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Revealed: the government agency stealing ideas from businesses

A number of businesses are complaining a Defence Department organisation has stolen their intellectual property, Crikey can reveal. Chris Seage reports new legislation makes the problem worse.

At least five businesses have alleged senior officers in the Defence Science and Technology Organisation have plagiarised their intellectual property for their own research and then passed it on to business partners to develop a rival product. They also allege there is a “rogue element within the agency” and a “culture of circling the wagons when confronted with allegations against them”.

And there are fears that IP plagiarising could increase with the Labor government last year implementing the Defence Trade Controls Act, which seeks to limit Australian businesses or individuals supplying technology to someone outside of Australia without first revealing their IP to the Australian government.

Brendan Jones, a Brisbane-based small businessman, spent 12 years of his life developing his revolutionary Kestrel Tactical Simulator, a PC-based professional military platform that simulates air, sea, land and space operations anywhere on the planet. The program simulated various transport modes, weaponry, radars and other sensors.

It realistically simulated injuries,” Jones explained to Crikey. “A shot soldier would start bleeding at a rate appropriate for the wound, and would have to get medical attention, say, via a medivac before they went into shock. I spent many years studying warfare intently to make it as accurate an experience as possible.”

Jones wanted to sell the software to the Defence Department but he was told he must go through DSTO. The government organisation looked at it but eventually recommended against funding the project because it was “impossible to do on a PC”. Jones battled on.

I developed the software myself from my own savings, but when I finished, DSTO tricked ADF into believing the software wouldn’t ship for several years. They then gave my IP to scientists I had been warned were plagiarising private sector research, broke a non-disclosure agreement, and three months later they commissioned their business partner to produce a rival version known as BattleModel,” Jones said.

Crikey understands BattleModel only began as an air simulator while Jones’ KTS was multi-domain (land, sea, air and space) and in particular had excellent maritime simulation capability that was a major attraction to the Navy. An independent investigator appointed by the ADF to investigate the theft of IP told Jones: “Your software and the DSTO BattleModel software were remarkably similar. When I started this case I couldn’t see any similarities between KTS and BattleModel.  Now I can’t see anything they don’t have in common.”

Most people Crikey spoke to were unwilling to speak on the record due to a fear of upsetting existing business contracts with the ADF. A CEO of a major defence industry organisation told Crikey the organisation was aware of three recent cases where the DSTO had plagiarised a small business and run off with its ideas. “I’m the first to say there are two sides to every story, but as more instances came up and I thought this is starting to happen a bit much,” the CEO said. “The first person you think, well, he might be a bad businessman and didn’t protect his IP, but then you start hearing of other people, and now I’ve had three cases across my desk, and I’m beginning to think that there is some sort of a systemic problem within the organisation.”

One of the businesspeople considered taking legal action but decided not to fight the department as he suffered a nervous breakdown during protracted negotiations. In a confidential email to the CEO, he said:

Just letting you know that I am finished now. DMO cancelled all of my contracts; DSTO awarded my last contract to xxxxx who had been given access to all of my IP and processes by DSTO so there’s nothing left for me to do now. All the work I developed and pushed with xxxxx will now go to xxxxx.”

Another businessman considering legal action was working alongside DSTO in one of its divisions to develop technology but his IP was passed on to a rival company, potentially costing him millions of dollars.  The company is still working with DSTO on other projects.  The managing director also had a signed non-disclosure agreement with DSTO.

We lost many years of investment through no fault of our own,” he said. “If you have technology that you pass on to them you’ve got to be really careful who you are talking to, and you have got to guard against those within; worse still, those rogues that are brazen enough to actually take on a roll of passing that information on. I’m aware of two other cases of where this has happened and were settled out of court.”

Crikey sources say the DSTO is a world leader in science and generally a professionally run organisation, but some rogue officers at junior and senior level within the agency threaten to damage a hard-earned reputation. The sources also believe the level of impartiality in subsequent defence investigations of complaints leaves a lot to be desired.

The defence industry organisation CEO said: “I think that once people gel into what they are doing they get extremely risk-averse and will not acknowledge things that have happened. I think this has happened in the cases I’ve been involved in, and they disbelieve that these things haven’t really gone on and industry are just making it up.”

This was supported by the small business managing director, who told Crikey: “The people concerned that were brought to the attention of DSTO are today still operating with impunity. You then have a layer of defence behaviour where they are all buddies and they will encircle the wagons; you go in and attack them, and they will just shoot you down. They don’t care; they will throw the kitchen sink at you. They will attack before they can defend themselves to the point they will create security incidents that don’t exist to try and discredit you.”

Now there are fears the Labor-initiated Defence Trade Controls Act will open the door to more plagiarising. The purpose of the legislation is to strengthen Australia’s existing export controls and implement the Australia-US Defence Trade Cooperation Treaty. Australia’s export control system aims to control goods and technology that can be used in chemical, biological and nuclear weapons, or military goods and technology, and prevent them from getting into the wrong hands. It will be phased in over a two-year period, but after that those who don’t comply face prison terms of up to 10 years and fines in the hundreds of thousands of dollars.

The legislation has drawn wide criticism across the academic sector. Brendan Jones is sceptical: “If I phoned or emailed someone overseas just to talk about it, e.g. to nibble for sales, get advice or discuss a technical problem, I could go to jail for 10 years. Instead I have to apply for permits from Defence just to talk about my work, with no recourse against Defence stealing my IP. After what happened last time, no way I’d expose myself to them again.”

A Defence spokesperson told Crikey that one complaint of IP plagiarism has been received by the DSTO in the last five years. The complaint was not upheld. Comment was sought from the DSTO Probity Board and the Inspector-General of the ADF, but they did not respond before deadline.

