Criminal Prosecution of Trade Secret Theft: The...
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Criminal Prosecution of Trade Secret Theft: The Economic Espionage Act Jim Stronski Crowell & Moring 24 th Annual Intellectual Property Law & Policy Conference
Transcript of Criminal Prosecution of Trade Secret Theft: The...
CriminalProsecutionofTradeSecretTheft:TheEconomicEspionageAct
JimStronskiCrowell&Moring
24th AnnualIntellectualPropertyLaw&PolicyConference
THEECONOMICESPIONAGEACT§ EconomicEspionageActof1996,18U.S.C.§§ 1831-1839
§ TheftofTradeSecretsClarificationActof2012,removeslimitationin§ 1832prosecutionsrequiringtradesecretincorporationinproductsproduced/placed incommercetoaddressU.S.v.Aleynikov,676F.3d 71(2d Cir.2012)
§ ForeignandEconomicEspionagePenaltyEnhancementActof2013increasedfinesunder§ 1831– upto$5millionforindividuals;upto$10millionorthreetimesthevalueofthestolentradesecretfororganizations
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THEECONOMICESPIONAGEACT§ 18U.S.C.§ 1831:Economicespionage– tradesecrettheft
tobenefitforeigngovernment,oritsinstrumentality,oragent.
§ 18U.S.C. § 1832:Tradesecrettheftforeconomicadvantage,whetherornottobenefitforeigngovernment,oritsinstrumentality,oragent.
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THEECONOMICESPIONAGEACT§ 18U.S.C.§ 1839(3)broadlydefinestradesecretas
□ “allformsandtypesoffinancial,business,scientific,technical,economic,orengineeringinformation…if
□ (A)theownerhastakenreasonablemeasurestokeepsuchinformationsecret,and
□ (B)theinformationderivesindependenteconomicvalueactualorpotential,fromnotbeinggenerallyknownto,andnotbeingreadilyascertainablethroughpropermeansbythepublic.”
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THEECONOMICESPIONAGEACT§ Elementsof§ 1831offense:
□ Knowingtheft(orconspiredorattemptedtodoso)ofinformationwithknowledgethatitisproprietary
□ Proprietaryinformationistradesecret
□ Knowledge/intentoffensewouldbenefitforeigngovernment,foreigngovernmentinstrumentalityorforeigngovernmentagent.
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THEECONOMICESPIONAGEACT§ Elementsof§ 1832offense:
□ Knowingtheft(orconspiredorattemptedtodoso)ofinformationwithknowledgethatitisproprietary
□ Proprietaryinformationistradesecret
□ Intenttoconverttradesecrettoeconomicbenefitofanyoneotherthanowner
□ Knowledgeorintenttoinjureowneroftradesecret
□ Tradesecretrelatestoproduct/serviceforused/intendedforuseininterstateorforeigncommerce
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THEECONOMICESPIONAGEACT§ ProvisionstoProtectTradeSecretsDuring
Investigation/Prosecution:□ Courtshallenterordersnecessaryandappropriatetopreserve
confidentialityoftradesecretsduringcase.18U.S.C.§ 1835□ GovernmentmayfilerelatedcivilactionforinjunctivereliefIn
connectionwithEEA investigationorcase– e.g.,topreventfurtherdisclosuresoftradesecretsduringacriminalinvestigation.18U.S.C.§1836(a)
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PENALTIESUNDERTHEEEA§ ImprisonmentandFines
□ § 1831– 15yearsandupto$5millionforanindividualandafineuptogreaterof$10millionorthreetimesvalueofstolentradesecretforanorganization
□ § 1832– 10yearsand$250,000forindividuals,andafineupto$5millionforanorganization
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PENALTIESUNDERTHEEEA§ CriminalForfeiture– Section1834– sentencingcourt:
□ shallorderforfeitureofanyproceedsorpropertyderivedfromviolationsoftheEEA,and
□ mayorderforfeitureofanypropertyusedtocommitortofacilitatethecommissionofthecrime
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PENALTIESUNDERTHEEEA§ Restitution– Mandatoryrestitution“inthefullamountof
eachvictim’slosses…”18U.S.C.3664(f)(1)(A)
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EXTRATERRITORIALITYOFTHEEEA§ 18U.S.C.§ 1837providesforextraterritorialapplicationif
either
□ TheoffenderisacitizenorpermanentresidentalienoftheU.S.,oranorganizationorganizedunderthelawsoftheU.S.oraStateorpoliticalsubdivisionthereof,or
□ AnactinfurtheranceoftheofficewascommittedintheU.S.
