CRIMINAL CONSEQUENCES OF TRADE SECRET
MISAPPROPRIATION: DOES THE ECONOMIC ESPIONAGE
ACT INSULATE TRADE SECRETS FROM THEFT AND
RENDER CIVIL REMEDIES OBSOLETE?
Mark D. Seltzer, Angela A. Burns *
Contents
I. The Threshold Elements of An EEA Prosecution In A Nutshell: The Narrowing of the EEA
Heartland
II. Background to Enactment
III. The Intended Scope of Criminal Conduct
IV. A Comprehensive Look at the Substantive Provisions of the EEA
A. The High Intent Requirements
B. Broad Definition of Trade Secret
C. Meeting the Interstate or Foreign Commerce Requirement
V. How Maintaining the Secrecy of the Trade Secret During the EEA Trial Is Problematic: Hsu
and the Perils of Voluntary Disclosure to the Government
VI. Legal Impossibility Is Not a Defense to Attempt and Conspiracy Under the EEA
VII. Trade Secrets May Be Discoverable in a Substantive EEA Case
VIII. The Hsu Dilemma
IX. A Victim Corporation Pursues Civil Remedies
X. The Balancing Test: Civil Remedies or Government Disclosure?
XI. Draconian Punishment
XII. A Survey of Government Enforcement Efforts Under the EEA
XIII. EEA Compliance Programs: How To Guard Against Potential EEA Violations
XIV. Conclusion
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The enactment of the Economic Espionage Act of 1996 [1] (“EEA”) was greeted with
great fanfare as an unprecedented and broad federal attack on foreign and domestic trade secret
misappropriation. Negligent, even inadvertent conversions of trade secrets seemed subject to
criminal prosecution in the broad wake of the statute. The statute's draconian criminal penalties
for individual and corporate offenders alike, coupled with its license to the Government to seek
protective orders, civil injunctive relief, and forfeiture, were viewed as the preferred remedy for
the victim of trade secret misappropriation. Yet the plain language of the threshold elements of
EEA offenses, and the statute's restrained interpretation and application by the United States
Department of Justice, reveal a statute more limited in prosecutorial scope, with its application
bound by significant legal obstacles.
The EEA does not criminalize every theft of trade secrets. Traditional notions of what a
protected trade secret is and when a theft is actionable may not apply to an EEA prosecution.
Ultimately, the EEA is not a panacea for the victim of a trade secret misappropriation. A civil
cause of action that seeks injunctive relief and economic compensation remains the preferred
and, perhaps, the most effective method for a victim to achieve an expedited and comprehensive
remedy.
Indeed, the single published opinion by a federal appellate court involving an EEA
prosecution sends clear warning signals to American private industry of the perils of referring
suspected trade secret misappropriation to the Department of Justice for criminal prosecution. [2]
The commencement of a federal criminal prosecution under the EEA may compel the disclosure
of formerly confidential proprietary information to the defendant and defense counsel as part of
discovery in the criminal case; the very same corporate secrets that the victim corporation sought
to protect by making its referral to the Government.
United States v. Hsu, which was decided by a panel of the Third Circuit during the
summer of 1998, raises troubling issues that corporations and their counsel should carefully
consider when weighing the decision of whether to disclose an incident of trade secret theft to
the Government or, alternatively, to pursue private remedies under available civil statutes or
common law theories. [3] These private remedies, however, may not give comfort to a corporate
victim that its proprietary information will be insulated from discovery in civil litigation.
Yet the EEA is not a sword of Damocles to the unknowing or unwitting corporate
beneficiary of a rogue employee's unlawful conversion of a trade secret. The multiple and
substantial intent requirements of the statute would preclude the imposition of corporate
vicarious liability for the ultra vires conduct of such an employee. [4] Nevertheless, corporate
and other business organizations should take affirmative steps to avoid any exposure under the
EEA to the risk of Government investigation through the implementation and enforcement of
comprehensive and well-documented trade secret protection programs.
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I. THE THRESHOLD ELEMENTS OF AN EEA PROSECUTION IN A NUTSHELL: THE NARROWING OF
THE EEA HEARTLAND
The Government must satisfy high intent and knowledge requirements to prosecute
successfully a domestic trade secrets misappropriation violation under the EEA. [5] The
prosecutions brought under the statute to date evidence that the effect of these threshold proof
requirements has been to limit the exercise of prosecutorial discretion under the EEA to the
indictment of conspicuous trade secret theft, which is often motivated by the payment of outright
bribes.
Congress imported into the EEA many of the specific intent requirements of the
traditional white collar crime statutes--mail and wire fraud, interstate transportation of stolen
property, money laundering--utilized by the Department of Justice to prosecute the
misappropriation of tangible and intangible property crimes. Like the specific intent and
knowledge requirements codified in other white collar crime statutes, the EEA mandates that the
Government demonstrate to a trier of fact that a defendant acted deliberately and knowingly at
the time of the alleged offense. [6] This is a formidable burden for the Government to carry
beyond a reasonable doubt at any white collar criminal trial and typically requires the
presentation of compelling proof of intent and knowing criminality, which may include the
defendant's own admissions and other direct inculpatory evidence.
Chief amongst the threshold intent requirements of the EEA are three elements that the
Government must prove beyond a reasonable doubt at any criminal trial: first, that the defendant
acted with specific intent to convert the trade secret with knowledge that the trade secret was
proprietary or closely guarded; second, that the defendant attempted to or conspired to convert
the trade secret for the economic benefit of anyone other than the rightful owner; and third, that
the defendant intended or knew that the conversion offense would injure the lawful owner of the
trade secret. [7]
This substantial burden of proof is further heightened by the threshold secrecy
requirements of the EEA, which requires that the Government prove beyond a reasonable doubt
that the victim-owner of the trade secret had taken reasonable measures to preserve and protect
the secrecy of the information at issue, and that the secret information had independent economic
value. [8]
These threshold proof requirements have seemingly narrowed the breadth of EEA
prosecutions by the Department of Justice to only clear cases of theft of tangible property where
there is physical evidence of the misappropriation. Such evidence is usually obtained from
Government-controlled sting operations, in which the defendant's knowledge and intent are
captured in surreptitiously recorded conversations. The indicted and unsealed cases approved by
the Department of Justice involving prosecutions of EEA violations reflect that the heartland of
EEA criminal conduct excludes historical disputes in which a putative defendant's intent and
knowledge are not easily illuminated by his statements and conduct. [9] In short, defensible
claims of trade secret misappropriation are not candidates for prosecution under the EEA.