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  • 1
    Andybob
    Posted Monday, 2 December 2013 at 1:51 pm | Permalink

    Doesn’t sound like ‘just terms’ to me. Where’s Lawrence Hammill QC when we need him ?

  • 2
    Serenatopia
    Posted Monday, 2 December 2013 at 1:56 pm | Permalink

    Absolutely brilliant article Chris. Meticulously researched and presented. Brendan Jones deserves justice.

    To all impacted parties, please contact Serene Teffaha from Levitt Robinson Solicitors to explore legal recourse in these circumstances. My mobile number is 0425 754 299.

  • 3
    graybul
    Posted Monday, 2 December 2013 at 2:22 pm | Permalink

    So now we truly glimpse the price of being Deputy Sheriff to a foreign power!
    The Australian Media to a large part is owned and directed by a foreign interest. The Australian Intelligence fraternity operates in their own interests and collude with foreign interests against the best interests of Australian citizens and Businesses. Australian Government(s) have descended into a functional state whereby lies, deception and non-accountability are the driving indicators and mode of exercising power. Our national values are indeed at risk.

  • 4
    Sailor
    Posted Tuesday, 3 December 2013 at 11:53 pm | Permalink

    graybul: sadly, this is a repeat of the Howard deceit. The dreadful “anti-terrorist” [ie, anyone who reckons the Gov’t fosters thugs is telling the truth & must be punished] laws are biting. Alexander Downer is rightly in the frame for deceit, but Reith is unscathed. Odd that.

    And as for John Hubris………gawdhelpme, he’s abysmal. So is his spawn Abbott.

  • 5
    Brendan Jones
    Posted Wednesday, 4 December 2013 at 3:44 pm | Permalink

    Very true, @Sailor! The universities fought the DTCA furiously:

    Sydney University’s Deputy Vice Chancellor of Research warned: “It would impede top scientists in developing technologies for tomorrow’s high-tech manufacturing industries, new vaccines and potential cures for cancer. The Australian government worries about a brain drain in advanced technology, but is poised to pass legislation that could force our best and brightest offshore” http://www.smh.com.au/opinion/politics/tighter-defence-ties-will-bind-academics-and-stifle-innovation-20121009-27b4n.html

    But the Commonwealth Chief Scientist was dismissive of their concerns: “Those boxing at shadows and guessing at what it (the laws) might mean to some unspecified but allegedly ‘substantial’ number of researchers can continue to do that if it makes them happy.” http://www.theaustralian.com.au/higher-education/chubbs-defends-researchers-prospects-under-the-defence-trade-controls-bill/story-e6frgcjx-1226508483554

    Labor rammed it through, just before a visit by US Secretary of Defense Leon Panetta. Although ostensibly to allow a US Free Trade Pact, an Australian-based American physicist warned: “Not even the Americans have this” http://theconversation.com/science-and-the-slammer-the-consequences-of-australias-new-export-control-regime-10127

    The DTCA got very little media coverage. Even a lot of academics have never heard of it, and Australia’s high-tech business community completely missed it; I am yet to speak to a single entrepreneur who has heard of it. When the first one of them is hauled off to jail, maybe then they’ll pay attention; With the surveillance regime it will be very easy for the APS to detect businesses communicating without permits. http://powerhouse.theglobalmail.org/the-australian-government-snoop-patrol-once-every-two-minutes-247-anyones-data/

    There’s also a compliance burden on business. To communicate with anyone overseas (e.g. even for advice) you need to apply for a permit from Defence, so that already slows you down. You also need to hire lawyers to implement it ($230-$500 per hour), allocate time for audits and administration (up to 25% of researcher time). Here is a good paper raising the problems with the permit system (including commercial interference), and how the DTCA will harm Australian business: http://www.ausairpower.net/PDF-A/APA-DP-2013-0801.pdf

    The DTCA doesn’t just apply to Defence, but an absurdly broad dual-use list 380 pages long: e.g. computers, IT, telecommunications, electronics or medicine (and that’s nothing to say of the restrictions University researchers face).

    I don’t even work in Defence any more, but you’d be a fool to start a high-tech business in Australia under the DTCA: http://theconversation.com/science-and-the-slammer-the-consequences-of-australias-new-export-control-regime-10127

    I’ve put an information page on the DTCA here: http://victimsofdsto.com/dtca/

  • 6
    su ba
    Posted Thursday, 5 December 2013 at 7:22 pm | Permalink

    What trash “journalism”. Too many “sources” that are unnamed, actually all the sources are anon. Who the hell is “CEO”? Who is “one of the businesspeople”? Who is “the small business managing director?” Who are these “five businesses”? If these allegations have any basis then the anons need to speak up! Wild allegations you aren’t required to even own is NOT journalism. If this has any truth to it, go get facts not very vague allegations. You know what you can do with your subscription.

  • 7
    Brendan Jones
    Posted Thursday, 5 December 2013 at 8:00 pm | Permalink

    su ba”, your post is disingenuous:

    The article explains “Most people Crikey spoke to were unwilling to speak on the record due to a fear of upsetting existing business contracts with the ADF.”

    It also explains how another person who complained had his contracts taken away.

    And of the five businesses, I’m named. Your disingenuous post makes no mention of that.

    As for your subscription, Google couldn’t find any other instances of you posting on Crikey. For all I know you don’t have a subscription, and created a freebie account today. I’m not even sure if “su ba” your real name; It would be hypocritical of someone posting anonymously to accuse others of not. Confirm that “su ba” is your real name, post your details and we’ll talk.

    Otherwise for all we know you might be one of the corrupt public servants trying to cover your tracks.

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