Spell check features in word processing programs sent correction fluid the way of the buggy whip. Walter Liew and Robert Maegerle, however, saw a $28 million dollar payout to sell the secrets to, among other things, typewriter correction fluid. It is doubtful that they can “white out” the bars of their new prison cells, though.
Liew, a California engineering consultant, and Maegerle, a former engineer, were convicted in what may be the first federal jury conviction under the Economic Espionage Act of 1996 for economic espionage, trade-secret theft, witness tampering, and making false statements.
What could be so incredibly secret and technical about correction fluid?
The white pigment in correction fluid is titanium dioxide. Titanium dioxide is used in hundreds of items, including paints, plastics, paper, rubber, cosmetic products, and food. Titanium dioxide is also used in electrical ceramics and semiconductor devices. The annual global sales of titanium dioxide are approximately $17 billion dollars.
Maegerle’s former employer holds trade secrets on how to make titanium dioxide, and accounts for one-fifth of the annual global sales of the chemical. Liew received the trade secrets from Maegerle and sold them for $28 million to China-based Pangang Group. Allegedly a Chinese state-owned company, Pangang is building a new plant to produce titanium dioxide in China.
The stolen trade secrets included a drawing of a plant system, an internal report about a computer model for a chemical process, a plant flow sheet and a basic data document containing the process and equipment needed to design a titanium dioxide production line.
Each defendant now faces up to 15 years in federal prison and hundreds of thousands of dollars in fines. Pangang was also charged but did not face trial because prosecutors were unable to serve legal documents on the company in China.
Liew’s wife Christina was also charged with economic espionage, trade secret theft and witness tampering. She will be tried separately.
With economic espionage statutes supplementing trade secret law, the government now has additional weapons against trade secret theft. Now, aggressive and determined efforts to steal U.S. intellectual property can be thwarted. Additional deterrents to would-be espionage targets are realized through larger penalties for conviction under both economic espionage and trade secret laws.
Liew and Maegerle understood that the simplicity of the underlying product covered by the trade secret does not detract from the trade secret’s importance to competitors. Although appeals are planned, it is unlikely that the defendants will have access to trade secrets protecting other “simple” devices, such as the locks on their prison doors.
For more information on U.S. v. Liew, 3:11-cr-00573, (N. D. Cal., 2014), see the Bloomberg News article and the FBI press release.