shutterstock_393956815The Ninth Circuit recently held in United States v. Liew that it was not plain error for the district court not to instruct the jury that disclosure “‘to even a single recipient who is not legally bound to maintain [a trade secret’s] secrecy’ destroys trade secret protection.” As a result, the Ninth Circuit upheld criminal convictions under the (pre-Defend Trade Secrets Act) Economic Espionage Act (“EEA”) for trade secret misappropriation despite a third-party competitor (who was not bound by any confidentiality obligations) acquiring the trade secret.

The trade secret at issue in United States v. Liew concerned methods of producing titanium dioxide (TiO2), a white pigment found in anything from paint to Oreo creme, which makes its manufacture a (surprisingly) competitive industry. DuPont has been a leader in TiO2 production since the 1940s, when it became more efficient to produce TiO2 through a chloride-based process. DuPont opened chloride plants around the US, including one in Antioch, California and one in Ashtabula, Ohio. The Ashtabula plant was built for Sherwin-Williams, subject to a fifteen-year confidentiality agreement effective through the plant’s sale in the 1970s. The plant was sold multiple times thereafter and was ultimately acquired by a competitor of DuPont who was not bound by any nondisclosure or confidentiality obligations to the company.  Continue Reading Trade Secrets May Retain Protections Despite Disclosure to Single Competitor

OverviewIn Seyfarth’s eighth installment in the 2016 Trade Secrets Webinar Series, attorneys Andrew Boutros, Katherine Perrelli and Michael Wexler focused on criminal liability for trade secret misappropriation. Trade secret misappropriation is increasingly garnering the attention of federal law enforcement authorities. This reality creates different dynamics and risks depending on whether the company at issue is being accused of wrongdoing or is the victim of such conduct.

As a conclusion to this well-received webinar, we compiled a summary of three takeaways that were discussed during the webinar:

  • The theft of trade secrets is not only a civil violation — it is also a criminal act subject to serious fines and imprisonment.  In an ever-increasing technological age where a company’s crown jewels can be downloaded onto a thumb drive, victims and corporate violators must be mindful of the growing role that law enforcement plays in this active area.  And, in doing so, working with experienced counsel is critical to interfacing with law enforcement (especially depending on which side of the “v.” you are on), while still maintaining control of the civil litigation.
  • With the advent of the Defend Trade Secrets Act, intellectual capital owners have a powerful new tool to both protect assets with as well potentially defend against.  As such, processes must be in place to carefully screen new employees as well as provide vigilance over exiting employees so that one can guard against theft and be prepared to address purported theft brought to ones doorstep with a new hire.  Finally, it is important to review and update agreements with the latest in suggested and required language to maximize protections which is best accomplished through annual reviews of local and federal statutes with one’s counsel.
  • “Protect your own home” by putting tools in place before a trade secret misappropriation occurs. This includes taking a look at your employment agreements to make sure they are updated to comply with the Defend Trade Secrets Act (DTSA) and that they have been signed. In addition, make sure you have agreements in place with third parties (e.g., clients, vendors, contractors, suppliers) to protect your proprietary information. Finally, secure your network and facilities by distributing materials on a need-to-know basis: Don’t let your entire workforce have access.

Tank Connection, LLC v. HaightThe stakes are getting higher: Trade secret misappropriation is increasingly garnering the attention of federal law enforcement authorities. This reality creates different dynamics and risks depending on whether the company at issue is being accused of wrongdoing or is the victim of such conduct.

On Tuesday, October 4, at 12:00 p.m. Central, Seyfarth attorneys Katherine E. Perrelli, Andrew S. Boutros and Michael D. Wexler will present “The Intersection of Trade Secrets Violations and the Criminal Law,” the ninth installment in Seyfarth’s 2016 Trade Secrets Webinar series.

Our presenters will focus on criminal liability for trade secret misappropriation, covering:

  • Key statutes: Economic Espionage Act, Computer Fraud and Abuse Act, and Defend Trade Secrets Act of 2016
  • Key elements for criminal prosecution
  • Factors prosecutors consider when deciding whether and what to prosecute
  • How to work with federal prosecutors and their law enforcement partners: Making your case attractive to the “Feds”
  • Cutting-edge considerations: Civil RICO under the Defend Trade Secrets Act
  • Best practices to avoid misappropriation and what to do when you suspect misappropriation has occurred, including a discussion of forensic investigation options

Our panel consists of experienced attorneys with significant experience investigating and litigating trade secret issues, advising clients on trade secret protection, drafting confidentiality and restrictive covenant agreements, conducting trade secret audits, and handling federal criminal matters. This CLE is recommended for management, HR personnel and in-house counsel.

*CLE Credit for this webinar has been awarded in the following states: CA, IL, NJ and NY. CLE Credit is pending for GA, TX and VA. Please note that in order to receive full credit for attending this webinar, the registrant must be present for the entire session.

register

shutterstock_144630422Although stealing bases, and even signs, in baseball may be part of the game, stealing another team’s trade secrets can land you in federal prison, as one executive recently learned the hard way.

As we previously reported, the FBI has been investigating the St. Louis Cardinals for hacking into the Houston Astros’ internal computer network and stealing proprietary information, including internal discussions about trades, proprietary statistics, and scouting reports. The investigation has now concluded, the Cardinals’ former director of baseball development, Chris Correa, pleaded guilty to five counts of unauthorized access of a protected computer in January, and he has now been sentenced to 46 months in federal prison. He also must pay $279,038 in restitution. According to NPR, “U.S. District Judge Lynn Hughes, as she sentenced Correa, noted that the crime has resulted in stricter security at other baseball teams, according to a press release from the Justice Department. When Correa apologized and called his actions ‘reckless,’ [Judge] Hughes replied, ‘No, you intentionally and knowingly did these acts.’”

As the Department of Justice reported at the time of Correa’s plea:

The plea agreement details a selection of instances in which Correa unlawfully accessed the Astros’ computers. For example, during 2013, he was able to access scout rankings of every player eligible for the draft. He also viewed, among other things, an Astros weekly digest page which described the performance and injuries of prospects who the Astros were considering, and a regional scout’s estimates of prospects’ peak rise and the bonus he proposed be offered. He also viewed the team’s scouting crosscheck page, which listed prospects seen by higher level scouts. During the June 2013 amateur draft, he intruded into that account again and viewed information on players who had not yet been drafted as well as several players drafted by the Astros and other teams.

Correa later intruded into that account during the July 31, 2013, trade deadline and viewed notes of Astros’ trade discussions with other teams.

