Trading Secrets : Trade Secrets Lawyers & Attorneys : Seyfarth Shaw Law Firm : Computer Fraud, Confidentiality Agreements, Corporate Espionage

U.S. Senators Herb Kohl (D-WI) and Christopher Coons (D-DE) introduced an amendment to the Currency Exchange Rate Oversight Reform Act yesterday aimed at protecting American trade secrets and innovation.

Currently, Title 18 of the US Code only permits the Attorney General to bring a civil action in federal court for trade secret theft. The amendments would open the federal courts to private parties as follows:  

(b)    Private Civil Actions

            (1)        In General-Any person aggrieved by a violation of section 1832 (a) may bring a civil action under this subsection

            (2)        Pleadings-A complaint filed in a civil action brought under this subsection shall-

                        (A)       describe with specificity the reasonable measures taken to protect the secrecy of the alleged trade secrets in dispute; and

                        (B)       include a sworn representation by the party asserting the claim that the dispute involves either substantial need for nationwide service of process or misappropriation of trade secrets from the United States to another country.

The amendment also provides for immediate ex parte seizure orders and damages for the unlawful conduct. 

Senators Kohl and Coons cited two examples of trade secret theft to support their amendment- a Chinese national convicted of stealing trade secrets valued between $50 and 100 million for a Chinese competitor, and a disgruntled Wisconsin employee that attempted to sell aviation related trade secrets valued at hundreds of thousands of dollars to a competitor. Their amendment would enable victims of trade secret theft to seek injunctive relief and compensation for their losses in federal court.

It is important to note that the amendment only provides private civil action when the trade secret theft victim shows a (1) substantial need for nationwide service of process or (2) misappropriation of trade secrets from the US to another country. A nationwide service of process would apply to cases where a state court may have difficulty acquiring personal jurisdiction over multiple defendants residing in different states. Thus, the amendment would provide relief in cases where the federal court’s jurisdiction extends beyond the territorial limitations of the state court.

The amendment aims to primarily protect American business against international and foreign misappropriators. Therefore, trade secret owners should not necessarily view this amendment as a free pass to federal court to assert trade secret claims.

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  By Erik Weibust (Boston) 

          Illustrating the roadblocks that Taiwanese companies still must overcome to do business in mainland China (Taiwan split from China amid a civil war in 1949), Forbes.com is reporting that electronics giant Hon Hai Precision Industry Co. recently took out half-page ads in major Taiwanese newspapers complaining about delays in a Chinese court over the prosecution of a Chinese competitor for allegedly stealing its trade secrets. In 2006, Hon Hai, which employs approximately 500,000 Chinese workers, sued BYD Company Limited, a Chinese competitor, for allegedly “systematically looting its trade secrets.”   According to Hon Hai, in 2006, two of its former employees took secret information when they left to work for BYD. Although the two employees have since been convicted of infringement in a Chinese court, according to Hon Hai, that may only be the tip of the iceberg. Specifically, Hon Hai alleges that over the past 4 to 5 years, 400 of its employees have moved to BYD, many of whom are suspected of providing the company with Hon Hai’s trade secrets and proprietary information. 

            According to the newspaper ads, the head of BYD is a member of the powerful People’s Congress, which has “the power to remove members of the judiciary.”  This, Hon Hai alleges in its ads has “result[ed] in a certain degree of unwillingness among local judicial and police members to deal with the case.” Nevertheless, Hon Hai believes that its rights will be vindicated eventually, particularly given China’s senior leaders’ commitment to protecting the interests of Taiwanese businesses on the mainland. 

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Judge Leoni Brinkema (E.D. Va.) sentenced Gregg W. Bergersen to almost five years in prison for his role in providing secret information about U.S.-Taiwanese military relationships to a Chinese spy.   According to Matthew Barakat, writing for the Associated Press, View Article, the Chinese spy (Tai Kuo) fronted as a New Orleans furniture salesman who was aligned with Taiwan.  Instead, Barakat reports, it turns out that Kuo was forwarding the information to China.   Bergersen stated in court that he believed he was helping Taiwan develop a new air defense system and did not turn over the information with a motive for financial gain, a claim that federal prosecutors challenged.

According to the article, Kuo has pleaded guilty to espionage, and sentencing for him should occur later this month.

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