Economic Espionage and Trade Secret Theft: Charges, Penalties & Defense

American flag and gavel depicting economic espionage

If you follow U.S. news at all, you know that we have been engaged for months in a trade war with China.

Not only are United States courts successfully prosecuting Chinese companies over the theft of microchips developed in Idaho. In addition, it appears that Tesla and Apple are going after former employees who have gone to work for Chinese companies, taking some of their documents with them.

The term for what is allegedly happening between these Chinese and American companies over new technology is “Economic Espionage,” and what stands to be gained or lost is billions of dollars in profit.

Under the Trump administration, our government is cracking down on trade secret theft. Now, Silicon Valley companies are following suit.

What Is A Trade Secret?

The term “Trade Secret” has a broad definition. It’s any formula, pattern, device or compilation of information used in a business and unknown to others that gives the firm a competitive advantage.

For instance, a trade secret may be an unpatented invention or process used by a company. It could be future product design, model or blueprint. The secret could be a research project or a unique product.

Documents in circulation throughout a company but not made public can be trade secrets:

  • Drawings
  • Lab notes
  • Test data
  • Training manuals, or company memos.

Information can be a trade secret, such as:

  • Customer information
  • Marketing plans
  • Purchasing orders
  • Financial information
  • Accounting records
  • Recruiting and legal information

Trade Secret Theft

Trade secret theft is different from a patent violation. Patent protection only covers certain types of unique inventions, processes or designs whereas trade secret protection encompasses all kinds of ideas and information.

The only requirements are that they must be a secret and not public knowledge and they must provide the company with a competitive edge.

The other difference is that patent protection generally lasts for 20 years after the date of filing an application. Whereas trade secret protection could continue indefinitely.

Penalties for Economic Espionage

The Economic Espionage Act, set into law in 1996, is a federal law protecting trade secrets from both international and domestic theft.

It recognizes that trade secret theft is a crime no matter who benefits, and organizations who violate this criminal law can be fined up to $5 million or, with alternate fines, up to twice the amount gained or lost as a result of the crime.

In addition, while the law doesn’t provide for economic relief for the offense, it also doesn’t prevent companies from pursuing civil litigation – or suing – for damages resulting in trade secret theft.

International Economic Espionage

Tesla and Apple have each singled out ex-employees who have gone to work for one of China’s most competitive robo-car companies after abruptly leaving under suspicious circumstances.

That may be one way to attempt to crack down on the theft of intellectual property (and enormous potential profit) from U.S. businesses to Chinese businesses.

However, U.S. companies have long been targeted for Intellectual Property theft from overseas hackers as a matter of course.

One way to combat foreign espionage is to increase the penalty for individuals who are found guilty of espionage that benefits an international company to up to 15 years in prison and $500,000 in fines.

A company who does this can face up to $10 million in fines. As for foreign hackers: U.S. companies are always striving to improve IT security.

Defense Strategies

U.S. companies can limit the exposure to trade secrets by outside parties and their own employees in a number of ways. However, the difficulty in prosecuting economic espionage is that any company’s secrets are not protected against someone else from another company coming up with the same “trade secret” on their own.

You are only liable under the EEA if you intentionally or knowingly do any of these with a trade secret:

  • Steal, appropriate without authorization, take, carry away, conceal
  • By fraud, artifice or deception obtain
  • Copy without permission, duplicate, sketch, draw, photograph, download, upload, alter, destroy, photocopy, replicate, transmit, deliver, send, mail, communicate or convey, receive, buy, possess knowing the same to have been stolen

The key word is “knowingly,” and prosecutors must prove that you knew what you were doing. Additionally, they must show that you didn’t come up with that trade secret independently.

Consult an Experienced Criminal Attorney

In conclusion, trade secret theft can and does result in trillions of dollars of economic loss to U.S. companies. It is occurring at a higher rate all the time as companies compete for market share of the newest technology.

If you are charged with economic espionage, you need to get an experienced criminal lawyer working for you right away. Call my office today.

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