Another set of intrusions occurred in March 2014. The Astros reacted by implementing security precautions to include the actual Ground Control website address (URL) and required all users to change their passwords to more complex passwords. The team also reset all Ground Control passwords to a more complex default password and quickly e mailed the new default password and the new URL to all Ground Control users.

Shortly thereafter, Correa illegally accessed the aforementioned person’s e mail account and found the e mails that contained Ground Control’s new URL and the newly-reset password for all users. A few minutes later, Correa used this information to access another person’s Ground Control account without authorization. There, he viewed a total of 118 webpages including lists ranking the players whom Astros scouts desired in the upcoming draft, summaries of scouting evaluations and summaries of college players identified by the Astros’ analytics department as top performers.

On two more occasions, he again illicitly accessed that account and viewed confidential information such as projects the analytics department was researching, notes of Astros’ trade discussions with other Major League Baseball teams and reports of players in the Astros’ system and their development.

The parties agreed that Correa masked his identity, his location and the type of device that he used, and that the total intended loss for all of the intrusions is approximately $1.7 million.

Michael McCann provides a good analysis of the sentence for Sports Illustrated and describes potential penalties Major League Baseball may pursue against the Cardinals.

shutterstock_152933135In today’s post, we have answered some of the most frequent and significant questions that we are asked about trade secret disputes and employment risks.

  1.  Could you provide a brief snapshot of current trends in trade secret disputes? Do companies need to be more aware of the potential risks in this area?

Milligan: Data theft of valuable company trade secrets through the use of portable electronic storage devices is occurring more and more, as is theft through cloud storage. We are also seeing an increase in more sophisticated hacking of company networks to obtain proprietary data by organized crime and foreign companies or states. Technological tools and employee use of personal mobile devices such as smartphones and tablets have given rise to a parallel trend of employers allowing — or requiring — their employees to use their own personal mobile devices at work. This “Bring Your Own Device” (BYOD) movement can provide benefits to employees and employers, such as convenience, greater flexibility and productivity, as well as cost savings. However, BYOD programs can also create risks for employers. Companies need to be aware of potential data security issues, BYOD policies in a unionized workforce, employee privacy concerns and intellectual property issues. Moreover, the recovery of stolen information and workplace investigations can be hampered by employee-owned devices, not to mention challenges in litigation when trying to gain access to such devices where privacy considerations are often leveraged. Additionally, attacks on reasonable secrecy measures — part of the definition of a trade secret — is also on the rise: One court recently ruled that password protection alone was not enough to demonstrate reasonable secrecy measures.

Wexler: Further, like the EU, the United States is considering enhancing trade secret protections through additions to its laws. There are two bills pending in the United States Congress to create a civil cause of action for trade secret misappropriation in federal court. If passed, the legislation would provide companies with an additional forum and remedy to combat trade secret theft. With the increasing accessibility of data from a variety of electronic devices and threats by insiders and outsiders, companies also need to be more aware of potential risks to their data and ensure that they have appropriate policies and agreements in place with employees, vendors, and business partners, as well as top of the class data security protections.

  1. How severe is the threat of losing trade secrets to a departing employee or departing executive? What are some of the common scenarios in which trade secrets can be compromised in this manner? Does the threat level change depending on the size of the company – small cap, mid cap, Fortune 50?

Wexler: The threat of losing trade secrets to a departing employee is real and not a matter of if, but when. Prudent companies will make sure that they have appropriate processes in place to address the threat when it occurs. As today’s businesses meet the challenges of intensifying global competition, a more volatile workforce and information being transmitted at an unprecedented speed, they also face a greater risk of losing their valuable proprietary information to theft, inadvertent disclosure, or coordinated employee departures. At a minimum, failure to take both proactive and immediate reactive measures could result in significant loss of profitability and erosion of an established employee and customer base. The threat of losing trade secrets to a departing employee or executive is enhanced if you don’t have appropriate policies and agreements in place to prevent such theft or hold employees accountable for their unlawful conduct. And it can happen so easily and rapidly: One thumb drive can carry millions of pages of proprietary information and company information transferred to a personal email account or in a personal cloud all pose means for theft.

Milligan: Just look at recent headlines involving some of the world’s largest companies who have seen their proprietary information compromised by insiders and outsiders. The crown jewels of many companies are at risk, and millions of dollars are in play. Lack of market secrecy measures, sloppy practices including poor supply side protections, lack of employee education and stale agreements and policies, poor security and different standards for executives who say one thing and do another are all common scenarios that put a company at risk. Common scenarios in which trade secrets can be compromised include letting an employee take company data when he or she leaves. Another red flag scenario is not utilizing non-compete or non-disclosure agreements. There can also be scenarios where the particular industry is highly competitive and competitors are willing to take the enhanced risks to acquire the business or technology. In such scenarios, companies need to make sure they have in place appropriate onboarding and off-boarding practices and procedures, and use the appropriate agreements so they are not exposed. In our experience, the threat level does not necessarily change depending on the size of the company, but the magnitude of harm may increase. The larger the company, the more information to protect and employees/third parties to regulate and police. But small and mid-cap companies have similar concerns because they oftentimes have innovative technology that competitors or other third parties want, so these companies can also be vulnerable.

  1. What steps can companies take during the hiring process to reduce the threat that it may later be sued for trade secret misappropriation – particularly executives or those employees with higher level access to sensitive IP assets?

Milligan: Companies need to have a thoughtful, pro-active process in place when hiring employees from competitors that is calculated to ensure that new employees do not violate their lawful agreements with their former employees, including using or disclosing their former employers’ trade secrets, and retaining any of their former employers’ property. It’s important to regulate who interviews the job candidate and evaluate the candidate’s non-compete or confidentiality agreement. Advise company personnel who are interviewing the candidate not to ask about a competitor’s confidential information during the hiring process. Focus the interview on the recruit’s general skills and experience in the industry. It’s also important not to disclose company trade secrets to the candidate — be careful of the access permitted to the candidate. Candidates for employment should sign certifications that they will not disclose any trade secrets of their current employer. Additionally, make sure you analyze a recruit’s agreements in advance of an offer being made. Should the candidate accept an offer, provide clear instructions to the employee that you don’t want the former employer’s trade secrets or property and use agreements with the employee documenting the same. There are unique issues surrounding the retention and departure of high-level executives, particularly related to non-compete and trade secret issues. Since businesses can become targets of trade secret-related lawsuits if they hire executives and senior management who have worked at a competitor and misappropriate trade secrets or otherwise violate their restrictive covenants, it’s important for companies to conduct due diligence on prospective employees and make sure that they have thoughtful plan in place before bringing on any high risk hires.