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The formidable statutory barriers to EEA prosecution also may have the effect of
spawning parallel civil suits brought by victim corporations to obtain expedited relief including
preliminary injunctive relief and compensatory damages. These private civil suits also will
impede the successful prosecution of EEA violations by subjecting the Government's material
witnesses in the pending criminal case to searching and protracted depositions and
interrogatories even before the Government can present testimony to a jury. Without being able
to resort to a private cause of action under the EEA, victim litigants who fear on-going harm and
the defendant's secretion of valuable assets may oppose Government requests for a stay of the
parallel civil proceeding. Avery Dennison Corporation and the Government are presently
involved in such a dispute. [10]
II. BACKGROUND TO ENACTMENT
The backdrop to enactment of the EEA was the perception by Congress that foreign and
domestic industrial espionage posed a major threat to American business enterprises. That
perception was correct. Corporate spying and theft of proprietary economic information by
employees, competitors and foreign governments have cost American businesses billions of
dollars. According to a study reported in 1996 by the American Society for Industrial Security,
financial losses to American industry resulting from intellectual property theft and
misappropriation amount to as much as $63 billion, with losses occurring at an estimated rate of
$2 billion a month. The high-tech industry alone suffers an average loss per incident of $19
million. [11]
The biotechnology and pharmaceutical industries are also primary targets for trade
secrets theft. The FBI reports more than 800 cases of economic espionage. Most are perpetrated
by company insiders who are motivated by both revenge and greed; about 20 percent of
economic espionage is committed by agents of foreign governments. [12]
Congress also viewed the prior statutory structure as inadequate in responding to the
increased theft of proprietary information. [13] Congress noted that prior to the EEA, federal
prosecutors primarily relied on traditional white collar crime statutes, including the Interstate
Transportation of Stolen Property Act (“ITSPA”), to prosecute intellectual property-related
crimes. [14] ITSPA was enacted in the 1930's to prevent the movement of stolen property across
state lines by individuals attempting to evade the applicability of state and local law. ITSPA,
however, relates to “goods, wares, or merchandise.” [15] It was “drafted at a time when
computers, biotechnology, and copy machines did not even exist.” [16] Congress recognized,
rightfully, that ITSPA was not “particularly well suited to deal with situations involving
intellectual property, which by its nature is not physically transported from place to place.” [17]
Additionally, courts were reluctant to extend ITSPA's coverage to criminalize intangible
property crimes. [18] In United States v. Brown, the defendant worked as a computer software
programmer for The Software Link, Inc. (“TSL”), a computer software company located in
Georgia. The FBI had conducted a search of Brown's apartment in connection with a separate
investigation and had discovered portions of a source code for TSL's computer programs. A
federal grand jury returned a three-count indictment charging Brown with transporting and
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receiving stolen property. The United States Court of Appeals for the 10th Circuit affirmed the
trial court's dismissal of the indictment reasoning that the computer program and source code
were intangible intellectual property that had not crossed state lines in tangible form, and
therefore were not within the statute's meaning of physical property. [19]
Prior to the enactment of the EEA, prosecutors also relied on the mail and wire fraud
statutes to reach crimes involving theft of proprietary information. [20] Courts have held that
both of these statutes cover the misappropriation of intellectual property. [21] In United States v.
Seidlitz, the Fourth Circuit considered evidence that the owner of a computer software product
had invested substantial financial resources in the software and had taken steps to prevent
unauthorized persons from using the product. The court held that a software system was
“property” within the meaning of the wire fraud statute and that the defendant had violated the
statute when he used the telephone to tamper with and manipulate the system. [22]
The application of these traditional white collar crime statutes to trade secret theft is
limited. For example, the mail fraud statute is applicable only when the mails are used to commit
or facilitate the commission of the offense. [23] Similarly, the wire fraud statute requires proof
that wire, radio, or television technology were used to commit or facilitate the commission of the
crime. [24]
Congress also recognized that state criminal law was also ineffective in preventing
instances of trade secret misappropriation. Although most states have some form of civil remedy
for the theft of proprietary economic information (either by recognizing the tort of theft and
misappropriation of trade secrets, or through the enforcement of contracts governing the use of
such information), only a few states have directly criminalized trade secret thefts. [25]
Additionally, many state statutes only apply to the theft of scientific or technical information.
The definition of trade secrets under the EEA, on the other hand, addresses the full nuances of
protected intangible property. [26]
The EEA has a number of important features that seek to fill the gap in existing federal
law and supplement weak state laws. The EEA prescribes stiff penalties including imprisonment,
fines and forfeiture of any property or proceeds derived from or facilitating violations. [27] It
also authorizes the Government to institute civil enforcement actions and obtain injunctive relief
when there is proof of an on-going harm. [28] There is also an extraterritorial jurisdiction
provision which applies to conduct occurring outside of the United States if the defendant is
either a citizen or permanent resident alien of the United States or a corporation organized in the
United States. [29] The Government also can prosecute foreign conduct actionable under the
EEA if a significant act in furtherance of the potential offense occurred in the United States. [30]
Due to the serious penalties involved and the potential to inhibit technological
innovation, all prosecutions brought under the EEA for a period of five years from its enactment
must first be approved by the Attorney General, the Deputy Attorney General, or the Assistant
Attorney General of the Criminal Division. [31] This centralized review and approval process
will effectively standardize the Department of Justice's enforcement of the EEA nationwide.
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Furthermore, Congress recognized that corporate victims would be hesitant to report
incidents of trade secret misappropriation because of the resulting publicity. The EEA therefore
requires that courts enter appropriate protective orders to preserve a trade secret's confidentiality
during the pendency of the EEA criminal proceeding. [32] The scope of this provision of the
EEA, as it relates to the conspiracy and attempt provisions of the EEA, has recently been defined
by the United States Court of Appeals for the Third Circuit in United States v. Hsu, the first
appellate court case to interpret the level of protection a corporate victim has under the EEA.
[33] The decision offers corporate victims of trade secret theft little assurance that their
proprietary information will be protected from discovery during EEA proceedings.
III. THE INTENDED SCOPE OF CRIMINAL CONDUCT
By its plain language, the EEA addresses traditional instances of theft, for example, when
the defendant physically takes the information from the owner's possession, as well as nontraditional methods of misappropriation and destruction of intangible property involving
electronic duplication or alteration. [34] In the latter instance, while the theft may not deprive the
owner of possession of the original property, the alleged illegal activity itself effectively destroys
the value of what is left. Given the rapid increase in technology, the EEA's application to less
traditional methods of theft may be its most powerful tool.
The EEA was specifically drafted by Congress to minimize the risk that it would be used
by the Government to prosecute individuals, including lawful competitors, who use their general
business knowledge, skills, and experience to compete with former employers, even as to the
“parallel development of a similar product.” [35] Congress did not intend that the EEA “apply to
innocent innovators or to individuals who seek to capitalize on the personal knowledge, skill, or
abilities they may have developed. The statute is not intended to be used to prosecute employees
who change employers to start their own companies from using general knowledge and skills
developed while employed.” [36] “[I]t is the intent of Congress ... to make criminal the act of
employees who leave their employment and use their knowledge about specific products or
processes in order to duplicate them or develop similar goods for themselves or a new employer
in order to compete with their prior employer.” [37] Reverse engineering, however, is “an
entirely legitimate practice” which is not prohibited by Congressional mandate. [38] The EEA's
high intent requirement makes it clear, according to Congress, that a prosecutable violation
requires “extraordinary theft, not mere competition.” [39]
IV. A COMPREHENSIVE LOOK AT THE SUBSTANTIVE PROVISIONS OF THE EEA
A. The High Intent Requirements
The EEA has two separate provisions that criminalize the foreign and domestic theft or
misappropriation of trade secrets. [40] Both provisions require that the Government prove
beyond a reasonable doubt that the defendant obtained, destroyed or conveyed the trade secret
information without the authorization of the owner. The requisite mens rea under both provisions
is that the defendant “knowingly” misappropriated the trade secret: that is, that the defendant
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knew that the information was closely-guarded when he converted the secrets to his personal
benefit at the expense of the true owner.
