At the Cambridge Cyber Summit in October 2017, Deputy Attorney General Rod Rosenstein discussed ways in which the Department of Justice has increased its vigilance when it comes to protecting American companies from cybercrime, noting that the DOJ's emphasis is on protecting “the ideas that make our nation strong and competitive in the marketplace.” In 2015, leaders from the G20 nations highlighted the need to protect trade secrets, and Rosenstein indicated that the DOJ has honored that commitment by stepping up efforts to criminally indict trade secret thieves.
Although the DOJ has jurisdiction to prosecute trade secret theft, trade secret disputes traditionally have been handled by private parties through civil litigation. The federalDefend Trade Secrets Act of 2016 and an array of state statutes allow victims of trade secret misappropriation to seek injunctions and monetary damages. But, under theEconomic Espionage Act, knowingly stealing a trade secret or knowingly receiving a stolen trade secret is a federal crime.
Prosecution of trade secrets misappropriation appears to be on the rise, particularly in the area of financial technology (fintech), which broadly describes the technological backing for financial firms. In April 2017, Joon Kim, Acting U.S. Attorney for the Southern District of New York, announced two charges of theft of financial trade secrets. The DOJ alleged that Zhengquan “Jim” Zhang used his access to the source code of his employer, a financial services firm, and hacked into other portions of the firm’s systems to install a program that would send data to a third-party site. By alerting and cooperating with the FBI, Zhang’s employer was instrumental in uncovering his alleged theft.
In another fintech case, Dmitry Sazonov was charged with attempted theft of trade secrets from his employer, Susquehanna International Group. On the morning of a meeting discussing his future with the firm, Sazonov allegedly attempted to smuggle out the firm’s trading code by camouflaging code within seemingly harmless PDF files, such as tax and immigration documents. Both cases are pending in the Southern District of New York.
These fintech trade secret prosecutions are among a number of criminal trade secret investigations in the technology sector. In one high-profile case, Anthony Levandowski, co-founder of the self-driving truck company Otto, faces potential criminal charges for allegedly bringing trade secrets from Google’s self-driving car project to his startup, which was later acquired by Uber. Although Levandowski has not been charged, the potential indictment has led him to invoke his Fifth Amendment privilege against self-incrimination. As a result, he has been unwilling to cooperate in discovery in the pending civil suit. That suit, of which Levandowski is not a named party, is set to go to trial in early December 2017.
In another matter, on May 23, 2017, federal prosecutors filed a criminal complaint against seven individuals for allegedly stealing military manufacturing trade secrets from a U.S. business for a Chinese firm. Although the case is still in its early stages, the district court granted restraining orders against two defendants.
These pending cases suggest that the DOJ is, in fact, using criminal prosecution of trade secret theft as a tool to protect the valuable intellectual property of American companies.