Wexler: Simple steps such as retaining hard drives when an employee leaves and inspecting computers, devices, cloud storage, and email accounts can alert an employer to theft of information. More sophisticated methods such a forensic exam and monitoring software can also detect theft. Most of all, create a culture in which recruits and new employees are told “we do not want anything from your prior employer.” Some additional best practice considerations follow below. Do not allow a recruit to do any work for your company until he or she has left his or her prior employer. Assist the employee in announcing the change in employment upon commencement of employment as appropriate. Focus on making the transition as smooth as possible for the current employer and encourage the departing employee to give proper notice and work out a mutually agreeable transition schedule with his or her current employer. With respect to the employee’s new position, don’t put the employee in a position in the company where he or she will necessarily need to reveal trade secrets. Finally, HR personnel needs to follow up with the employee to make sure that she is following her agreements and not pushing the envelope, and also follow up with managers to make sure the employee is doing the same.

  1. In what ways is the technology now available to employees changing the playing field in terms of loss or theft of trade secrets?

Milligan: The constant evolution of technology, particularly in mobile devices, data storage and security, and social media, has created legal challenges for companies and the playing field has changed tremendously. Portable electronic storage devices, online data storage, and personal email are available to employees for nominal to no expense and can provide the means to trade secret theft. Additionally, business leaders often want data and information immediately and often want to make it accessible to various constituents, but companies don’t necessarily keep up with the latest in security in protecting such data. Companies need to stay on top of technology, including the latest in data storage and security and storage devices. Hacking of computers and mobile devices is more of a concern these days, and more mobility for employees also means more potential security issues for companies. Companies also need to stay on top of social media. Given its rapid and somewhat haphazard growth, social media carries with it a set of issues that traditional avenues of trade secret disclosure do not. For instance, unlike the departing employee who knowingly takes with him a box of documents, the relaxed and non-professional environment of social media sites could lead to employees disclosing confidential information without even realizing they are doing so. Exposure of confidential company information and employee privacy rights are all issues that companies are now struggling with.

Wexler: Social media privacy legislation has become increasingly common in the United States and often impacts trade secret investigations. Issues related to social media privacy in the workplace are not going away and we expect to see more disputes to define acceptable practices in this area. In light of this uncertainty, employers should determine whether their company has employees in any of the states that have adopted or are planning to adopt social media privacy laws in order to ensure compliance with such laws. Employers should also be aware that state laws may restrict requests for information about such activity. Counsel should review the applicable state social media access law before asking an employee for any account-related information. Additionally, employers should not overlook social media evidence in conducting employee investigations, and trade secrets and restrictive covenant lawsuits, but make sure that your company’s review and access of such information does not violate applicable law.

  1. How can companies avoid trade secret misappropriation and what should they do if they suspect misappropriation has occurred? What forensic investigation options might be available?

Wexler: Apart from civil liability, the Economic Espionage Act makes it a federal crime to steal trade secrets, and companies can be liable if they hire employees who misappropriate trade secrets for their new employers’ benefit. Make sure your executives know the importance of playing by the rules. Employers can best avoid trade secret misappropriation with solid hiring practices and strong off-boarding procedures which are calculated to protect trade secrets and honor lawful agreements, coupled with effective ongoing employee training on trade secret protection and fair competition. Protecting your company information is critical to avoid trade secret misappropriation, and companies should work with their outside counsel to create solid policies and agreements, and solutions for onboarding to avoid exposure on restrictive covenants and trade secrets. It’s also crucial to know your business partners, and have them vetted, so that they don’t expose your valuable trade secrets. Critical to any trade secret matter is the thorough investigation of what, if any, wrongdoing occurred. Companies should work with legal counsel who is experienced in conducting such investigations. Comprehensive interviews and a review of relevant files, emails and workspaces are often the starting points of a competent investigation.

Milligan: We also regularly collaborate with forensic experts and computer specialists to find out how secrets were taken, and by whom, and to preserve any evidence necessary to future litigation. It’s important to preserve data, review emails, and talk to relevant witnesses to interpret the forensic data. A digital forensics examination often includes collecting and analyzing artifacts from the operating system, internet history, and unallocated space. Routine eDiscovery does not typically delve into questions about the source computer or storage device and ESI, although eDiscovery may uncover the need to ask questions related to internet history, webmail, cloud storage, mobile devices and phone back-ups, and removable devices.

  1. How should companies interact with criminal prosecutors and federal/state law enforcement to complement civil claims for trade secret misappropriation?

Milligan: Private companies can investigate misappropriation claims and provide information to authorities for purposes of prosecuting Economic Espionage Act and/or Computer Fraud & Abuse Act claims as well as similar state criminal laws, but businesses need to be aware of two important points: 1) allowing law enforcement access to the business can be a double edged sword creating interference with operations and disclosure of more information than the business may want, and 2) when conducting an investigation be certain to follow accepted forensic practices and chains of custody in collecting information. In sum, ensure that you have your house in order so you don’t become the target of an investigation. When considering criminal prosecutions, always be cognizant of the ethical rule required of attorneys that generally prohibits threatening or initiating criminal proceedings to gain an advantage in a civil proceeding. Consultation with criminal authorities should be done in secrecy and ideally by non-attorneys so as not to run afoul of ethical rules. However, note an attorney can have contact with authorities, it is not prohibited in and of itself.

Wexler: It should also be noted that criminal prosecutors may make a request regarding the secrecy of the investigation or to hold off taking certain actions in the civil matter (or pursing the case altogether while the criminal case is ongoing) as they are focused on the criminal matter whereas a company and its counsel may be focused on the civil matter and damages. These differing interests can collide at times, so coordination is key. No private right of action exists yet under the Economic Espionage Act. The U.S. Senate and House are currently considering legislation on this issue.

  1. What kinds of challenges do US companies face in pursuing trade secrets and non-compete claims against foreign companies, particularly from China?

Milligan: U.S. companies may face the challenge of not being able to enforce injunctive relief orders and judgments, as well as jurisdictional challenges posed by foreign companies. Additionally, in some cases, Chinese companies doing business in the U.S. have quite limited assets in the U.S. and individual defendants may be judgment proof. Even if a U.S. company obtains a favorable judgment from the U.S. court, the judgment may not be recognized or enforceable in China, and thus, the company may not obtain sufficient monetary or equitable remedy. Therefore, the U.S. company must carefully select its business partners and the jurisdiction in a confidentiality or non-compete agreement to attempt to enhance its ability to obtain an injunction and judgment. If forced to sue abroad, remember the court systems are different and there are different views on IP. Your company may not be able to get complete relief in a foreign jurisdiction. The EU Commission has proposed a directive to harmonize trade secrets law in Europe that may assist in this regard in the future if approved.