Section 1831(a) specifically addresses foreign economic espionage, punishing the theft,
misappropriation, wrongful alteration, and delivery of trade secrets to benefit a foreign
government, instrumentality or agency. [41] Here, the prosecution must show beyond a
reasonable doubt that the defendant acted with the intent to aid, or had knowledge that his
actions would aid, a foreign government, instrumentality or agent. [42]
When there is no such evidence of foreign government involvement, the Government
may charge a putative defendant with violations of section 1832(a). This section addresses
domestic instances of trade secret theft. Since Congress did not intend for the law to hinder
innocent innovators who seek to capitalize on their lawfully developed knowledge or skills,
§1832(a) incorporates a high threshold of specific intent and knowledge. Here, the Government
must show beyond a reasonable doubt that: (i) the defendant actually attempted or conspired to
steal trade secrets with the specific intent of converting the trade secret to the economic benefit
of someone other than the owner; (ii) the defendant intended to or knew that the offense would
harm or injure the owner; and (iii) the trade secret was related to, or included in a product that
was produced for or placed in, interstate or foreign commerce. [43]
The substantial intent and knowledge requirements of the EEA were designed by
Congress to prevent Government prosecutions of mistaken or accidental conversions of trade
secrets, or instances of misappropriation where the purported trade secrets may be publicly
known or without potential economic value.
This section requires that the government prove that the person charged with the crime
acted with the intent to accomplish one of two goals. One, a person will be guilty under this
section if they wrongfully copied or otherwise controlled a trade secret with the intent to benefit
any foreign government. [Second, for domestic violations of the Act,] the government must
prove that the defendant intended to confer an economic benefit, not an abstract benefit or
reputational enhancement, through his actions. Therefore, a person who discloses a trade secret
but who does not intend to gain economically from it, or intends that some other person
economically gain from [the] trade secret, cannot be prosecuted under this section .... The
government must also show that the defendant intended to disadvantage the rightful owner of the
B. Broad Definition of Trade Secret
The EEA's broad definition of a trade secret includes a wide array of technological and
intangible information that is “no longer restricted to formulas, patterns, and compilations, but
now includes programs and codes, ‘whether tangible or intangible, and whether or how stored.”’
[45] Section 1839 defines “trade secrets” as “all forms and types of financial, business, scientific,
technical, economic, or engineering information.” [46]
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Information such as a customer list may easily qualify as a trade secret if it has been
developed at significant expense over time and is kept a secret by the owner. Similarly, market
analysis procedures, service manuals, and technical data can be defined as trade secrets under the
EEA.
The information is deemed a trade secret if: (1) the owner took reasonable measures to
keep the information secret commensurate with the value of the trade secret; and (2) the
information derives actual or potential independent economic value from not being made known
to the public. [47]
The Government must demonstrate that the information was not known to, or readily
ascertainable by the victim's competitors in the industry and the general public. [48] Prosecutors
must determine the extent of security measures used to protect the trade secret, including
physical security, computer security, as well as the company's policies on sharing information
with employees, sub-contractors and licensed vendors. If low-level employees in a large
company could have gained access to the information then the information is not considered a
protected trade secret under the EEA. [49]
Further, the trade secret must derive “independent economic value ... from not being
generally known to ... the public.” [50] The Act does not require that the Government provide a
specific value for the information. In some circumstances, the value of the information can be
established by showing what the trade secret was worth on the open market. Case law in a civil
trade secret context might be instructive in determining what constitutes a relevant market value.
This economic value element may pose a substantial evidentiary obstacle to the
Government if the trade secret was stolen at the developmental stage or if the victim-company
chose not to sell or license the technology. Proof of the potential economic value of the
technology at any jury trial would require expert testimony that would likely be subject to
extensive cross-examination and impeachment by rebuttal testimony.
C. Meeting the Interstate or Foreign Commerce Requirement
The Government must prove beyond a reasonable doubt that the trade secret was “related
to or included in a product that is produced for or placed in interstate or foreign commerce.” [51]
When the trade secret is related to a product which is being manufactured and sold, the element
is easily established by evidence of interstate sales. However, when the trade secret is related to a
product which is in the research and development stage and not yet being produced for sale, the
Government may have difficulty meeting the interstate commerce requirement beyond a
reasonable doubt at any trial.
V. HOW MAINTAINING THE SECRECY OF THE TRADE SECRET DURING THE EEA TRIAL IS
PROBLEMATIC: HSU AND THE PERILS OF VOLUNTARY DISCLOSURE TO THE GOVERNMENT
Section 1835 of the EEA authorizes a court to grant a protective order to maintain the
secrecy of the purported trade secret during the EEA criminal litigation. [52] However, this
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Congressional intent to preserve the confidentiality of trade secrets during EEA litigation and
encourage victims of misappropriation to disclose wrongdoing to the Government may be
thwarted by a defendant's Fifth and Sixth Amendment right to prepare effectively for trial by
gaining access to and reviewing the Government's material discovery. This tension between the
Congressional intent to protect proprietary information from disclosure to the “public” versus the
constitutionally-mandated disclosure of discovery to a defendant involved in an EEA criminal
prosecution was confronted by the United States Court of Appeals for the Third Circuit in the
Hsu case. [53] In Hsu, the defendants were charged under 18 U.S.C. §1832(a)(4)(5) with attempt
and conspiracy to steal the manufacturing formulas and processes for Taxol, an anti-cancer drug
manufactured by Bristol-Myers Squibb and regarded as a valuable company trade secret.
According to the indictment, returned by a federal grand jury more than a year before the
Third Circuit's opinion on the Government's interlocutory appeal, the defendants were ensnared
in an FBI-orchestrated “sting” operation in which they were negotiating to purchase the Taxol
technology from an FBI undercover agent posing as a technological information broker. The
operation culminated in the defendants meeting with a purportedly corrupt Bristol-Myers
scientist who was cooperating with the FBI. [54]
Over a fourteen-month period, the defendants allegedly offered to pay $400,000 in cash,
stock, and royalties to obtain the Taxol technology. At the pre-arranged meeting, the scientist
provided detailed information about Taxol production and displayed sensitive corporate
documents that were clearly marked “confidential.” The defendants reviewed the documents and
asked the Bristol-Myers scientist numerous questions about the Taxol technology. The
defendants were arrested by the FBI before the sale of the documents could be consummated.
