Federal Laws Against the Theft of Trade Secrets - 18 U.S.C. § 1832
Theft of trade secrets, often called “economic espionage,” occurs in many different ways, but the underlying offense always involves converting someone's trade secret to their benefit.
This specific federal crime is now the standard practice of many private companies throughout the United States.
To combat the growing problem, the U.S. Attorney's office has increased its efforts to seek prosecution of corporate espionage cases and their loss of crucial business information.
The phrase “trade secrets” is extensive and covers illegal physical property and proprietary computer programs.
This federal law aims to prevent the loss of a company's critical advances in innovation and technology to other local or international companies.
This federal crime is charged against someone or company when their product or service is used for interstate or foreign commerce.
However, it must be proven that the accused knew their offense would cause some form of injury or loss to the trade secret owner.
Section 1832 of Title 18 of the United States Code legally defines the federal crime of theft of trade secrets, including some of the most valuable intellectual property owned by a company or person.
In 1997, the Economic Espionage Act took effect. This federal law criminalizes the stealing or misappropriation of trade secrets and harshly penalizes those convicted.
If you've been charged with violating federal trade secret theft laws, you need to speak with a lawyer who has experience defending against these types of federal offenses.
Our Los Angeles criminal defense attorneys will take a closer look at the federal laws below.
What is Considered a Trade Secret?
By their nature, trade secrets are valuable by their confidential and proprietary status. If the “secret” becomes public information, the economic damage to the inventor or owner could be immediate and significant.
Theft of trade secrets is a severe white-collar offense, which is why this crime rises to the level of being prosecuted in a federal courtroom. Under federal law, the term trade secret is narrowly defined.
Under 18 U.S.C. § 1839, before information can be qualified as a trade secret, the following two elements must be met:
- The trade secret owner must have taken “reasonable measures” to maintain the secrecy of the information;
- The information must be a secret that, in and of itself, derives “independent economic value.”
A trade secret can come in many shapes, sizes, and forms. As outlined in the statute's definition, it can be tangible or intangible and might include:
- “financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes.”
In short, anything from an apple pie recipe to a sophisticated software program could be considered a trade secret if the two elements of the definition of a trade secret are present.
To qualify as an actual trade secret, a third party cannot readily ascertain the information through proper means, such as reverse engineering or simple observation of final products introduced into commerce.
In other words, it is any tangible or intangible piece of information that is economically valuable because its owner keeps it secret.
What are the Elements of the Crime?
You could be charged with violating federal law under the theft of trade secrets statute, 18. U.S.C. § 1832, if you:
- Take or convert a trade secret used, or intended to be used, across state lines or in foreign commerce;
- Intend to use that trade secret for economic benefit without the owner's consent;
- Intend or know that committing the theft will injure the trade secret owner.
Specifically, 18. U.S.C. § 1832prohibits any of the following acts:
- Stealing, appropriating, or deceptively obtaining a trade secret;
- Copying, duplicating, drawing, photographing, downloading, uploading, altering, destroying, replicating, transmitting, sending, mailing, communicating, or conveying a trade secret without consent;
- Receiving, buying, or possessing a trade secret that you know has been stolen, appropriated, obtained, or converted without the owner's authorization.
If you're found guilty of the theft of trade secrets in violation of federal law, you could face severe penalties, including forfeiture, fines, and up to 10 years in federal prison.
The defendant must have known that the stolen information was proprietary, and they intended to exploit the stolen trade secret for the benefit of someone other than the original owner.
Finally, they also must have known or intended the original owner to suffer some economic harm from the theft.
Economic Espionage - 18. U.S.C. § 1831
Section 1831 pertains to those who act knowingly or intentionally and commit the act of trade secret theft for the benefit of a foreign government.
Under the statute, you could be charged with economic espionage if you commit any offenses outlined under 18. U.S.C. § 1832, or if you conspire with anyone else to commit the crimes. Importantly, these prohibitions apply to individuals as well as organizations.
Suppose you're found guilty of theft of trade secrets in violation of economic espionage under 18. U.S.C. § 1831, you could face severe penalties, including fines up to $5 million and imprisonment of up to 15 years.
Organizations convicted under 18. U.S.C. § 1831 may be fined up to $10 million or three times the value of the organization's stolen trade secret, including expenses for research and design and other costs of reproducing the trade secret the organization has thereby avoided.
What are the Best Defenses?
Both U.S.C. § 1831 and § 1832 require a degree of intent before the statutes are triggered. If you're accused of the theft of trade secrets by federal prosecutors, they will need to prove you intended to commit the offense.
You may also be able to defend yourself by demonstrating the information you used didn't fall under the definition of a trade secret. Remember, the description is comprised of two crucial elements.
Those accused of stealing trade secrets may utilize an affirmative defense in some cases. Under 18 U.S.C. § 1833, there are certain exceptions to the prohibition against the theft of trade secrets.
Under 18 U.S.C. § 1833, an individual isn't criminally liable under the federal trade secret laws if the trade secret disclosure was made for the purgation or a lawsuit and “in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney.”
Additionally, a person is not committing trade secret theft in violation of federal law if they utilize the trade secret information involved in an anti-retaliation lawsuit.
The United States Supreme Court ruled that law does not protect the trade secret owner from discovery by honest means, such as an independent invention or reverse engineering.
California Law Prohibiting Theft of Trade Secret
If the federal statute isn't triggered, you could still be prosecuted under California larceny laws. California's definition of a trade secret under Penal Code 499(c) is similar to the national report as information of a business that has a value for not being known to the public. If convicted at the state level, you could face fines and jail time.
If you, or someone you know, is under investigation for already indicted for theft of trade secrets in violation of federal law, contact our experienced teams of federal criminal lawyers for an initial consultation.
Eisner Gorin LLP is based in Los Angeles County and serves people in California and United States for a federal offense. Contact us for an initial consultation at (310) 328-3776.