trade secret prosecutions

During the past week, federal courts around the country have seen a handful of high profile pleas, convictions and sentencing in cases in which defendants are accused of stealing their former employer’s trade secrets. 

On May 7, 2012, Yuan Li, a former research scientist with Sanofi Aventis, who had pled guilty to one count of violating 18 U.S.C. § 1832 (the section of the Economic Espionage Act dealing with commercial economic espionage) in January 2012, was sentenced to 18 months in prison by the United States District Court for the District of New Jersey. In pleading guilty, Li, a Chinese national, admitted to stealing data on Sanofi’s compounds, including their chemical structures, and sending that data via email or through use of a thumb drive to her home computer. Li was also ordered to pay $131,000 in restitution damages to Sanofi.

Later that same week, on May 9, 2012, the United States District Court for the Northern District of California convicted former Silicon Valley engineer, Suibin Zhang, of five counts; three counts for his theft and copying of trade secrets and downloading the trade secrets from a secure database, one count for duplication of trade secrets, and one count for possession of stolen trade secrets. This verdict followed a two-week bench trial before Judge Ronald M. Whyte, which concluded on November 9, 2011.

The evidence presented against Zhang during trial showed that, while employed as a project engineer for Netgear, Inc., he accessed the secure database of Marvell Semiconductor, Inc., downloading information with the intent of using that information after accepting a job at Marvell’s chief competitor, Broadcom Corporation and later loading Marvell’s trade secret information onto his Broadcom laptop. Zhang will be sentenced on August 27, 2012, and could face 10 years in prison, up to $250,000 in fines, plus restitution damages to Marvell if the court deemed such restitution damages appropriate.

Also last week, on May 11, 2012, former Frontier Scientist Inc. chemist, Prabhu Mohaptra, entered a guilty plea in the United States District Court for the District of Utah, pleading guilty to one count of unlawful access to a protected computer. Mohaptra’s guilty plead was in exchange for the government dropping 25 other charges against him. 

Mohaptra admitted to improperly accessing Frontier’s chemical resource notebook and emailing certain chemical formulas to his brother-in-law in India. Mohaptra’s case marks the first time that the Economic Espionage Act was used to prosecute a case in Utah. Mohaptra is scheduled for sentencing on August 28, 2012, at which time he faces up to five years in prison.

Each of these cases highlight the need for companies to monitor the access of its employees to secure databases. Companies should consider using additional preventive means to prohibit employees from stealing trade secrets, such as configuring the operating system to restrict access to external devices, thus, restricting the ability to download information to an external device; blocking a user from uploading information to a web-based site; and/or utilizing software that blocks employees from sending emails to certain domain names. In situations like this, companies may also wish to consider placing blocks on the ability of its employees to email certain domain names that are known to be used for personal email accounts. In an era in which data is becoming increasingly portable, companies much increase their vigilance in monitoring use and exporting of its data and trade secrets.