Baker Hostetler New York White Collar Defense and Corporate Investigations attorneys Jonathan B. New and Christy Nixon co-authored an article titled, “DOJ Steps Up Prosecutions for Trade Secret Theft: The Agency Has Pursued Recent IP Enforcement Actions Under the Economic Espionage Act,” which appeared in The National Law Journal on January 31, 2011.
In the article, the authors describe the Department of Justice’s (DOJ’s) recent efforts to aggressively investigate and prosecute intellectual property crimes. The authors note that in connection with this initiative, during a speech to the New York City bar this past fall, U.S. Attorney for the Southern District of New York, Preet Bharara, appropriated the catch-phrase, “If you see something, say something,” as a call for reporting white collar crimes, in particular, intellectual property crimes such as the misappropriation of trade secrets. The authors contend that DOJ’s initiative provides a powerful weapon for companies seeking to protect their trade secrets, but also raises challenges for corporate counsel.
During fiscal year 2010, the FBI opened at least 190 new IP crime investigations, 66 of which concerned trade secret theft. DOJ awarded almost $4 million to state, local and tribal law enforcement agencies and prosecutors in fiscal year 2010 for education, deterrence, enforcement and evidence gathering to prosecute IP crimes in coordination with federal efforts.
The Economic Espionage Act of 1996 criminalizes two types of trade secret misappropriation: commercial economic espionage (18 U.S.C. 1832) and foreign economic espionage (18 U.S.C. 1831). Conviction under both requires that the defendant knowingly misappropriated a trade secret. Misappropriation includes the possession, receipt, purchase, destruction, duplication or transmission of a stolen trade secret. A trade secret is any type of financial, business, scientific, technical, economic or engineering information deriving independent economic value from not being generally known to the public and is the subject of the owner's reasonable efforts to maintain its secrecy.
The authors explain that to commit foreign economic espionage, a defendant must intend to benefit, or know that the offense would benefit, a foreign government, instrumentality or agent. In contrast, for commercial economic espionage, a defendant must intend to convert the trade secret to the economic benefit of someone other than the owner. Commercial economic espionage may lead to 10 years imprisonment and a fine on organizations up to $5 million. Foreign economic espionage could lead to 15 years imprisonment and a fine on organizations up to $10 million. In exercising discretion to pursue criminal cases in an area traditionally associated with civil litigation, DOJ appears to focus on the amount of financial harm to the victim, cases with international facets and alleged thefts of proprietary information related to the financial sector and high technology.
The authors affirm that DOJ’s recent focus on prosecuting IP crimes gives corporate victims of trade secret misappropriation another mechanism for protecting their proprietary information. However, to avoid being swallowed up by the wave of DOJ investigations, companies should be mindful of the source of information used by their employees, conduct due diligence on new hires and exercise caution when recruiting employees from competitors.
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