  1. What are some practical considerations for US companies or multinational companies doing business in Asia and Europe to protect their trade secrets and confidential information?

Wexler: Know your business partners. Have them fully vetted so they don’t steal your IP. Try to protect your supply side with appropriate agreements. You should also be careful about what you share with your business partners. If it is bet-the-company information, consider keeping that internal. In addition to getting employees and business partners to execute well-prepared agreements, training — both on-board and on-the-job — can be a powerful measure. Employers should make sure that access to trade secrets and confidential information is granted only to those with necessity to know and make sure your local workforce abroad is trained on company policies and signs appropriate agreements to protect IP. Realize that you are not in the U.S., and the legal systems and respect for IP may be different. For example, in China, different locales may have different views on trade secret protections and non-compete agreements. For instance, the statutory minimum non-compete compensation in Shenzhen is higher than the one in Shanghai. U.S. companies or multinational companies doing business in China should be aware of such local variations and may need to take different measures in different places to ensure protection.

Milligan: Within a foreign forum the selection of the right venue, meaning a locale where the court is more willing to implement the rule of law is essential. In China, for example, the enforcement varies by locale. For instance, recent decisions indicate that Shanghai courts are more willing to give protection to the employer in trade secret and non-compete cases, including issuing injunctive relief. Try to use contractual choice of law, consent to jurisdiction, and forum clauses for the most favorable forum for you. Also consider international arbitration. Assess your security vulnerabilities, particularly in light of the foreign locale, and put in place appropriate safeguards. Carefully access your IT security in foreign countries and be alert for unauthorized monitoring and surveillance. Provide training to executives on traveling abroad and conducting business abroad to ensure that trade secrets are not carelessly compromised.

  1. In your experience, what should a company do if a trade secret dispute arises between it and a former employee?

Milligan: If a company suspects that valuable information has been improperly taken or compromised, you need to first assess the potential competitive threat to the company. It’s important to take fast, effective action and consider whether to pursue civil remedies or criminal intervention against the former employee. If litigation is anticipated with the departure of an employee, you should take precautionary steps immediately:

  • Secure and establish a chain of custody for all items returned by the departing employee, including laptop computer, desktop computer, USB devices, tablets, and physical property.
  • Secure and maintain a chain of custody of the employee’s office and the items in that office until it is searched.
  • Retain outside counsel to investigate the departure and have outside counsel secure the services of a digital forensic investigation firm with a good reputation.
  • If the employee is computer savvy, do an immediate search of the internet for relevant materials posted to social media sites, including LinkedIn, Facebook, and Twitter.

Wexler: When our clients are faced with possible trade secret misappropriation by former employees, we immediately investigate and develop the facts through interviews, document review, and collaborate with a qualified digital forensic expert. Forensic investigation of computing devices to identify the possible theft of confidential information is a must. We assess the company’s business objectives as well as the chance of success, and assuming that there is sufficient evidence to pursue, we demand compliance and appropriate remedies via cease and desist demands prior to the initiation of litigation. Should written requests for compliance not be successful, we seek injunctive relief and damages to protect company assets and further our client’s objectives.

  1. In the battle against trade secret theft and related disputes, do companies place enough importance on the language and provisions contained in employment contracts? How can employment contracts be strengthened to either reduce trade secret theft or improve the company’s chances of reaching a successful outcome in a trade secret dispute?

Wexler: In our experience, companies should place more importance on their agreements with employees, vendors, and business partners to protect trade secrets. Companies need to strengthen the language and provisions contained in such agreements, including clearer definitions of protectable trade secrets, return of company property provisions, appropriate restrictive covenants, and appropriate forum and choice of law provisions. Well-drafted agreements can reduce the risk of information being misappropriated. Such agreements should be updated annually, as needed, based on changes in the law, and companies should routinely audit their practices to make sure each employee has an appropriate agreement. Companies should also make it an agreed requirement for employees to sit for an exit interview and return any company confidential information stored on any personal devices. Finally, agreements should include an attorneys’ fee provision for breach.

Milligan: Additionally, a thorough exit interview should be conducted at the time any employee separates, and as part of that exit interview process, each exiting employee should be given a written reminder of their ongoing trade secret, confidentiality and social networking obligations, and should be asked to sign the reminder acknowledging receipt and their agreement to comply with such obligations. The exit interview is also the time to get company property returned by the departing employee and make any arrangements for the return and remediation of company property on any personal devices.

shutterstock_270428249Generally when one refers to “competitors” in the context of protecting trade secrets, it is in regard to business competitors, not competing sports teams.  And usually when the talking heads on sports radio and television are discussing legal issues, they relate to domestic violence or other crimes, concussions, illicit and performance enhancing drugs, or labor disputes (sometimes even non-competes), not to corporate espionage.  Recently, however, the worlds of sports and trade secret protection collided on the baseball diamond when the St. Louis Cardinals were accused of hacking into the Houston Astros’ internal computer network and stealing proprietary information. According to the New York Times, Cardinals employees gained access to the Astros’ “internal discussions about trades, proprietary statistics and scouting reports,” which the Astros no doubt would prefer to keep private.  Specifically:

Law enforcement officials believe the hacking was executed by vengeful front-office employees for the Cardinals hoping to wreak havoc on the work of Jeff Luhnow, the Astros’ general manager, who had been a successful and polarizing executive with the Cardinals until 2011.

The Astros hired Mr. Lunhow away from the Cardinals in December 2011, and he quickly helped to turn the struggling team into a contender (they currently have the best record in the American League—and the second best record overall, trailing only the Cardinals who are perennial contenders). This allegedly caused Cardinals personnel to be concerned that Mr. Lunhow had taken their proprietary baseball information with him to the Astros (he has denied doing so). Indeed, highlighting the benefits of a trade secret audit, accessing the Astros’ computer system was apparently quite simple and unsophisticated, as Mr. Lunhow purportedly used the same password to access the Astros’ network that he had previously used to access the Cardinals’ network (he has denied this as well).  According to the Times:

Investigators believe that Cardinals personnel . . . examined a master list of passwords used by Mr. Luhnow and the other officials when they worked for the Cardinals.  The Cardinals employees are believed to have used those passwords to gain access to the Astros’ network, law enforcement officials said.