The indictment charged the defendants, in part, with attempt and conspiracy to steal trade secrets
in violation of 18 U.S.C. §§1832(a)(4) and (a)(5). [55]
In pre-trial motions, the defendants had sought discovery of the confidential documents
used in the FBI sting operation. The Government had produced to the defense a sanitized version
of the documents after they had been redacted by Bristol-Myers Squibb. The defendants argued
that they needed the entirety of the very documents they were accused of conspiring and
attempting to steal in order to establish that the Government had failed to prove an essential
element of its case: the existence of a trade secret. [56] The defendants asserted a legal
impossibility defense: they contended that, as a matter of law, they could not be convicted of
attempting and conspiring to steal a trade secret if the documents they were shown by the
Government during the sting operation did not contain trade secrets. [57]
The defendants proposed a protective order that would have required the Government to
disclose the proprietary information about Taxol to defense attorneys, experts, and witnesses.
The Government opposed the defendants' discovery motion and sought a protective order under
§1835 of the EEA to protect the Bristol-Myers' trade secrets from disclosure. [58] Section 1835
provides that a district court “shall enter such orders and take such other action as may be
necessary and appropriate to preserve the confidentiality of trade secrets, consistent with the
requirements of the Federal Rules of Criminal and Civil Procedure, the Federal Rules of
Evidence, and all other applicable laws.” [59]
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The Government argued that the defense did not need access to the confidential
information because the indictment only charged the defendants with attempt and conspiracy,
and not an actual theft of trade secrets. The Government also proposed that the district court
review the documents in camera to determine the discoverability of the proprietary information
prior to any court-ordered disclosure to the defense.
The trial court balanced the competing interests of trade secret confidentiality and the
defendant's constitutionally-mandated right to full discovery of material evidence, and ruled in
favor of the defendants' access to the claimed proprietary information. [60] U.S. District Judge
Stewart Dalzell of the Eastern District of Pennsylvania held that the defendants' constitutional
right to use the alleged stolen material to prove at trial that it was not a trade secret exceeded the
victim's right to absolute trade secret confidentiality, and ordered Bristol-Myers to hand over the
information to the defendants in unredacted form. [61] The trial court reasoned that “... the
defendants must be given the ‘correlative right’ to compare the information relating to Taxol
production that is publicly available, e.g. in the form of patents and scientific literature, with
whatever details of the Taxol technology that the Government will claim at trial is a confidential
‘trade secret’.” [62]
The trial court reduced the scope of the protective order sought by the Government under
§1835 to a signed non-disclosure agreement binding the defendants' attorneys, outside defense
experts, and certain prospective defense witnesses who would need access to the proprietary
information to assist in the preparation of a defense. [63]
The defense camp was precluded by the terms of the protective order from utilizing the
proprietary information for purposes collateral to the defense of the EEA prosecution. They also
were prohibited from disclosing the information to unrelated third parties. The district court's
protective order was, at best, a Pyrrhic victory for the Government and Bristol-Myers Squibb.
The Government immediately took an interlocutory appeal of this decision to the Third
Circuit pursuant to 18 U.S.C. §1835, which provides that “[a]n interlocutory appeal by the
United States shall lie from a decision or order of a district court authorizing or directing the
disclosure of any trade secret.”
VI. LEGAL IMPOSSIBILITY IS NOT A DEFENSE TO ATTEMPT AND CONSPIRACY UNDER THE EEA
The Third Circuit, in an opinion by Judge Marjorie O. Rendell, reversed the district
court's mandated disclosure of the unredacted Bristol-Myers Squibb documents. [64] The Court's
rationale was two-fold: first, it ruled that legal impossibility is not a viable defense to charges of
attempt and conspiracy to steal trade secrets in violation of the EEA. Second, the Court noted
that the district court had mistakenly believed that the defendants were charged with the
completed offense of trade secret theft. [65]
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The Court held that the Government can satisfy its burden in a conspiracy and attempt
prosecution under the EEA by proving beyond a reasonable doubt that the defendants had sought
to acquire information that they believed to be a trade secret, regardless of whether the
information actually qualifies as trade secret information under the EEA. Since the Government
does not have to prove that actual trade secrets were used in a sting operation that did not result
in the actual sale of proprietary information, the Court concluded that the defendants had not
established a legal basis for discovery of the Taxol information. [66]
In reaching its holding that the defense of legal impossibility is not available in an EEA
attempt and conspiracy prosecution, the Court relied on the legislative history of the EEA. The
Court opined that Congress intended to provide a comprehensive solution to corporate economic
espionage, and had not intended to recognize the common law defense of legal impossibility as a
complete defense to a charged violation of the EEA. The Court indicated that such a defense
would severely undercut the enforcement of the EEA because the Government would be forced
to disclose actual trade secrets during undercover or “sting” operations. [67] Similarly, the Court
reasoned that legal impossibility is not a defense to a charge of conspiracy because it is the
conspiratorial agreement, and not the underlying substantive acts, that forms the basis of a
conspiracy charge. [68]
The Hsu defendants had raised for the first time on appeal the contention that the
unredacted documents were also material to their presentation of potential defenses of
entrapment, outrageous government misconduct, and lack of jurisdiction. Noting its skepticism
of the relevance and materiality of the Bristol-Myers Squibb trade secret information to those
defenses, the Third Circuit refused to address the claims because the defendants had not raised
these issues in the district court as a basis for discovery. [69]
The Third Circuit remanded the case to the district court to (i) conduct an in camera
review to determine whether Bristol-Myers Squibb had in the first instance, at the Government's
behest, properly redacted the documents to exclude only confidential information; and (ii) to
determine whether the redacted information is material to the other defenses raised for the first
time on appeal. [70]
VII. TRADE SECRETS MAY BE DISCOVERABLE IN A SUBSTANTIVE EEA CASE
The Third Circuit did not decide whether a defendant may obtain production of a
corporate victim's trade secret information when a completed trade secret theft has been charged
by the Government. Although Hsu left unresolved this tension between the EEA confidentiality
provision and a criminal defendant's constitutional right to discover documents that will assist in
his or her defense, the Court did frame the inquiry: is the actual content of a victim's confidential
information relevant to the determination of whether the information is a “trade secret” as
defined under the EEA? [71]
The legislative history of the EEA suggests that proof of the existence of a trade secret
may be essential to the prosecution of an EEA violation. Under §1839(3) of the EEA,
information is deemed to be a trade secret if: (1) the owner took reasonable steps commensurate
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with the value of the trade secret to keep the information secret; and (2) the information derives
actual or potential independent economic value from not being made known to the public. [72]
The Third Circuit also suggested that proprietary information may be discoverable if it is
material to a recognized defense. The Court indicated that “[e]ven if proof of an actual trade
secret is not an element of § §1832(a)(4) and (a)(5), an independent assessment of whether
materials are nonetheless discoverable is anticipated in the language of §1835 ....” [73] The
Court was guided by the language of Rule 16(a)(1)(C) of the Federal Rules of Criminal
Procedure which provides that “defendants can obtain documents in the government's possession
that are material to the preparation of their defense, or which are intended for use by the
government as evidence in chief at trial.” [74]
VIII. THE HSU DILEMMA
Since a court's determination of materiality is influenced by the Government's charging
decisions and the defenses raised by the indicted defendants, the corporate victim may have little
control over the discoverability of its proprietary information in an EEA prosecution. In Hsu,
Bristol-Myers Squibb had sought to protect its Taxol process from disclosure by itself redacting
the documents, without oversight by either the district court, or the Government, let alone the
defendants. The Third Circuit, however, refused to grant such absolute discretion to the owner of
a trade secret, noting that the unredacted documents could reveal information material to theories
of defense. It ruled that the district court could not make a judgment about the materiality of the
unredacted materials without first reviewing the materials in camera. [75]
After Hsu, prosecutors may opt to protect a victim's trade secrets from disclosure during
an EEA prosecution by structuring the indictment to foreclose discovery of trade secret
information. To gain a victim's cooperation in an EEA prosecution, the Government may be
forced to charge only attempt and conspiracy violations and use documentary evidence at trial
that does not contain the victim's valuable trade secret information. For example, in Hsu, the
Government assured the Court that it did not intend to use or refer to the alleged trade secret
documents at trial. Instead, the Government indicated that it intended to prove the attempt and
conspiracy violations with other evidence, including an e-mail list that defendant Chou had
allegedly sent to the cooperating Bristol-Myers Squibb scientist outlining the “core technology”
that the defendants would need to complete a deal. [76] The Government intends to use this
evidence to prove that the defendants attempted to steal what they believed were trade secrets,
although the Government will present to the jury the actual content of the redacted proprietary
information.
