Companies May Get a New Weapon in the Fight Against Economic Espionage

Efforts to protect property from global threats gained momentum in Washington this summer with the introduction of a pair of bills that would create a federal civil cause of action for trade secret theft.

Currently, intellectual property owners that want to file suit for trade secret theft can only do so in state court. Under the Senate’s Defend Trade Secrets Act and the House’s Trade Secrets Protection Act, plaintiffs could sue in federal court, where it can be easier to reach defendants that have fled to another state or country.

Both bills, which are similar in scope, have Democratic and Republican sponsors, who cited federal estimates that U.S. businesses lose $300 billion a year as a result of trade secret theft.

“Federal authorities have been talking about this problem for the last several years,” says Morrison & Foerster partner Daniel Westman. “This to me is a sign of determination by Congress to do something about it.”

The proposals come less than two years after Congress passed legislation expanding both the scope and available criminal penalties under the Economic Espionage Act, which makes trade secret theft a federal crime. Since then, the U.S. Department of Justice has gotten the world’s attention with a string of corporate espionage indictments, capped by the sentencing this summer of a chemical engineer convicted of selling DuPont trade secrets to the Chinese government, says Morrison & Foerster partner Eugene Illovsky, a former assistant U.S. attorney.

 Stephen Freccero, also a Morrison & Foerster partner and former assistant U.S. attorney, says he sees the international enforcement push gaining steam, with federal authorities seeking alliances with authorities overseas. “It’s a strategy they’ve used with great success in antitrust and anti-money laundering enforcement,” he says.

But with the evidentiary bar high for bringing a criminal charge and the problem so widespread, authorities tend to be highly selective about the cases they take on, says Westman. That’s why creating a federal civil cause of action is important. “The more options you have, the better,” he says.

Even with increased protections, businesses with valuable trade secrets must do more to just prevent theft. “One of the best tools is encouraging employees to understand that not everyone is well intentioned by training them about threats,” says Westman.

While most employees are well-intentioned, perpetrators are occasionally aided by sympathetic insiders. “Perhaps they are skeptical of authority or of big business, and they might be persuaded to turn a blind eye to wrongdoing,” says Westman. “For those people, it’s important for companies to convey that they are deadly serious about this.”