The FBI is investigating and “subpoenas have been served on the Cardinals and Major League Baseball for electronic correspondence.”  The Cardinals and/or any employees involved in the hacking could face federal criminal charges, including charges under the Economic Espionage Act (EEA), which deals with theft of trade secrets, the Computer Fraud and Abuse Act (CFAA), which deals with the hacking itself, and perhaps even the Wire Fraud Statute.

Charges under the EEA would require prosecutors to prove that the Cardinals:  (1) stole or misappropriated trade secret information (as defined by the Uniform Trade Secrets Act); (2) knew that such information was proprietary; (3) knew that such information was stolen or misappropriated; (4) acted with the intent of economically benefitting someone other than the Astros (i.e., the Cardinals); and (5) intended to injure the Astros.  Moreover, the prosecution would also have to prove that the trade secrets were “related to or included in a product that is produced for or placed in interstate or foreign commerce,” which Major League Baseball (the “product” here) certainly is. A person found guilty of violating the EEA can be fined or imprisoned up to 10 years, or both, and an organization such as the Cardinals that is found guilty can be fined up to $5 million.

Charges under the CFAA would require prosecutors to prove that the Cardinals:  (1) accessed a protected computer, (2) without authorization or by exceeding such authorization as was granted; (3) knowingly and with the intent to defraud; and (4) obtained something of value in furtherance of the intended fraud.  Penalties under the CFAA also include fines and imprisonment.

Some states have analogous criminal statutes, including both Texas and Missouri, which could be implicated given that the victim of the alleged hacking, the Astros, are located in Houston, and the alleged perpetrators, the Cardinals, are located in St. Louis.

The Astros could also seek civil damages under federal law, including under the CFAA and possibly the Stored Communications Act (if communications were hacked), as well as under state law, including state unfair business practices statutes, trade secret misappropriation statutes, and common law claims of misappropriation, conversion, and the like.  Indeed, the Missouri criminal statute discussed above contains a civil cause of action that allows for the recovery of compensatory damages and attorneys’ fees where there tampering with computer data, equipment, and users can be proven (including “any expenditures reasonably and necessarily incurred by the owner or lessee to verify that a computer system, computer network, computer program, computer service, or data was not altered, damaged, or deleted by the access”).

Although it appears, based on the limited facts that have been publicly disclosed to date, that the Astros could have strong civil claims against the Cardinals, it is far more likely that they will simply allow federal officials to pursue any criminal charges they may deem appropriate, and otherwise handle the issue within the confines of MLB’s disciplinary process.  Indeed, MLB’s constitution requires that teams address “[a]ll disputes and controversies related in any way to professional baseball” internally, with the commissioner acting as arbitrator.

Dean Pelletier and Eric Ostroff have very informative blog postings on this topic as well that are certainly worth reading.  And we will be sure to provide any updates as they become available.

On October 1, 2014, Michael D. Wexler and Robert B. Milligan, partners and co-chairs of Seyfarth Shaw’s Trade Secrets, Computer Fraud & Non-Competes practice group participated in a Q&A mini-roundtable from Corporate Disputes Magazine on current trends in trade secret disputes and the steps companies can take to reduce these disputes.  Below are fielded questions from the Seyfarth Shaw Reprint of Corporate Disputes Magazine, OCT-DEC Issue. We hope you find this informative.

CD: Could you provide a brief snapshot of current trends in trade secret disputes?  Do companies need to be more aware of the potential risks in this area?

Milligan: Data theft of valuable company trade secrets through the use of portable electronic storage devices is occurring more and more, as is theft through cloud storage.  We are also seeing an increase in more sophisticated hacking of company networks to obtain proprietary data by organised crime and foreign companies or states.  Technological tools and employee use of personal mobile devices such as smartphones and tablets have given rise to a parallel trend of employers allowing – or requiring – their employees to use their own personal mobile devices at work.  This ‘Bring Your Own Device’ (BYOD) movement can provide benefits to employees and employers, such as convenience, greater flexibility and productivity, as well as cost savings.  However, BYOD programs can also create risks for employers.  Companies need to be aware of potential data security issues, BYOD policies in a unionised workforce, employee privacy concerns and intellectual property issues.  Moreover, the recovery of stolen information and workplace investigations can be hampered by employee-owned devices, not to mention challenges in litigation when trying to gain access to such devices where privacy considerations are often leveraged.  Additionally, attacks on reasonable secrecy measures – part of the definition of a trade secret – is also on the rise: one court recently ruled that password protection alone was not enough to demonstrate reasonable secrecy measures.

Wexler: Further, like the EU, the United States is considering enhancing trade secret protections through additions to its laws.  There are two bills pending in the United States Congress to create a civil cause of action for trade secret misappropriation in federal court.  If passed, the legislation would provide companies with an additional forum and remedy to combat trade secret theft.  With the increasing accessibility of data from a variety of electronic devices and threats by insiders and outsiders, companies also need to be more aware of potential risks to their data and ensure that they have appropriate policies and agreements in place with employees, vendors and business partners, as well as top of the class data security protections.

CD: How severe is the threat of losing trade secrets to a departing employee or departing executive?  What are some of the common scenarios in which trade secrets can be compromised in this manner?  Does the threat level change depending on the size of the company – small cap, mid cap, Fortune 50?

Wexler: The threat of losing trade secrets to a departing employee is real and not a matter of if, but when.  Prudent companies will make sure that they have appropriate processes in place to address the threat when it occurs.  As today’s businesses meet the challenges of intensifying global competition, a more volatile workforce and information being transmitted at an unprecedented speed, they also face a greater risk of losing their valuable proprietary information to theft, inadvertent disclosure or coordinated employee departures.  At a minimum, failure to take both proactive and immediate reactive measures could result in significant loss of profitability and erosion of an established employee and customer base.  The threat of losing trade secrets to a departing employee or executive is enhanced if you don’t have appropriate policies and agreements in place to prevent such theft or hold employees accountable for their unlawful conduct.  And it can happen so easily and rapidly: one thumb drive can carry millions of pages of proprietary information and company information transferred to a personal email account or in a personal cloud all pose means for theft.

