The judgments rendered in two recent 2014 federal criminal cases reveal the inherent complexity in prosecuting international trade secret misappropriation claims.
In U.S. v. Liew, Judge White of the U.S. District Court for the Northern District of California sentenced defendant Walter Liew to 15 years in prison for misappropriating trade secrets from chemical giant DuPont and selling them to an overseas Chinese company known as the Pangang Group, based in Chengdu. It was proven during the trial that Liew and his company, ironically named USA Performance Technology, received over $27.8 million in compensation for selling DuPont’s industrial trade secrets to Pangang, the trade secrets including technical blueprints belonging to DuPont related to the manufacturing of titanium dioxide, a white-colored pigment used in many commonplace consumer products such as paper and plastic. Thus, Liew’s intent to misappropriate trade secrets was established beyond a reasonable doubt by U.S. Attorneys.
On the other hand, in U.S. v. Yeh, a Texas jury acquitted former Texas Instruments (TI) employee Ellen Yeh on all counts brought against her (including trade secret misappropriation) based on proprietary information she admitted downloading before leaving the U.S. to work for a semiconductor manufacturing company in China. In her testimony, which she submitted polygraph results for, Ms. Yeh stated that she had no idea such activity was illegal or unauthorized, was confused about what constituted a TI trade secret vs. non-trade secret, and merely downloaded the files only for safekeeping in case another job opportunity arose to work for TI in China. Therefore, after a nine-day jury trial, she was acquitted because she was not found to have the requisite intent to commit trade secret misappropriation or illegal copying.
Proving Intent to Misappropriate Trade Secrets Beyond A Reasonable Doubt
In the Yeh case, it was difficult to prove Ms. Yeh’s intent to misappropriate trade secrets beyond a reasonable doubt, which is the standard used under the law, e.g., trade secrets misappropriation prohibited by the Economic Espionage Act and illegal copying prohibited by the National Information Infrastructure Act, a U.S. computer crime law passed in 1996. It is also harder to establish the commission of complex crimes such as criminal trade secret misappropriation because such claims require multiple elements to prove, such as the accused having to know what a trade secret is first (and why it would derive value from not being generally known to the public) and then knowingly, willfully misappropriating the trade secret once having this knowledge.
It may have been harder to prove intent in the Yeh case because it only involved the downloading of proprietary information. In the Liew case, not only was their possession of trade secrets (in the form of blueprints) but there were proven sales of that information made by Liew to the Pangang group. Liew also paid former DuPont engineers for trade secrets, so there were financial transactions Liew underwent to acquire the trade secrets in the first place. Therefore, the presence of commercial activity may make it easier to prove intent to misappropriate trade secrets, because it already establishes that the accused knows that the proprietary information he is selling or buying has high economic value.
Knowledge of What Constitutes a Trade Secret v. A Non Trade Secret
In the Yeh case, Ms. Yeh asserted that she was confused about what constituted a TI trade secret versus non-trade secret proprietary information. It may be difficult to discern a highly valuable trade secret from information that is already proprietary. Therefore, the burden is on the trade secret holder to educate their employees properly about company information, or to have stricter protection protocols under company policies for information clearly constituting trade secrets. The easier it is to establish that an accused party knows what a trade secret is, the easier it will be to establish the intent of that accused party to misappropriate trade secrets. For example, in addition to being found guilty of paying former DuPont employees to provide him with company trade secrets, Liew was also found guilty of filing false tax returns, making false statements, and witness/evidence tampering. Therefore, it might be clearer in Liew’s case that he knew what trade secrets were and also knew their true value – which is why he went to such extents to acquire them and sell them to the Pangang Group.
Limited Time for Prosecution
Having a smaller window of time to pursue remedies for trade secret misappropriation allows a higher likelihood of success. As does ensuring the defendant does not leave the country. Ms. Yeh departed TI over nine years ago. In 2005, because she had been living in China for a while already, the prosecution was stalled for over five years, and even after the grand jury indictment in 2008, she still continued to live overseas in China. Not until August of 2013 did Yeh finally return to the U.S. to face trial after she was detained at the South Korean border in response to a “Red Notice” issued by Interpol at the U.S. government’s request. The process would have been much better for the prosecution, strategically as well as time-wise, if the defendant stayed in the United States, like the Liew case.
The Defendant Need Not Actually Use The Trade Secrets
Liew’s attorney, Stuart Gasner from Keker & Van Nest, argued that Liew received the trade secrets from a former DuPont engineer who had kept them sitting in his closet for 14 years. He further stated that there was no proof that Liew actually used those secrets to hurt DuPont. Assistant U.S. Attorney John Hemann quickly responded that Gasner’s argument that the trade secrets weren’t used was “the most insulting thing that has been suggested” and that there was still misappropriation and the sale of such highly confidential, proprietary information.
There are a number of factors, as discussed above, that need to be taken into consideration when prosecuting a trade secret misappropriation claim in a federal criminal case. For a crime as complex as trade secret misappropriation, the more details and facts that can be established about the defendant’s state of mind, the stronger the case will be.