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RESOURCESDEDICATEDTOEEAENFORCEMENT
§ TheFBIhasinvestigativeresponsibilityforcomplaintsunder§§ 1831and1832.
§ 112SpecialAgentsAssignedtoInvestigateEEA violationsasofSeptember2014.
§ 102ActiveFBIInvestigationsofTradeSecretTheftasofSeptember 2014.
§ Approximately60%increaseininvestigations2009-13.
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RESOURCESDEDICATEDTOEEAENFORCEMENT
§ 30%increaseinEEA prosecutions2012to2013.
§ 33%increaseinEEA prosecutions2013tofirst9monthsof2014.
§ Morethanhalfofprosecutionssince2013have“China”link.
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InitiatingaGovernmentInvestigation
§ First,decidewhethertogocriminal
§ - Prosincludethegov’tdoesmostofthework,hasadditionaltools
§ - Consincludinglossofcontrolbecausethegov’tdoesn’tworkforthevictim
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InitiatingaGovernmentInvestigation
§ Second,convincethegov’ttoinvestigate
§ - Presentas“fullybaked” acaseaspossible
§ - Emphasizekeyfactorssuchasmagnitude,economicsectorofinterest,foreignbeneficiaries
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InitiatingaGovernmentInvestigation
§ Third,proactivelymanagetheprocess
§ - Butbecarefulabouttoneandapproach(seeabove– gov’tdoesn’tworkforthevictim)
§ - Considerstrategicinterplaywithcivilproceedings
§ - Trytoshapethecriminalremedies(restitution,forfeiture,assetfreezes)
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DEPARTMENTOFJUSTICEOVERSIGHT§ 1996to2001– Forfiveyearsfromitsenactment, allEEA
prosecutionsrequiredpriorapprovalfromAttorneyGeneral,DeputyAttorneyGeneral,orAsst.AttorneyGeneraloftheCriminalDivision.
§ 2001topresent– priorapprovalrequiredfromAssistantAttorneyGeneral,NationalSecurityDivision,Counterespionage Sectiontoinitiate§ 1831prosecutions.
§ 2001topresent– nopriorapprovalrequiredtoinitiate§ 1832prosecutionbutconsultationwithDOJ’sComputerCrimeandIntellectualPropertySectionrecommended.
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CaseStudy:DuPontv.Kolon
§ Kevlar®tradesecrets§ CompetitorKolon hiredformerDuPontemployeestoconsult
□ 2009FBIinvestigationbeginsconcerningex-employeeMitchell□ Expandstoincludeotheremployees,includingDr.Shultz
§ ParallelCivilTradeSecretCasefiledin2009□ $919millionverdictin2011,latervacatedandremanded
§ Mitchellpleadin2009,Schultzpleadin2014,Kolon pleadin2015□ $360million-- $275inrestitution;$85millioncriminalfines
§ Civilcaseconfidentiallysettled
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OtherRecentEconomicEspionageActCases
§ U.S.v.Liew– 2014convictioninN.D.Cal.ofsellingrecipeforDuPont’stitaniumdioxidetoChinesestateownedentities.15yearsentence.
§ U.S.v.WangDong– 2014indictmentinW.D.ofPa.againstfiveChinesearmycomputerhackerswhoaccessedconfidentialemailsanddocumentsofWestinghouse,SolarWorld,U.S.Steel,Alcoaandothercompanies.
§ U.S.v.MoHailong – 2016pleainSouthernDistrictofIowatoconspiracytostealDuPontPioneerandMonsantogeneticallymodifiedseedforChineseconglomerate.
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OtherRecentEconomicEspionageActCases
§ U.S.v.XuandXi – 2016indictmentintheEasternDistrictofPaofGlaxoSmithKlinescientistsfortransmittingdataonnewcancerdrugtoco-conspiratorsatChinesefirm.
§ U.S.v.Xi, – 2015indictmentinEasternDistrictofPaofChairofTempleUniversityphysicsdepartmentforprovidingsuperconductingtechnologytoChineseindividuals– chargesdroppedbeforetrialbasedonshowingthattransferswereexplainedasstandardcollaborationsamongscientistsatdifferentuniversities.
§ U.S.v.Chen– 2014indictmentinSouthernDistrictofOhioofNationalWeatherServicehydrologistandnaturalizedcitizen,casedismissedbeforetrialin2015.
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