Milligan: Just look at recent headlines involving some of the world’s largest companies who have seen their proprietary information compromised by insiders and outsiders.  The crown jewels of many companies are at risk, and millions of dollars are in play.  Lack of market secrecy measures, sloppy practices including poor supply side protections, lack of employee education and stale agreements and policies, poor security and different standards for executives who say one thing and do another are all common scenarios that put a company at risk.  Common scenarios in which trade secrets can be compromised include letting an employee take company data when he or she leaves.  Another red flag scenario is not utilising non-compete or non­disclosure agreements.  There can also be scenarios where the particular industry is highly competitive and competitors are willing to take the enhanced risks to acquire the business or technology.  In such scenarios, companies need to make sure they have in place appropriate onboarding and off-boarding practices and procedures, and use the appropriate agreements so they are not exposed.  In our experience, the threat level does not necessarily change depending on the size of the company, but the magnitude of harm may increase.  The larger the company, the more information to protect and the more employees and third parties to regulate and police.  But small and mid-cap companies have similar concerns because they oftentimes have innovative technology that competitors or other third parties want, so these companies can also be vulnerable.

CD: What steps can companies take during the hiring process to reduce the threat that it may later be sued for trade secret misappropriation – particularly executives or those employees with higher level access to sensitive IP assets?

Milligan: Companies need to have a thoughtful, proactive process in place when hiring employees from competitors that is calculated to ensure that new employees do not violate their lawful agreements with their former employers, including using or disclosing their former employers’ trade secrets, and retaining any of their former employers’ property.  It is important to regulate who interviews the job candidate and evaluate the candidate’s non-compete or confidentiality agreement.  Advise company personnel who are interviewing the candidate not to ask about a competitor’s confidential information during the hiring process.  Focus the interview on the recruit’s general skills and experience in the industry.  It’s also important not to disclose company trade secrets to the candidate – be careful of the access permitted to the candidate.  Candidates for employment should sign certifications that they will not disclose any trade secrets of their current employer.  Additionally, make sure you analyse a recruit’s agreements in advance of an offer being made.  Should the candidate accept an offer, provide clear instructions to the employee that you don’t want the former employer’s trade secrets or property and use agreements with the employee documenting the same.  There are unique issues surrounding the retention and departure of high-level executives, particularly related to non-compete and trade secret issues.  Since businesses can become targets of trade secret-related lawsuits if they hire executives and senior management who have worked at a competitor and misappropriate trade secrets or otherwise violate their restrictive covenants, it’s important for companies to conduct due diligence on prospective employees and make sure that they have thoughtful plan in place before bringing on any high risk hires.

Wexler: Simple steps such as retaining hard drives when an employee leaves and inspecting computers, devices, cloud storage, and e-mail accounts can alert an employer to theft of information.  More sophisticated methods such as forensic exam and monitoring software can also detect theft.  Most of all, create a culture in which recruits and new employees are told ‘we do not want anything from your prior employer’.  Some additional best practice considerations follow below.  Do not allow a recruit to do any work for your company until he or she has left his or her prior employer.  Assist the employee in announcing the change in employment upon commencement of employment as appropriate.  Focus on making the transition as smooth as possible for the current employer and encourage the departing employee to give proper notice and work out a mutually agreeable transition schedule with his or her current employer.  With respect to the employee’s new position, don’t put the employee in a position in the company where he or she will necessarily need to reveal trade secrets.  Finally, HR personnel needs to follow up with the employee to make sure that she is following her agreements and not pushing the envelope, and also follow up with managers to make sure the employee is doing the same.

CD: In what ways is the technology now available to employees changing the playing field in terms of loss or theft of trade secrets?

Milligan: The constant evolution of technology, particularly in mobile devices, data storage and security, and social media, has created legal challenges for companies and the playing field has changed tremendously.  Portable electronic storage devices, online data storage and personal email are available to employees for nominal to no expense and can provide the means to trade secret theft.  Additionally, business leaders often want data and information immediately and often want to make it accessible to various constituents, but companies don’t necessarily keep up with the latest security in protecting such data.  Companies need to stay on top of technology, including the latest in data storage and security and storage devices.  Hacking of computers and mobile devices is more of a concern these days, and more mobility for employees also means more potential security issues for companies.  Companies also need to stay on top of social media.  Given its rapid and somewhat haphazard growth, social media carries with it a set of issues that traditional avenues of trade secret disclosure do not.  For instance, unlike the departing employee who knowingly takes with him a box of documents, the relaxed and non-professional environment of social media sites could lead to employees disclosing confidential information without even realising they are doing so.  Exposure of confidential company information and employee privacy rights are all issues that companies are now struggling with.

Wexler: Social media privacy legislation has become increasingly common in the United States and often impacts trade secret investigations.  Issues related to social media privacy in the workplace are not going away and we expect to see more disputes to define acceptable practices in this area.  In light of this uncertainty, employers should determine whether their company has employees in any of the states that have adopted or are planning to adopt social media privacy laws in order to ensure compliance with such laws.  Employers should also be aware that state laws may restrict requests for information about such activity.  Counsel should review the applicable state social media access law before asking an employee for any account-related information.  Additionally, employers should not overlook social media evidence in conducting employee investigations, and trade secrets and restrictive covenant lawsuits, but make sure that their company’s review and access of such information does not violate applicable law.

CD: How can companies avoid trade secret misappropriation and what should they do if they suspect misappropriation has occurred?  What forensic investigation options might be available?

Wexler: Apart from civil liability, the Economic Espionage Act makes it a federal crime to steal trade secrets, and companies can be liable if they hire employees who misappropriate trade secrets for their new employers’ benefit.  Make sure your executives know the importance of playing by the rules.  Employers can best avoid trade secret misappropriation with solid hiring practices and strong off-boarding procedures which are calculated to protect trade secrets and honour lawful agreements, coupled with effective ongoing employee training on trade secret protection and fair competition.  Protecting your company information is critical to avoid trade secret misappropriation, and companies should work with their outside counsel to create solid policies and agreements, and solutions for onboarding to avoid exposure on restrictive covenants and trade secrets.  It’s also crucial to know your business partners, and have them vetted, so that they don’t expose your valuable trade secrets.  Critical to any trade secret matter is the thorough investigation of what, if any, wrongdoing occurred.  Companies should work with legal counsel who is experienced in conducting such investigations.  Comprehensive interviews and a review of relevant files, emails and workspaces are often the starting points of a competent investigation.

Milligan: We also regularly collaborate with forensic experts and computer specialists to find out how secrets were taken, and by whom, and to preserve any evidence necessary to future litigation.  It is important to preserve data, review emails and talk to relevant witnesses to interpret the forensic data.  A digital forensics examination often includes collecting and analysing artefacts from the operating system, internet history, and unallocated space.  Routine e-discovery does not typically delve into questions about the source computer or storage device and ESI, although e-discovery may uncover the need to ask questions related to internet history, webmail, cloud storage, mobile devices and phone back-ups, and removable devices.