The Hsu trial court rightly warns American private industry that the EEA was not
designed by Congress to offer “perfect” protection in a highly competitive global market. [77]
This warning was echoed by the Third Circuit's refusal to offer Bristol-Myers Squibb absolute
protection from the potential discovery of its confidential information. Hsu does not allay the
concerns of victim corporations who fear that reporting trade secret misappropriation schemes to
the Government will inevitably result in the judicially-compelled disclosure of their proprietary
information to the defense.
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The principal lesson of Hsu for the corporate victim may be that, ultimately, the best
remedy is the implementation of a well-documented trade secret protection program that
minimizes the risk of future incidents and, if necessary, assists in demonstrating the
confidentiality of a trade secret in any legal proceeding. Owners of trade secrets should: (i)
clearly mark information which they consider to be proprietary; (ii) protect the physical property
in which trade secrets are stored; (iii) limit employees' access to trade secrets to only those who
need access in the performance of their duties; and (iv) train all employees on the nature and
value of the company's trade secrets.
IX. A VICTIM CORPORATION PURSUES CIVIL REMEDIES
An EEA prosecution scheduled for trial in mid-March in an Ohio federal district court
evidences the continuing tension between the Government's interest in successfully enforcing the
EEA and that of a corporate victim, the Avery Dennison Corporation, in protecting its
proprietary information from public disclosure. Rather than wait for the Government to vindicate
the confidentiality of its proprietary information in the EEA case, Avery Dennison chose to seek
civil remedy. United States v. Pin Yen Yang, involves the alleged theft and attempted theft of
Avery Dennison proprietary manufacturing information and research data over an eight year
period. [78] A parallel civil RICO suit brought by Avery Dennison against the criminal
defendants, seeks preliminary injunctive relief and compensatory damages. A Government
motion, opposed by Avery Dennison and the defendants, to stay the discovery in the civil RICO
action pending the trial of the EEA criminal case was granted in part. The Government's
principal witness in the criminal case, cooperating defendant Lee, cannot be deposed prior to the
commencement of the criminal trial, unless the civil trial proceeds first and Avery Dennison calls
Lee as a witness. The Government's other material witnesses are subject to deposition.
The Avery Dennison case may help to resolve the unanswered question in Hsu: whether
proof of the existence of a trade secret is required when a defendant is charged with the
substantive offense of trade secret theft.
X. THE BALANCING TEST: CIVIL REMEDIES OR GOVERNMENT DISCLOSURE?
A victim corporation's calculus of the benefits of disclosure to the Government of an
incident of trade secret theft or threatened misappropriation should include an analysis of
potential civil remedies as an alternative to triggering an EEA prosecution. Although civil
statutes and common law theories may offer victim corporations greater protection than the EEA
because of the potential to obtain compensatory damages, civil remedies in fact raise similar
problems of compelled trade secret disclosure during legal proceedings.
Civil statutes impose similar burdens of proof in establishing the existence of a trade
secret which may compel a victim corporation to disclose confidential information during the
course of discovery. For example, when a departing employee misappropriates corporate trade
secrets, the former corporate employer will inevitably seek, through the commencement of
litigation, to enjoin the former employee from using the misappropriated information during the
course of his or her new employment. If there is a valid non-competition or confidentiality
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agreement, an employer will seek to enforce it to prevent disclosure of the confidential
information. Here too, however, the employer must initially establish that the proprietary
information is a trade secret. Much like the inquiry under the EEA, courts that have decided civil
claims have looked to such factors as (1) the extent to which the information is known outside of
the business; (2) the degree of measures taken by the employer to guard the secrecy of the
information; and (3) the ease or difficulty with which the information could be properly acquired
by others. [79]
In Hsu, the Third Circuit noted that the definition of a trade secret under the EEA is
similar to that required by many state civil statutes and the Uniform Trade Secrets Act (UTSA).
The only apparent distinction is that under the EEA, information is a trade secret if it is not
generally known to, or readily ascertainable by, the victim's competitors and the general public.
Under the UTSA, however, information is a trade secret if it is not known by competitors. [80]
Regardless of the legal remedy that a corporate victim may pursue to prevent the
unauthorized use of proprietary information, the corporation must confront the very real
possibility that it may be forced to disclose sensitive information during the discovery and trial
phases of legal proceedings. Civil remedies may provide the corporate victim a greater degree of
control over the direction of trade secret litigation, and afford the victim the opportunity to obtain
monetary relief. The EEA's stiff criminal penalties, on the other hand, are a strong deterrent
against the misappropriation of trade secrets.
XI. DRACONIAN PUNISHMENT
The EEA prescribes stiff maximum criminal sanctions. [81] The maximum penalties for
an individual offender of §1831, the foreign economic espionage provision, is 15 years of
imprisonment, and a $500,000 fine. A violation of §1831 by an organization triggers a maximum
fine of $10 million. Since Congress considered domestic offenses of trade secret
misappropriation less serious than foreign economic espionage, §1832 prescribes less severe but
equally harsh penalties. An individual violator of §1832 faces maximum penalties of 10 years of
imprisonment and a $500,000 fine. Organizations that violate §1832 are subject to a maximum
fine of $5 million. Section 1834 of the EEA also provides for criminal forfeiture of property and
proceeds derived from, used, or intended to be used in alleged unlawful activities proscribed by
the Act.
