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Prosecutions for theft of trade secrets on the rise

Last month, federal prosecutors meeting in D.C. warned the American public to expect a “spike” in prosecutions against individuals and companies suspected of stealing intellectual property and selling it to third parties. The announcement dovetails with the government’s increasingly aggressive approach to prosecuting theft of trade secrets and international export regulations, especially when the cases involve a country experiencing tension with the U.S., such as China or Iran.

When is theft of trade secrets a crime?

One of the most common statutes used by the Government to prosecute individuals and companies for stealing intellectual property is 18 U.S.C. § 1832, which prohibits and penalizes the “theft of trade secrets.”

A “trade secret” is defined as any type of financial, scientific, technical, or engineering information: 1) that the owner has taken “reasonable measures” to keep secret, and 2) that derives independent economic value from being kept secret and from not being “readily ascertainable” by others who could gain economic value from the disclosure or use of the information.

So, for example, the recipe for Coke Classic can be considered a trade secret if the Coca Cola company has taken “reasonable measures” to keep the recipe a secret and if the recipe gets its value from being kept secret since it’s not “readily ascertainable” to Coca Cola’s competitors.

There are five ways a person can be convicted under 18 U.S.C. § 1832, which applies to any person or organization who, with the intent to use the trade secret for their own purposes, knowingly:

  • Steals, appropriates, takes, or fraudulently obtains a trade secret;
  • Without authorization copies, duplicates, transmits, mails, or conveys a trade secret;
  • Receives, buys, or possesses a trade secret knowing it was stolen, fraudulently obtained, or copied without authorization;
  • Attempts to engage in any of the conduct described above; OR
  • Enters a conspiracy with one or more other persons to engage in the conduct above.

Using Coke as example again, as explained above, one could be convicted under § 1832 if they worked for Coke, copied the recipe without permission, and sold it to a competitor.

The potential sentences for being convicted under § 1832 are stiff–people can be sentenced up to 10 years in prison, while organizations that are convicted can be fined up to $5 million or 3x the value of the stolen trade secret.

Individuals and corporations can also be prosecuted for “economic espionage” under 18 U.S.C. § 1831, which is very similar to § 1832 with one major exception. To convict a defendant under § 1831, the government must prove beyond a reasonable doubt that a defendant stole, fraudulently obtained, copied, or received stolen trade secrets with the intent and knowledge that it would benefit a foreign government.

The potential punishments for individuals who violate § 1831 include prison for up to 15 years and up to a $5 million fine. Organizations convicted under § 1831

What are the defenses available in a prosecution for theft of trade secrets?

Individuals and companies facing charges of theft of trade secrets under § 1832 and other statutes should know the defenses available to them. The Government must prove each element of the offense beyond a reasonable doubt, meaning they must prove, not only that the defendant intentionally and knowingly stole the information, but that the information was, in fact, “a trade secret.”

As discussed above, information or intellectual property is only a “trade secret” if 1) the owner of the information has taken “reasonable measures” to keep the information secret, and 2) the information derives economic value from being kept secret because others cannot “readily ascertain” the information on their own.

This means that a creative defense lawyer can, in some cases, show that the information was not really a “trade secret” because the company did not take any specific measures to keep it secret or because others in the market could have discovered the information independently on their own, without having access to the company’s information.

Again using Coke as an example, a defendant charged with stealing the recipe for Coca Cola could argue that the company did not treat it as a “trade secret” since they did not take certain measures to keep the recipe secret, such as by keeping it hidden or locked away, or by only allowing certain employees access to the recipe. A defendant could also use an expert witness to show the jury that the recipe for Coca Cola could have been discovered independently by a competitor by reverse-engineering or testing the soda to determine what exactly goes into the recipe.

Other defenses include proving that the defendant did not act with knowledge or a criminal intent. Each case is different based on the information at issue, the industry involved, and the defendant’s relationship to the owner of the alleged trade secret.

Our federal defense lawyers can help in theft of trade secrets cases

Our firm has represented numerous clients charged with theft of trade secrets under § 1832 and other statutes, and we are very familiar with the tactics used by prosecutors and what defenses can succeed at trial.

In one case, for example, we represented an employee of a company who is accused of taking his employer’s information related to airplane technology and using it for his work with another company in order to innovate a new product. Our defense in that case is that the information he is accused of taking from his employer is not a “trade secret.” We developed a strong defense that our client’s employer did not take the kinds of measures that you’d expect from a company trying to protect a “trade secret,” it was not the type of exclusive technology that could not be “readily ascertained” by other companies or engineers, and our client did not believe he was stealing a “trade secret” when he used information he learned from one company to help innovate a new product at a different company.

Our firm also has significant experience in cases involving international export violations. Given the government’s efforts to crack down on trade secrets being sold to China and other countries, we expect to see a lot more prosecutions of theft of trade secrets involving foreign countries. Currently, foreign companies are attempting to acquire trade secrets from U.S. companies through hacking and by inducing American employees to sell them trade secrets.

Call our firm now to talk to one of our experienced attorneys about your theft of trade secrets case

Our experienced federal attorneys have over 25 years of experience defending individuals charged with federal crimes, including those charged with theft of trade secrets or for violating certain export regulations. Don’t let the government intimidate you– contact us now to speak to an experienced lawyer about your case.