Theft of Trade Secrets

18 U.S.C. § 1832 - Theft of Trade Secrets 

Theft of trade secrets (economic espionage) allegations under 18 U.S. Code 1832 are on the rise by private companies. These cases are unique because they are referred to the U.S. Attorney's office for criminal prosecution and civil actions.

There are efforts to combat corporate espionage and the loss of valuable business information. The term “trade secret” crimes is broad and includes taking possession of physical objects to proprietary company information.

The efforts to fight the theft of trade secrets are to prevent U.S. companies from losing valuable innovation advances to domestic competitors and other countries.

18 U.S.C. § 1832 - Theft of Trade Secrets 
18 U.S. Code 1832 theft of trade secrets law makes it a crime to steal proprietary company information.

While enforcement of this federal law increases, there is a higher risk to people subjected to corporate policies prohibiting storing or transferring information to their home computers.

18 U.S.C. 1832 says, “(a) Whoever, with intent to convert a trade secret, that is related to a product or service used in or intended for use in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will, injure any owner of that trade secret, knowingly—

(1) steals, or without authorization appropriates, takes, carries away, or conceals, or by fraud, deceit, or deception obtains such information;

(2) without authorization, copies, duplicates, sketches, draws, photographs, downloads, uploads, alters, destroys, photocopies, replicates, transmits, delivers, sends, mails, communicates, or conveys such information;

(3) receives, buys, or possesses such information, knowing the same to have been stolen or appropriated, obtained, or converted without authorization;

(4) attempts to commit any offense described in paragraphs (1) through (3); or

(5) conspires with one or more other persons to commit any offense described in paragraphs (1) through (3), and one or more of such persons do any act to effect the object of the conspiracy, shall, except as provided in subsection (b), be fined under this title or imprisoned not more than ten years, or both.

What is a Trade Secret?

The definition under the federal statute is broad. It depends on several subjective determinations regarding whether “reasonable measures” were taken to protect the information and whether it has secrecy value.

This primary target for defense counsel can be the difference between conviction or acquittal. Ultimately, the determinations related to certain trade secrets depend on the company's information valuation, secrecy policies and procedures, and the judgment of expert witnesses.

18 U.S.C. 1839 defines a “trade secret” as “all forms and types of financial, business, or scientific, also known as economic espionage, can occur in various plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if—

  • (A) the owner thereof has taken reasonable measures to keep such information secret; and
  • (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information;

Theft of Trade Secrets - Criminal Acts

The Economic Espionage Act (EEA) prohibits the theft of trade secrets under 18 U.S. Code Chapter 90 Protection of Trade Secrets. Further, most states have enacted the Uniform Trade Secrets Act, consistent with the World Trade Organization's Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS).

The EEA has separate provisions that make stealing or misappropriating trade secrets a crime. For example, 18 U.S.C. 1831 focuses on foreign economic espionage and requires that the trade secret be stolen to benefit a foreign government or agent. 18 U.S.C. 1832 covers the commercial theft of trade secrets, regardless of who benefits.

Federal prosecutors at the Department of Justice (DOJ) often consult with the Computer Crime and Intellectual Property Section (CCIPS) before filing criminal charges.

Theft of Trade Secrets – Quick Facts

There are several essential facts you should know about the federal crime of 18 U.S.C. 1832 theft of trade secrets, such as the following:

  • Theft of trade secrets typically involves someone converting a trade secret to their benefit.
  • It's charged as a federal crime where the product or service is used for interstate or foreign commerce.
  • The alleged perpetrator must know their crime will cause some injury or loss to the trade secret's owner.
  • Trade secrets constitute some of the most valuable intellectual property companies and individuals own.
  • A trade secret can be any tangible or intangible information that is economically valuable because its owner keeps it secret.
  • Trade secrets are only valuable by their confidential and proprietary status.
  • To qualify as an actual trade secret, third parties cannot readily ascertain the information through proper means.
  • Examples of trade secrets include the secret formula for a popular soft drink and the engineering process required to make smartphones.

What Factors Must Be Proven for a Conviction?

To convict an alleged perpetrator of theft of trade secrets, the federal prosecutor must prove several elements of the crime defined under 18 U.S.C. 1831, including the following:

  • Defendant stole or, without authorization by the owner, obtained, destroyed, or conveyed information;
  • Defendant knew this information was proprietary;
  • The information was, in fact, a trade secret; 
  • Defendant knew the offense would benefit them or was intended to benefit a foreign government, foreign instrumentality, or foreign agent;
  • Defendant must have known or intended that the original owner suffered some economic harm from the theft;
  • The trade secret must have been related to a product placed in interstate or international commerce.

What Are the Related Federal Laws?

18 U.S. Code Chapter 90 protection of trade secrets has several federal laws that are related to 18 U.S.C. 1832 theft of trade secrets, such as the following:

  • 18 U.S.C. 1831 - Economic espionage;
  • 18 U.S.C. 1833 - Exceptions to prohibitions;
  • 18 U.S.C. 1834 - Criminal forfeiture;
  • 18 U.S.C. 1835 - Orders to preserve confidentiality;
  • 18 U.S.C. 1836 - Civil proceedings;
  • 18 U.S.C. 1837 - Applicability to conduct outside the United States;
  • 18 U.S.C. 1838 - Construction with other laws;
  • 18 U.S.C. 1839 - Definitions.

What Are the Penalties for 18 U.S.C. 1832?

Suppose you are convicted of violating Section 1832 theft of trade secrets. In that case, you are facing the following penalties:

  • A maximum of ten years in federal prison plus fines;
  • Organizations can be fined up to $5,000,000 or three times the value of the trade secrets in question, whichever is greater;
  • Anyone convicted under the EEA will face mandatory forfeiture of any proceeds or property derived from the violation.

What About Civil Enforcement?

Often, any company that discovers a theft of its trade secrets will investigate independently and then file a civil action, including seeking an injunction that prevents further disclosure of items or information stolen or misappropriated.

Theft of Trade Secrets Civil Enforcement
Many companies will independently investigate theft of its trade secrets and file a civil action.

Next, they will refer the alleged violation to the United States Department of Justice (DOJ) for potential criminal prosecution.

In the end, if proven, any company is entitled to recover the monetary value of the damage caused in the civil case or through restitution in the criminal case, but not both. Notably, before any civil action or referral to the DOJ, they must consider the confidentiality of the trade secret.  

18 U.S.C. 1835(a) says, “In any prosecution or other proceeding under this chapter, the 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. An 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.”

What Are the Legal Defenses?

Our federal criminal defense lawyers can challenge allegations that you violated federal law on theft of trade secrets.

Perhaps we can argue that you have reverse-engineered the trade secret. The U.S. Supreme Court ruled the law does not protect the owner of a trade secret from discovery by honest means. This could include an independent invention or a parallel development of products or ideas, not a theft or trade secret violation.

Perhaps we can negotiate with the federal prosecutor for a favorable plea bargain or a civil resolution to avoid criminal charges.  Contact our law firm for a free case evaluation. The Hedding Law Firm is located in Los Angeles, California.

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