XII. A SURVEY OF GOVERNMENT ENFORCEMENT EFFORTS UNDER THE EEA
To date, the Government has prosecuted alleged violations of the EEA when there is
conspicuous evidence of intentional trade secret theft, or attempted theft, often obtained in a
Government-sponsored sting operation. Some of these EEA cases also are buttressed by proof of
the payment of outright bribes to obtain control of the tangible property embodying the trade
secret. As the cases summarized below demonstrate, the EEA prosecutions sometimes include
the existence of physical evidence of the misappropriation. The EEA prosecutorial record also
reveals that the Government has not brought prosecutions when trade secrets have been disclosed
unintentionally, i.e. through mere negligence or inadvertence. No reported case has involved a
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theft of trade secrets sponsored by or intended to benefit a foreign government, but several of the
prosecuted cases have involved efforts by foreign companies to obtain trade secrets from
“insiders” of domestic companies. [82]
The following is a brief survey of the illustrative EEA case developments.
United States v. Worthing, Crim. No. 97-9 (W.D. Pa, Crim. Complaint filed Dec. 9,
1996). On December 7, 1996, the first arrest under the EEA was made in Pittsburgh,
Pennsylvania. Patrick Worthing and his brother, Daniel, were arrested by FBI agents after
agreeing to sell Pittsburgh Plate Glass (“PPG”) proprietary information for $1,000 to a FBI
undercover agent posing as a representative of Owens-Corning. The Government alleged that
Worthing solicited Owens-Corning's CEO under an assumed name in a letter that stated: “Would
it be of any profit to Owens-Corning to have the inside track on PPG?” The Owens-Corning
executive, in turn, provided the letter to PPG executives who then contacted the FBI. Both
defendants were charged under 18 U.S.C. § 1832. Patrick Worthing admitted to stealing
documents, blueprints, photographs, and product samples from PPG. He pled guilty to the theft
of trade secrets, and was sentenced to 15 months in jail and three years of probation. His brother
also pled guilty to conspiracy to violate the EEA for which he received five years of probation.
United States v. Davis, Crim. No. 97-CR-124 (M.D. Tenn. 1997). On January 26, 1998,
Steven Louis Davis, a contractor who was employed by Massachusetts-based Gillette, pled guilty
to five counts of theft of trade secrets in violation of the EEA. Davis was an engineer with
Wright Industries, a contractor engaged by Gillette to develop production equipment for a new
shaving system design. Davis downloaded 600 megabytes of secret data and drawings from the
confidential Gillette project onto his laptop computer. In anger at his supervisor and fearing that
his job was in jeopardy, Davis disclosed the proprietary information to Gillette competitors by
fax and e-mail, including Schick, Wilkinson, and Bic. Davis was sentenced to 27 months of
imprisonment and ordered to pay $1.2 million in restitution to Gillette.
United States v. Yang, Crim. No. 97-CR-288 (N.D. Ohio 1997). On September 5, 1997,
Dr. Ten Hong Lee, an employee of the Avery Dennison Corporation in Concord, Ohio was
arrested when an FBI surveillance team captured him rummaging through a colleague's files
which contained confidential documents. After his arrest, Lee cooperated with officials to obtain
the indictment of the chairman of Four Pillars, Pin Yen Yang, and his daughter Hwei Chen
Yang, an employee of Four Pillars. Lee had reportedly received between $150,000 and $160,000
from Four Pillars/Pin Yen Yang for his involvement in causing the transfer of Avery Dennison's
proprietary manufacturing information and research data over an eight year period. On October
1, 1997, a federal grand jury returned a 21 count indictment charging Four Pillars, Pin Yen Yang
and Hwei Chen Yang with theft and attempted theft of trade secrets, mail fraud, wire fraud,
money laundering, and receipt of stolen property. Lee pled guilty to one count of wire fraud. A
parallel civil RICO suit brought by Avery Dennison against Four Pillars, both of the Yangs, and
Lee, seeks preliminary injunctive relief and compensatory damages. The case is scheduled for
trial in mid-March of this year.
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On January 5, 1999, it was reported that Four Pillars, the Taiwanese adhesive company
that employed the defendants, filed a civil complaint in Taiwan against Avery Dennison alleging
fraud and theft, and seeking $262 million in damages. Four Pillars alleges that Avery Dennison
initiated talks with it about a joint venture agreement with the intent to gain trade secrets from
Four Pillars during the course of negotiations. Avery Dennison has denied the claims and asserts
that the complaint is an attempt by Four Pillars to distract attention from its own legal problems
spawned by the Yang prosecution. [83]
United States v. Trujillo-Cohen, Crim. No. 97-CR-251 (S.E. Tex. Indictment filed Nov.
14, 1997). In November, 1997, federal prosecutors in Houston charged a former employee of
Deloitte and Touche with attempting to sell confidential software programs. The employee
allegedly downloaded the programs onto her personal laptop computer and then engaged in
negotiations to sell the software to a company in New York for $7 million. The indictment
charged her with two counts of EEA violations. The defendant pled guilty to one EEA violation
and a wire fraud count, and was sentenced to 48 months of imprisonment and ordered to pay
$337,000 in restitution.
United States v. Pei, Crim. No. 98-M-4090 (D.N.J. 1998). In July 1998, Huang Dao Pei,
a former research scientist for Roche Diagnostics, a division of health care giant Hoffman La
Roche, was arrested and charged with attempting to steal Roche's trade secret for a Hepatitis C
monitoring kit Pei hoped to sell in China. Pei allegedly attempted to buy the information from a
Roche employee who was cooperating with FBI agents. Pei requested specific documents that
would show him how to duplicate parts of the kit. It is reported that the diagnostic kit took
millions of dollars to develop and is the market leader.
United States v. Camp, Crim. No. 98-CR-48-P-H (D. Maine 1998). In late July 1998,
Caryn L. Camp, a chemist at Idexx Labs, a Maine-based manufacturer of veterinary products,
accidentally sent an e-mail that contained allegedly incriminating evidence about Camp's theft of
confidential Idexx information to an Idexx manager. The e-mail allegedly revealed Camp's plan
to resign and deliver Idexx trade secrets to her new employer, Stephen R. Martin, a Sonoma
county veterinarian. Both Camp and Martin were indicted on multiple counts of conspiracy to
steal trade secrets, mail and wire fraud, interstate transportation of stolen property, and
conspiracy to transport stolen property. Trial is tentatively scheduled for June 7, 1999.
United States v. Hallstead, Crim. No. 98-CR-00041 (E.D. Texas 1998); United States v.
Pringle, Crim. No 4:98-M00037 (E.D. Texas 1998). In July, 1998, Steven Craig Hallstead pled
guilty to a conspiracy to steal trade secrets. Hallstead and an accomplice, Brian Russell Pringle,
who also pled guilty, contacted Cynix Corp., a division of National Semiconductor Corp.,
offering to sell stolen prototype Intel Corp. “Slot II” computers for $75,000. An FBI sting
operation exposed Hallstead and Pringle. Hallstead was sentenced to a term of imprisonment of
77 months, three years of supervised release, and was ordered to pay a criminal fine of $10,000.
Pringle was sentenced to a 60-month term of imprisonment, three years of supervised release,
and a $50,000 fine.