CD: How should companies interact with criminal prosecutors and federal/state law enforcement to complement civil claims for trade secret misappropriation?

Milligan: Private companies can investigate misappropriation claims and provide information to authorities for purposes of prosecuting Economic Espionage Act or Computer Fraud & Abuse Act claims as well as similar state criminal laws, but businesses need to be aware of two important points.  First, allowing law enforcement access to the business can be a double edged sword creating interference with operations and disclosure of more information than the business may want.  Second, when conducting an investigation, be certain to follow accepted forensic practices and chains of custody in collecting information.  In sum, ensure that you have your house in order so you don’t become the target of an investigation.  When considering criminal prosecutions, always be cognizant of the ethical rule required of attorneys that generally prohibits threatening or initiating criminal proceedings to gain an advantage in a civil proceeding.  Consultation with criminal authorities should be done in secrecy and ideally by non-attorneys so as not to run afoul of ethical rules.  However, note an attorney can have contact with authorities; it is not prohibited in and of itself.

Wexler: It should also be noted that criminal prosecutors may make a request regarding the secrecy of the investigation or to hold off taking certain actions in the civil matter — or pursing the case altogether while the criminal case is ongoing — as they are focused on the criminal matter whereas a company and its counsel may be focused on the civil matter and damages.  These differing interests can collide at times, so coordination is key.  No private right of action exists yet under the Economic Espionage Act.  The US Senate and House are currently considering legislation on this issue.

To view the full Article, click here.

We are pleased to let you know that the webinar “Protecting Trade Secrets: The Current Landscape, Top Threats, Best Practices for Assessing and Protecting Trade Secrets, Proposed Legislation and Future Scenarios” is now available as a podcast and webinar recording.

Robert B. Milligan, partner and co-chair of Seyfarth Shaw’s Trade Secrets, Computer Fraud & Non-Competes practice group, Daniel Hart associate in Seyfarth’s Atlanta office and member of the Trade Secrets, Computer Fraud & Non-Competes practice group along with the Center for Responsible Enterprise and Trade, CREATe.org’s CEO Pamela Passman and Marissa Michel, Director in PriceWaterhouseCoopers’ Forensic Services Group took a rigorous look at the issue or trade secret theft and discussed insights from a recent PwC – CREATe.org report: Economic Impact of Trade Secret Theft: A framework for companies to safeguard trade secrets and mitigate potential threats.

As a conclusion to this well-received webinar, we compiled a list of key takeaway points, which are listed below.

  • Theft of trade secrets poses a substantial threat to companies throughout the world and will likely remain a significant challenge in the next 10-15 years as companies face increasing threats from competitors, malicious insiders, nation states, transnational organized crime, and hacktivists.
  • Companies should carefully assess their existing trade secrets portfolio and the steps needed to protect their trade secrets by following a detailed and comprehensive 5-step framework: (1) identifying their trade secrets, (2) assessing the threats to their trade secrets portfolio and possible exposures, (3) analyzing the relative priorities of their trade secrets to assess which trade secrets require the highest level of protection, (4) assessing the likely economic impact that would be caused by a theft of trade secrets, and (5) secure the trade secrets portfolio by implementing a management system (including policies, protocols, training, and other measures across the organization).
  • Effective protection of trade secrets requires a coordinated and deliberative effort across all business units in a company, including IT, HR, legal, and other business leaders.  The only way to effectively protect a company’s trade secrets portfolio is to carefully analyze the threats to the company’s trade secrets and thoughtfully develop a comprehensive and customized strategy with buy-in from all stakeholders across the organization.

Please join us for our next webinar on October 28, How and Why California is Different When it Comes to Trade Secrets and Non-Competes

As a special feature of our blog –special guest postings by experts, clients, and other professionals –please enjoy this blog post by digital forensics expert Trent Livingston, a Director of iDiscovery Solutions.

By Trent Livingston

Do you recall the early days of the spy movie genre? Many of these movies depicted cloaked secret agents slinking around dark offices snapping pictures of evil plots to take over the world with their tiny spy cameras. Now a tiny spy camera is a bit passé given that every smartphone worth its salt makes this a standard feature. What is scary though is that camera is part of a digital storage device that can hold gigabytes of data, which coincidently, is connected to what we now commonly refer to as “the Cloud”.

Companies may not be plotting to take over the world, but one can be sure there is data within corporate walls that ownership wants kept under wraps. Does that mean everyone out there with a smartphone is stealing company secrets? The statistics are a bit unnerving. And a connected smart device is literally a mechanism that puts the ability to mastermind digital theft at one’s fingertips.

The Evolution of IP Theft

A five year old study conducted in 2009 by Ponemon Institute documented that when employees were dismissed, or voluntarily left their employer, more than 59% reported that they kept company data. Of the individuals surveyed, 61% reported to have taken it in the form of paper documents or hard files, 53% used CD or DVD media, 42% used media such as hard drive or USB memory stick, and 38% sent documents as attachments to a personal email account.

Fast forward to 2014 and bring your own device (“BYOD”) policies have introduced an entirely new way to pilfer corporate information. It may be as simple as a contact list, or as complex as source code for a new software release. The issue is, when it comes to Cloud connectivity, a corporation may never know a theft of this type has happened until it is too late. Given that the total losses attributed to IP theft of all types are in the hundreds of billions of dollars annually, it is not something to ignore.

With the advent of Web 2.0, new ways to share files have emerged in the last half decade that were not as prevalent in 2009 when the Ponemon survey was conducted. Google and many others introduced their enterprise web applications in 2009, and cloud computing began to hit its stride. Portable media like the CD and DVD have essentially become obsolete with increased bandwidth allowing large files gigabytes in size to be transferred in the time it takes to create one CD that can only warehouse a fraction of the same data.

While emailing information to personal email accounts is a likely suspect in intellectual property theft, data can leave an organization through a myriad of communication channels, including Social Media. Currently 74% of all adults use some form of social networking website or application. Essentially this means that 3 out of every 4 employees within any organization are using some form of Social Media to communicate. Of these individuals, 69% of them that are Facebook users say they visit the site at least once or more daily.

Social Media provides a means to obfuscate data theft, essentially allowing a perpetrator to abscond with information outside of the company’s firewall. Social networking applications such as LinkedIn, Facebook, and Twitter all have means of private communication. Access to these accounts is easy with any type of mobile device capable of running a social application.

