Valley, Calif. "Whether they were from Microsoft or the trade press was never clear."

Leyton remembers one incident that exemplifies the climate in the early nineties. After Microsoft "disinvited" Borland to an important trade conference after a heated licensing dispute between corporate attorneys, Leyton tried to broker a deal with Microsoft's Jonathan Lazarus.

"He told me he would only reinvite us if I agreed to fire [Borland general counsel] Bob Coen," he said. "When I said I wouldn't do that, he then agreed to reinvite us only if we sent him a photograph showing all five of Bob's tires slashed. He then followed up with a fax confirming that conversation, asking for a letter from [Borland chairman Philippe Kahn] promising not to reimburse Coen for the cost of the tires."

Cooler heads prevailed, and Borland was able to negotiate an invitation, with Coen's tires remaining intact, Leyton said.

In 1992, Rob Glaser, then vice president of multimedia development at Microsoft, ran off with a slew of Apple (stock: AAPL) press kits after he was refused entrance to a packed Apple briefing. Glaser left Microsoft in 1994 to found RealNetworks (stock: RNWK), Seattle, now a competitor of Microsoft's.

In 1993, Borland, the leader in PC databases, hired a private detective to watch for spies at its Palm Desert, Calif., developers conference. It took the unusual action after a product manager for Microsoft Access, a rival database, was discovered snooping around at the event and allegedly trying to access a PC loaded with secret Borland plans in an empty conference room, according to former Borland employees. Asked about the incident at the time, the product manager, Tod Nielsen, said the incident was an innocent misunderstanding.

Nielsen, who later became vice president of developer relations, left Microsoft early this month to pursue other opportunities. He could not be reached for comment.

Perhaps most notably, Symantec chairman Gordon Eubanks and lieutenant Eugene Wang, were accused by Borland of purloining top-secret Borland documents. Wang, a top Borland executive, was hired away by Symantec (stock: SYMC), a competitor in software languages and tools. Wang and Eubanks were even criminally prosecuted, but the charges were dropped, amid complaints that Borland itself footed much of the cost of the police investigation.

America Online (stock: AOL) admitted to hiring Investigative Group International (IGI), the same agency Oracle used, in an effort to uncover foes in its fight in California over "open access" to cable lines, the The Wall Street Journal reported.

Microsoft itself acknowledged that in February 1993, an investigator it hired pulled important documents from the trash of Supercom, which was accused of reproducing Microsoft software, the Journal reported. That incident occurred during a police raid.

Despite the prevalence of such activities, some experts say rummaging through a rival's trash, or offering to pay for it, as happened in the Oracle (stock: ORCL) case, is beyond the pale of acceptable behavior.

"It certainly steps across a certain privacy line," said George Geis, a professor at UCLA's Anderson School of Management. "It certainly steps across the line of what's seemly and what's honest."

IGI, Washington, D.C., was linked to dumpster diving in its probe of the Independent Institute, Oakland, Calif.; the National Taxpayers Union, Arlington, Va.; and the Association for Competitive Technology, Washington, D.C. Oracle, Redwood City, Calif., suspected all three of supporting Microsoft in its antitrust battle with the government in return for funding.

Microsoft said it was outraged by Oracle's tactics.

"Oracle apparently believes its business goals are more important than the free speech and privacy rights of others," the Redmond, Wash., company said.

"Most people would probably say this is not typical Oracle behavior, this is extreme," said Geis, who is writing a book on partnerships within the digital economy. "We're dealing with something that's really intense between Oracle and Microsoft."

Competition between Oracle and Microsoft is incredibly fierce, with Oracle close to overtaking Microsoft as the No. 1 software maker. While Microsoft has stumbled in extending Windows to support e-commerce, Oracle has been able to reap the financial benefits of redesigning its database and ERP software for the Internet.

And Microsoft chairman Bill Gates and Oracle chairman and CEO Larry Ellison are locked in the battle of billionaires, being, respectively, the No. 1 and No. 2 richest men in the world.

"I'm obsessed with making Oracle the No. 1 software company in the world," Ellison said earlier this week. "I don't care at all about Bill Gates. I care a lot about Microsoft, and Microsoft is the company we have to beat."

Barbara Darrow contributed to this report.