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United States v. Fulton, Crim. No. 98-CR-0059 (W.D. Pa 1998). John Fulton, a former
employee of Joy Mining Machinery, Inc., pled guilty on April 17, 1998 to stealing Joy trade
secrets. Fulton stole schematic designs for an electronic switch box that operates components of
a coal-mining machine that Joy manufactures. Fulton reportedly intended to use the diagrams to
start his own competing business. He admitted offering another Joy employee $1,500 for
confidential information. He was sentenced on November 13, 1998 to five years of probation,
including 12 months of home detention.
United States v. Campbell, Crim. No. 98-CR-64 (N.D. Georgia 1998); United States v.
Soucy, Crim. No. 98-CR-59 (N.D. Georgia 1998). Carroll Lee Campbell, a former circulation
manager for the Gwinnett Daily Post, was sentenced to three months in prison, four months of
home probation, and a fine of $2,800 for offering to sell confidential business information.
Campbell offered to sell Gwinnet's marketing plans and subscription lists to Gwinett rival, the
Atlanta Journal-Constitution, for $150,000 while the two papers were engaged in a lawsuit over
which had the right to publish Gwinett County legal notices. Campbell sent letters and used an
alias to communicate with representatives of the Journal by phone and through personal ads in
the paper. The Journal notified authorities. Campbell and a co-worker, Paul Soucy, both pled
guilty to conspiracy to steal trade secrets. Soucy was sentenced to three years probation, and was
ordered to pay a $1,000 criminal fine and $500 in restitution. Campbell was sentenced to three
months of imprisonment, four months of home confinement, and ordered to pay $2,800.
United States v. Krumrei, Crim. No. 98-CR-80943 (E.D. Michigan 1998). While
employed with Vactec Coatings, defendant David T. Krumrei allegedly attempted to sell the
process plan for Formica, information which Vactec was developing for Wilsonart. The
information is said to have been worth millions of dollars to a Wilsonart competitor. Trial is
scheduled for June 7, 1999.
There also are alleged reports of an ongoing criminal investigation as to whether Reuters
Analytics, Inc., a Stamford, Connecticut subsidiary of Reuters Holding P.L.C. of London, stole
proprietary data from a rival news service, Bloomberg, L.P. According to a published report, the
Reuters subsidiary allegedly induced a consultant to conduct electronic break-ins of Bloomberg
computers to obtain confidential data. The parent company claims that it had no knowledge of
any wrongdoing by the subsidiary. [84]
These Government prosecutions under the EEA should not mislead corporate victims that
the perils of compelled disclosure are unique to the Hsu decision. Hsu remains a significant
deterrent to bringing the Government into internal investigations of trade secret theft. Because
the Government is not involved in a civil suit, the decision to pursue civil remedy may invest a
business with greater control over litigation tactics. However, given that a civil suit may still
require that the victim prove the existence of a trade secret, a civil forum may not provide any
greater comfort for a corporate victim that its proprietary information will be absolutely insulated
from discovery.
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XIII. EEA COMPLIANCE PROGRAMS: HOW TO GUARD AGAINST POTENTIAL EEA VIOLATIONS
Despite the stringent requirements for prosecution under the EEA, companies would be
well advised to take preventative measures to protect their secret information from
misappropriation and to guard against their own potential EEA corporate liability. Employers
should be particularly concerned about new employees and the knowledge that they may bring
from a competitor company. New employees with knowledge of a prior employer's trade secrets
should be debriefed by legal counsel upon hiring and instructed as to how to protect their prior
employer's trade secrets. Employers may consider debriefing a departing employee as to the
same information in order to protect its own proprietary information.
To ensure further compliance with the EEA and to avoid potential Government
enforcement investigations, companies may wish to take the following steps:
(1) Clearly identify and advise employees of what the company considers to be its
proprietary information;
(2) Require that employees who have access to confidential information sign a
confidentiality agreement;
(3) Establish a well-documented internal policy which clearly expresses the company's
strict compliance with the EEA. The policy should include a statement that spying, theft
or breach of a non-disclosure agreement will not be tolerated. The policy also should
include detailed examples of how the EEA may be violated. Finally, employees should be
advised that federal investigators and prosecutors are vigilant in seeking EEA
enforcement and may use surveillance and undercover techniques to record EEA
violations;
(4) Employees should be informed of their individual liability under the EEA. They also
should be warned of potential solicitations by foreign governments and competitors;
(5) Establish an internal self-reporting procedure which assures employees that there will
be no retaliation for reporting their knowledge of potential violations of the EEA to
designated senior corporate officers;
(6) If the company is solicited to purchase a competitor's proprietary information, report
any potential violation to the victim company;
(7) Report any potential violation to appropriate federal and state law enforcement
authorities; and
(8) Designate an internal compliance officer who has the central responsibility for
handling compliance issues and referring employee inquiries to counsel or to appropriate
Governmental authorities.
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XIV. CONCLUSION
The Economic Espionage Act does not criminalize every theft of trade secrets. The high
intent and knowledge requirements of the EEA has limited the scope of federal prosecutorial
discretion. The Department of Justice's record of current prosecutions reveals an EEA heartland
reduced to conspicuous incidents of clear theft, or attempted theft, coupled with evidence of
outright bribery or attempted bribery. The Government has resorted to aggressive law
enforcement tactics, including sting and undercover operations, to develop compelling evidence
of specific intent. In addition, the Third Circuit's Hsu decision may significantly narrow the
corporate victim's ability to protect its valuable proprietary information from disclosure when
completed EEA violations are charged by the Government. The Hsu dilemma may lessen the
incentive for a victim business to report trade secret theft to the Government.
Thus, while the EEA does address the nuances of trade secrets, unlike the traditional
federal white collar crime offenses of mail or wire fraud, for a victim corporation it may not be a
preferred remedy to a civil cause of action for injunctive relief and compensatory damages.
* Mark D. Seltzer is Of Counsel at the Boston law firm Goulston & Storrs, where he
concentrates his practice in the representation of corporations and individuals in white collar
criminal investigations and trials, and related civil, administrative, and regulatory enforcement
proceedings, compliance matters, and internal investigations. He is a member of the firm's
Regulatory Compliance and White Collar Criminal Defense Practice Group. Prior to joining
Goulston & Storrs, Mr. Seltzer was a federal prosecutor for thirteen years both in Boston, as
Director of the New England Bank Fraud Task Force of the United States Department of Justice,
and in Miami, as an Assistant United States Attorney for the Southern District of Florida. He has
spoken and written extensively on issues involving trade secret theft, and has authored three
articles on the Economic Espionage Act of 1996 for White-Collar Crime Reporter: the first, for
the September 1998 issue, entitled “The Criminal Consequences of Trade Secret
Misappropriation;” the second, for the January 1999 issue, entitled “Trade Secret Information
May Still Be Discoverable To Defend Completed EEA Violations Under Recent Third Circuit
Case;” and the third, for the February 1999 issue, entitled “Victim Corporations May Be Forced
To Disclose Valuable Trade Secret Information In Economic Espionage Act Prosecutions.”
Angela A. Burns, J.D. 1999 Northeastern University Law School is a law clerk at Goulston &
Storrs.
[1]. See 18 U.S.C. §§ 1831-1839.
