Theft of Trade Secrets (Economic Espionage) – What You Need to Know

As the information age has taken off, there has been an increase in the number of trade secret theft cases in federal courts.

Trade secret theft, otherwise known as “economic espionage,” is a serious federal crime. It covers a wide range of circumstances, from the theft of physical property to intellectual property like proprietary computer algorithms and process information. Depending on the facts of the case, instances of trade secret theft can include charges related to wire fraud, the Computer Fraud and Abuse Act, identity theft and others.

Economic espionage cases can be complex. They include massive amounts of information and often revolve around the nuances of federal law, such what specifically constitutes a trade secret and how the information was used. 

If you or someone you know is suspected of theft of trade secrets, it’s important to speak with a skilled and experienced federal defense attorney as soon as possible. Your attorney can review the facts of the case with you in detail and provide advice on the best course of action.

What is a trade secret?

The definition of a trade secret is very broad under federal law. 

According to 18 U.S.C. § 1839, a trade secret is “all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing,” if the following two items are true:

  1. The rightful owner of the information has taken reasonable measures to keep it secret, and
  2. The information that was taken has independent economic value, either actual or potential, because it is not generally known or ascertainable by another person who does not have access to the information.

While this definition is very broad, it’s important to note that you cannot be prosecuted for using general knowledge or skills that you gained while working for a company. A person can only be prosecuted if the federal government can show they stole or misappropriated a particular trade secret.

Theft or misappropriation of trade secrets

Theft or misappropriation of trade secrets is made illegal by the Economic Espionage Act (“EEA”). While the EEA applies in a few different scenarios — such as theft of trade secrets to benefit foreign governments — the most common domestic application is in 18 U.S.C. § 1832.

This crime has six elements:

  1. The defendant obtained, destroyed or conveyed information without permission of the owner.
  2. The defendant knew this information was proprietary.
  3. The information was in fact a trade secret.
  4. The defendant intended to convert the trade secret to economic benefit for someone other than the owner.
  5. The defendant knew or intended that that owner of the trade secret would be injured.
  6. The trade secret was related to or included in a product that was produced or placed in interstate or foreign commerce.

Taking a closer look at the individual elements of economic espionage, we see first that the defendant must have known beforehand that the information they obtained was proprietary.

The defendant must have also intended to use the trade secret for someone’s tangible economic benefit other than the owner. In other words, if someone steals a trade secret and it does not produce a real monetary benefit for someone else, it is not a violation of the EEA.

Finally, the defendant must know or intend that the owner of the trade secret would be “injured” by their actions. This means that the prosecution must show that the defendant acted with knowledge that some kind of harm would come to the owner from their actions.

Penalties for trade secret theft

If convicted of economic espionage, a person can face:

  • Up to $5 million in fines or three (3) times the value of the secret, including expenses for research and design of the secret.

This is in addition to civil penalties and other federal charges, such as wire fraud or identity theft.

Defenses against trade secret theft charges

As we mentioned above, many defenses against economic espionage charges relate to the “secret” itself.

Parallel development of a product or idea does not constitute trade secret theft, nor does honest reverse engineering of the method or process. Furthermore, if a court cannot prove that the defendant meant to use the benefit for theirs or someone else’s economic gain, with the knowledge or intent that it would injure the rightful owner, then the defendant is not guilty of economic espionage.

An experienced criminal defense attorney can help you navigate these issues and more. Practicing in the Los Angeles area, Robert M. Helfend has defended the constitutionally guaranteed rights of clients in federal courts since 1984. Call today for your free case evaluation – 800-834-6434.