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When to Call the Feds for Trade Secret Theft

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A couple of recent high-profile cases have some employers wondering what criminal law can help them do to protect their own trade secrets and when they should involve police or federal authorities instead of merely filing a civil suit.

Last week, the bench trial began in the U.S. District Court for the Northern District of Illinois against software engineer Hanjuan Jin. Jin is accused of stealing trade secrets from her former employer, Motorola Corporation, and selling them to the Chinese military. Last month, charges were brought against Yihao Ben Pu in the same court for stealing the trade secrets of his former employer, hedge fund Citadel. Both Jin and Pu have been charged under the Economic Espionage Act of 1996 (EEA).

Penalties under the EEA can run up to ten years of imprisonment for individuals and $5 million in fines for organizations. The Act is broad-sweeping, providing criminal liability for misappropriation, unauthorized duplication, and receiving of trade secrets, as well as conspiracy to do any of those things.

The FBI has placed economic espionage, on both a national and local level, second on its list of priorities, right behind fighting terrorism. The Department of Justice (DOJ) has created its own Task Force on Intellectual Property with fifteen assistant U.S. attorneys and 20 FBI special agents.

One difference between criminal and civil enforcement is that the EEA requires that the defendant have the criminal "intent to convert" the secret, or the intent to profit from it financially. Unfortunately, this means criminal prosecution may be easier after fact. A company must also consider the possibility of disclosure of trade secrets during the course of criminal prosecution.

With these disadvantages, why would anyone wish to pursue a criminal prosecution? First, public prosecutions make other employees more aware of the consequences of theft. Second, the threat of prison may make other employees more willing to divulge what they know about the theft. Third, for thefts with suspected foreign involvement, the DOJ has vast experience and substantial authority to pursue both domestically and beyond the U.S. borders.

Want to know more? Read the full article by Shelby R. Schwartz at Littler Mendelson

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