[2]. See United States v. Hsu, 155 F. 3d 189 (3d Cir. 1998).
[3]. See 155 F. 3d 189.
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[4]. See 18 U.S.C. § 1832.
[5]. See H.R. Rep. No. 104-788 (1996).
[6]. See 18 U.S.C. §§ 1831(a)- 1832(a).
[7]. See Hsu, 155 F.3d at 195 (citing 18 U.S.C. § 1832).
[8]. See 18 U.S.C. § 1839(3).
[9]. See discussion infra, Part XII.
[10]. See United States v. Pin Yen Yang, Crim. No. 97-CR-288 (N.D. Ohio 1997).
[11]. See Neil J. Gallagher, Statement for the Record Before the Congressional Joint Economic
Committee, March 24, 1998, <http:// www.fbi.gov/congress/gallaher.htm>, (visited April 12,
1998); See also H.R. Rep. No. 104-788 (1996).
[12]. See Robert Matthews, Post Cold War Spies Will Stop at Nothing to Trade in Secrets,
SUNDAYTELEGRAPH, Dec. 14, 1997, at 4.
[13]. See H.R. Rep. No. 104-788 (1996).
[14]. See id. (citing 18 U.S.C. § 2314).
[15]. See id.
[16]. See S. Rep. No. 104-359 at 10 (1996).
[17]. See H.R. Rep. No. 104-788 (1996).
[18]. See e.g. United States v. Brown, 925 F.2d 1301, 1308 (10th Cir. 1991).
[19]. See id.; see also Dowling v. United State s, 473 U.S. 214, 216 (1985) (holding that ITSPA
“seems clearly to contemplate a physical identity between the items unlawfully obtained and
those eventually transported, and hence some physical taking of the subject goods.”).
[20]. See 18 U.S.C. §§ 1341 and 1343.
[21]. See e.g., United States v. Seidlitz, 589 F.2d 152, 160 (4th Cir. 1978).
[22]. See id.
[23]. See 18 U.S.C. § 1341.
[24]. See 18 U.S.C. § 1343.
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[25]. See H.R. Rep. No. 104-788 (1996). Massachusetts has two provisions under General Laws
Chapter 266 that criminalize the theft of trade secrets. Section 30(4) addresses the theft of trade
secrets and section 60A criminalizes the sale or purchase of trade secrets. Like the EEA, the
Commonwealth must prove that the owner took precautionary measures to secure and protect the
confidentiality of the trade secret. See Commonwealth v. Robinson, 7 Mass. App. Ct. 470, 473
(1979) (quoting Jet Spray Cooler v. Crampton, 361 Mass. 835, 840 (1972) (though defendant
fraudulently obtained the victim's process and used the information to manufacture and sell a
similar device, section 30(4) did not apply because there was no indication that the victim took
any precaution to secure the secrecy of the information.). This high burden of proof may explain
the lack of published cases under 30(4) and 60A.
[26]. See 18 U.S.C. § 1839(3).
[27]. See 18. U.S.C. §§ 1831(a), 1832(a) and 1834.
[28]. See 18 U.S.C. § 1836.
[29]. See 18 U.S.C. § 1837.
[30]. See id.
[31]. See U.S. Dep't of Justice, Federal Prosecution of Violations of Intellectual Property Rights
85 & n. 109 (May, 1997) [hereinafter DOJ Manual].
[32]. See 18 U.S.C. § 1835
[33]. See 155 F. 3d 189 (3d Cir. 1998).
[34]. See 18 U.S.C. §§ 1831(a) and 1832(a).
[35]. See 142 Cong. Rec. S12,213 (1996); see also Hsu, 155 F.3d at 197.
[36]. H.R. Rep. No. 104-788 (1996).
[37]. Id.
[38]. 142 Cong. Rec. H10,462 (1996).
[39]. Id.
[40]. See 18 U.S.C. §§ 1831(a) and 1832(a).
[41]. See 18 U.S.C. § 1831(a).
[42]. See id.
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[43]. See Hsu, 155 F.3d at 195-96 (citing 18 U.S.C. § 1832(a)).
[44]. See H.R. Rep. No. 104-788 (1996).
[45]. 18 U.S.C. § 1839(3).
[46]. Id.
[47]. See 18 U.S.C. § 1839(3).
[48]. See Hsu, 155 F.3d at 196.
[49]. See DOJ Manual, supra note 32, at 76.
[50]. See 18 U.S.C. § 1839(3)(B).
[51]. 18 U.S.C. § 1832(a).
[52]. 18 U.S.C. § 1835.
[53]. See Hsu, 155 F.3d 189.
[54]. See id. at 192.
[55]. See id. at 193.
[56]. See United States v. Hsu, 982 F. Supp. 1022, 1026 (E.D. Pa. 1997).
[57]. See id. at 1027.
[58]. See id. at 1026 & n.5.
[59]. 18 U.S.C. § 1835.
[60]. See Hsu, 982 F. Supp. at 1027.
[61]. See id. at 1025.
[62]. See id.
[63]. See id. at 1023, 1025.
[64]. See Hsu, 155 F.3d at 203.
[65]. See id.
[66]. See id.
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[67]. See id. at 202.
[68]. See id. at 203.
[69]. See id. at 205.
[70]. See id.
[71]. See id. at 198, n. 15.
[72]. 18 U.S.C. § 1839(3).
[73]. Id. at 205.
[74]. See id.; see also F.R.C.P. Rule 16(a)(1)(C).
[75]. See Hsu, 155 F.3d at 205.
[76]. See id. at 204-05, n. 22.
[77]. See Hsu, 982 F.Supp. at 1027.
[78]. United States v. Pin Yen Yang, Crim. No. 97-CR-288 (N.D. Ohio 1997).
[79]. See e.g. Danieli v. Braverman, Civ. No. 9306532, 1994 WL 879855, (Mass. Super. Jan. 20,
1994) (citing Augat, Inc. v Aegis, Inc., 565 N.E.2d 415 (1991)); Pepsico, Inc. v. Redmond, 54
F.3d 1262, 1269 (7th Cir. 1995) (citing Illinois Trade Secret Act, which supplants common law
remedies but does not dispense with the requirement that the plaintiff must show either the
existence of a trade secret or the likelihood that a former employee will compromise those
secrets or other confidential business information); see also Jet Spray Cooler, Inc. v. Crampton,
282 N.E.2d 921, 925 (1972) (citations omitted).
[80]. See Hsu, 155 F.3d at 196-97 (citing UTSA §1(4)).
[81]. See 18 U.S.C. §§ 1831(a), 1832(a), and 1834.
[82]. See Hsu, 155 F.3d 189; see also United States v. Yang, supra.
[83]. See Patricia M. Smith, Avery Dennison Charged with Fraud and Theft of Trade Secrets,
Business Wire, Jan. 5, 1999.
[84]. See Kurt Eichenwald, Reuters Unit is Investigated Over Theft of Rival's Data, N.Y. TIMES,
Jan. 30, 1998, at A1.
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Copyright © 1999 Boston College Intellectual Property & Technology Forum, Mark D. Seltzer,
Angela A. Burns