Queue the Economic Espionage Act

Your company terminates the employment of a highly skilled computer programmer who then attempts to sell the source code for your proprietary training software to a foreign entity.1 What would your company do?

Queue the Economic Espionage Act (the Act). Enacted in October of 1996, the Act makes the theft or misappropriation of a commercial trade secret a federal crime.2 “Misappropriation” includes both the conspiracy to misappropriate trade secrets and the subsequent acquisition of such misappropriated trade secrets. The Act provides companies with an alternative to private civil litigation against offenders. Under the Act, “[c] ompanies can present their case to federal prosecutors and request that the government conduct a criminal [investigation] against the offending individual and/or company.”3

The Two Different Sections of the Act

The statute prohibits two specific types of misappropriation concerning commercial trade secrets. The first type encompasses an offender that has the knowledge or intent that the theft will benefit a foreign entity.4 The second type of economic espionage prohibited involves the misappropriation of a trade secret that relates to or includes a product, which is produced for or placed in interstate commerce (including international commerce), and the offender has knowledge or intent that the misappropriation will result in an economic benefit to anyone other than the owner of the trade secret.5

Both sections use broad language, which allows for wide judicial discretion in interpretation. However, there is a slight difference in the burden of proof required to illustrate the culpability of the offender in the two sections of the Act. Section 1831 requires intent or knowledge that the Act will benefit a foreign government, instrumentality or agent.6 Section 1832 strictly requires intent, a much more difficult fact to prove.7

The Act can only be used in flagrant and egregious cases of information theft.8  Recent litigation under the Act has spiked, though, illustrating the government’s renewed interest in protecting American businesses’ proprietary information.9

What Should Your Company Do?

Protect your data. Title I of the Act defines a “trade secret” broadly, to include both tangible property and intangible information, as long as the owner “has taken reasonable measures to keep such information secret” and the information “derives independent economic value . . . from not being generally known to . . . the public.”10 Maintain a written policy of your data sharing policies with outside entities and make sure your employees are aware of its contents. Hopefully this action prevents the misappropriation from occurring, but if not, it will at least serve as evidence of an employee’s knowledge of the law and their intent to violate it.

Not only does a company need to worry about protecting its own trade secrets from wouldbe thieves, they must also ensure that their company practices cannot be construed as the misappropriation of another’s trade secrets. One such example of this tableturning situation includes the legality of various forms of information gathering typically designed to help business decisionmakers within a company gain a competitive advantage in areas such as strategy, marketing, research and development, or negotiations.11 If your company relies primarily on the collection and analysis of public information from which they identify events, patterns, and trends of actionable interest, you should be within the letter of the law. However, your company must be careful that it is not accessing another’s proprietary information.