File sharing applications are also mobile. With a quick click, and attachment saved from a corporate email account can be uploaded from anywhere to the likes of Box.net or Dropbox. These applications serve both the corporate and personal markets, which means distinguishing access to a personal or corporate account using corporate IT based IP address blocking solutions can become quickly limited.

Takeaways

Given that mobile devices serve a dual purpose for both the employee and employer under a BYOD policy, social and file sharing applications are integrated into the everyday corporate environment without second thought to their destructive capability. It is important to set up controls and company guidelines that specifically address employee usage of both social and file sharing web services. While direct monitoring of these types of personal accounts is not permitted, a departing employee’s ability to access sensitive company information should be quickly locked down. Without the proper controls in place, corporations are open to rampant IP theft should an employee have the desire to commit such an act.

Trent Livingston is a digital forensics expert who has given testimony in numerous cases involving topics such as evidence preservation, documentation of events, and computer forensic methodologies. Mr. Livingston has extensive experience working on litigation and consulting matters involving computer forensics, e-discovery and other high technology issues. He serves his clients through the litigation or consulting lifecycle by assisting them with important issues like data scoping, preserving, gathering, processing, hosting, review and production, as well as deeper diving issues uncovered through the use of computer forensics. Mr. Livingston can be contacted at tlivingston@idiscoverysolutions.com. Please note that each case may be unique and this single blog post is not intended to fully cover everything related to trade secret investigations or constitute advice, legal or otherwise. It is always best to consult a qualified person to assist with any investigation.

The judgments rendered in two recent 2014 federal criminal cases reveal the inherent complexity in prosecuting international trade secret misappropriation claims.

In U.S. v. Liew, Judge White of the U.S. District Court for the Northern District of California sentenced defendant Walter Liew to 15 years in prison for misappropriating trade secrets from chemical giant DuPont and selling them to an overseas Chinese company known as the Pangang Group, based in Chengdu. It was proven during the trial that Liew and his company, ironically named USA Performance Technology, received over $27.8 million in compensation for selling DuPont’s industrial trade secrets to Pangang, the trade secrets including technical blueprints belonging to DuPont related to the manufacturing of titanium dioxide, a white-colored pigment used in many commonplace consumer products such as paper and plastic. Thus, Liew’s intent to misappropriate trade secrets was established beyond a reasonable doubt by U.S. Attorneys.

On the other hand, in U.S. v. Yeh, a Texas jury acquitted former Texas Instruments (TI) employee Ellen Yeh on all counts brought against her (including trade secret misappropriation) based on proprietary information she admitted downloading before leaving the U.S. to work for a semiconductor manufacturing company in China. In her testimony, which she submitted polygraph results for, Ms. Yeh stated that she had no idea such activity was illegal or unauthorized, was confused about what constituted a TI trade secret vs. non-trade secret, and merely downloaded the files only for safekeeping in case another job opportunity arose to work for TI in China. Therefore, after a nine-day jury trial, she was acquitted because she was not found to have the requisite intent to commit trade secret misappropriation or illegal copying.

Proving Intent to Misappropriate Trade Secrets Beyond A Reasonable Doubt

In the Yeh case, it was difficult to prove Ms. Yeh’s intent to misappropriate trade secrets beyond a reasonable doubt, which is the standard used under the law, e.g., trade secrets misappropriation prohibited by the Economic Espionage Act and illegal copying prohibited by the National Information Infrastructure Act, a U.S. computer crime law passed in 1996. It is also harder to establish the commission of complex crimes such as criminal trade secret misappropriation because such claims require multiple elements to prove, such as the accused having to know what a trade secret is first (and why it would derive value from not being generally known to the public) and then knowingly, willfully misappropriating the trade secret once having this knowledge.

It may have been harder to prove intent in the Yeh case because it only involved the downloading of proprietary information. In the Liew case, not only was their possession of trade secrets (in the form of blueprints) but there were proven sales of that information made by Liew to the Pangang group. Liew also paid former DuPont engineers for trade secrets, so there were financial transactions Liew underwent to acquire the trade secrets in the first place. Therefore, the presence of commercial activity may make it easier to prove intent to misappropriate trade secrets, because it already establishes that the accused knows that the proprietary information he is selling or buying has high economic value.

Knowledge of What Constitutes a Trade Secret v. A Non Trade Secret

In the Yeh case, Ms. Yeh asserted that she was confused about what constituted a TI trade secret versus non-trade secret proprietary information. It may be difficult to discern a highly valuable trade secret from information that is already proprietary. Therefore, the burden is on the trade secret holder to educate their employees properly about company information, or to have stricter protection protocols under company policies for information clearly constituting trade secrets. The easier it is to establish that an accused party knows what a trade secret is, the easier it will be to establish the intent of that accused party to misappropriate trade secrets. For example, in addition to being found guilty of paying former DuPont employees to provide him with company trade secrets, Liew was also found guilty of filing false tax returns, making false statements, and witness/evidence tampering. Therefore, it might be clearer in Liew’s case that he knew what trade secrets were and also knew their true value – which is why he went to such extents to acquire them and sell them to the Pangang Group.

Limited Time for Prosecution

Having a smaller window of time to pursue remedies for trade secret misappropriation allows a higher likelihood of success. As does ensuring the defendant does not leave the country. Ms. Yeh departed TI over nine years ago. In 2005, because she had been living in China for a while already, the prosecution was stalled for over five years, and even after the grand jury indictment in 2008, she still continued to live overseas in China. Not until August of 2013 did Yeh finally return to the U.S. to face trial after she was detained at the South Korean border in response to a “Red Notice” issued by Interpol at the U.S. government’s request. The process would have been much better for the prosecution, strategically as well as time-wise, if the defendant stayed in the United States, like the Liew case.

The Defendant Need Not Actually Use The Trade Secrets

Liew’s attorney, Stuart Gasner from Keker & Van Nest, argued that Liew received the trade secrets from a former DuPont engineer who had kept them sitting in his closet for 14 years. He further stated that there was no proof that Liew actually used those secrets to hurt DuPont. Assistant U.S. Attorney John Hemann quickly responded that Gasner’s argument that the trade secrets weren’t used was “the most insulting thing that has been suggested” and that there was still misappropriation and the sale of such highly confidential, proprietary information.

Takeaways

There are a number of factors, as discussed above, that need to be taken into consideration when prosecuting a trade secret misappropriation claim in a federal criminal case. For a crime as complex as trade secret misappropriation, the more details and facts that can be established about the defendant’s state of mind, the stronger the case will be.