February 23, 2018

BNA Publishes My Report on EEA Prosecutions

BNA’s Patent, Trademark and Copyright Journal published my analysis of the approximately 124 indictments that the government has obtained under the Economic Espionage Act. Based on the prosecutions the article draws conclusions about (1) the location of the cases; (2) the extent of foreign government involvement; (3) defendant’s gender; (4) defendant’s level of education; (5) relationship of defendant to the victim; (6) nationality of the defendant/purpose of the theft; (7) type of trade secrets stolen; (8) identify of the victim; (9) adequacy of protective measures; (10) dispositions; and (11) sentences.

Based on these findings and conclusions, the article also makes meaningful conclusions and recommendations for both government and industry. With regard to the government, the findings suggest that it should be more aggressive in prosecuting violations of the EEA if it were truly serious about deterring thefts of trade secrets, and that the government has not been as active as claimed. Further, there is marked difference among U.S. Attorney’s Offices in the number of cases the office has charged under the EEA.

The article also concludes that the effectiveness of the EEA in protecting trade secrets is also hampered by statutory limitations of the current version of the EEA. In particular, Congress should amend the EEA so that it unambiguously covers the theft of trade secrets to the extent permitted by the Commerce Clause, and that it also should protect trade secrets in the development stage. Finally, Congress should increase the penalties for theft of trade secrets not involving a foreign entity; more than 90 percent of the prosecutions, thus far, have not involved a foreign entity, and the defendant was sentenced to probation or home confinement in almost 40 percent of the cases.

With regard to industry, the findings indicate that companies are not doing enough to protect their valuable proprietary information and that the process of protecting trade secrets is organic, in that, all businesses should constantly update their trade secret protection programs in response to ever changing conditions and threats. For example, the threat of foreign economic espionage, especially by Chinese entities, has greatly increased over the past several years.

To read the entire article, click here.

Protecting Your Intellectual Property: Tip #1

In an effort to assist companies to better protect their intellectual property and to avoid being accused of stealing IP from other companies, I will provide one easy to follow tip each week.

The most common scenario for companies to become defendants in theft of trade secret cases arises when hiring personnel from competitors. New employees in this situation often bring with them confidential and proprietary information from their former employer to help them succeed at their new employer. Companies can no longer expect to avoid liability for their new employees’ use of such information, even where they have no knowledge of the new employees’ actions. Accordingly,

TIP #1: WHEN HIRING PERSONNEL FROM A DIRECT COMPETITOR, EMPLOYERS SHOULD MAKE A THOROUGH, MEANINGFUL, AND DILIGENT EFFORTS TO ENSURE THAT THEIR NEW HIRES HAVE NOT TAKEN ANY OF THEIR FORMER EMPLOYER’S  ELECTRONIC OR HARD COPY RECORDS.

 

What Your Company Can Learn From My Analysis of the Economic Espionage Act

If you think your company’s trade secrets are safe, think again! In my article, which was published on September 212, 2012, in  BNA’s Patent, Trademark & Copyright Journal, I trace the approximately 124 prosecutions that the government has brought under the Economic Espionage Act (“EEA”), and one of my conclusions is that very few companies are doing enough to protect their intellectual property. In addition, the article includes conclusions about: (1) the locations of the cases: (2) the extent of foreign government involvement; (3) defendant’s gender; (4) defendant’s level of education; (5) relationship of defendant to the victim; (6) nationality of the defendant/purpose of the theft; (7) type of trade secret stolen; (8) identify of the victim; (9) dispositions; and (10) sentences. The study was based on the first compilation of EEA prosecutions under the EEA, which I conducted using a variety of sources including Pacer, Westlaw, the Department of Justice website, and other public sources.

Based on these findings and conclusions, the article also makes conclusions and recommendations for both government and industry. With regard to the government, the findings suggest that it should be more aggressive in prosecuting violations of the EEA if it were truly serious about deterring thefts of trade secrets and that the government has not been as active as claimed. Further, there is a marked difference among United States Attorney’s Offices in the number of cases the office has charged under the EEA.

The effectiveness of the EEA in protecting trade secrets is also hampered by statutory limitations of the current version of the EEA. In particular, Congress should amend the EEA so that it unambiguously covers the theft of trade secrets to the extent permitted by the Commerce Clause, and that it also should protect trade secrets in the development stage. Finally, Congress should increase the penalties for theft of trade secrets not involving a foreign entity; more than 90 percent of the prosecutions, thus far, have not involved a foreign entity, and the defendant was sentenced to probation or home confinement in almost 40 percent of the cases.

With regard to industry, the findings indicate that companies are not doing enough to protect their valuable proprietary information and that the process of protecting trade secrets is organic, in that, all businesses should constantly update their trade secret secret protection programs in response to ever changing conditions and threats. For example, the threat of foreign economic espionage, especially by Chinese entities, has greatly increased over the past several years.

Please read the article if you’re interested in learning more about this important subject.

I was Right About Apple!

In a previous post I predicted that Apple would win its patent infringement lawsuit against Samsung. Not only was I right, but my reasoning was also correct. In general, I predicted that if Apple was able to convert a “boring” patent trial involving highly technical matters into an inquiry as to whether Samsung flagrantly copied the “look and feel” of the iPhone and iPad, Apple would win. From everything I’ve read about the trial, Apple was able to do just that. In contrast, Samsung was not able to convince the jury that there was a innocent explanation as to why its products and Apple’s were so similar. If you’re interested in learning more about my reasoning, here’s a video of my recent appearance on “This Week in Law.”

There are a number of important lessons that every company can and should learn from Apple about how to better protect it’s intellectual property even without having an unlimited budget to do so. Companies should review their intellectual property portfolio with an eye to whether increased protection can be obtained through the use of design patents and trade dress. This is especially true for manufacturing companies. Apple was able to utilize both of these types of IP with great success against Samsung. [Read more…]

Release 18 of Intellectual Property and Computer Crimes Just Published

Law Journal Press just published Release 18 of my book, Intellectual Property and Computer Crimes, which features an analysis of two recent appellate court decisions that setback the government’s efforts to protect intellectual property in the United States. In United States v. Aleynikov, the Second Circuit ordered the acquittal of a former Goldman Sachs Group Inc. computer programmer who had been prosecuted under the Economic Espionage Act (“EEA”) and the National Stolen Property Act (“NSPA”) for stealing computer source code from Goldman. The court found a computer program to be intangible property that does not constitute “goods, wares or merchandise,” as required by the NSPA and that the government must prove under the EEA that a trade secret itself is “intended to, or actually move in interstate or foreign commerce.” Click here to purchase Intellectual Property and Computer Crimes.

The Ninth Circuit in United States v. Nosal rejected an expansive reading of the Computer Fraud and Abuse Act and held that the CFAA was intended to punish hacking, not misappropriation of trade secrets.

Other topics discussed in this Release include: Review of the approximate 120 prosecutions that the government has brought under the EEA; requirements for bringing a civil action under the CFAA; what it means to “exceed authorization” under the CFAA; whether the interception of computer keystrokes is a violation of 18 U.S.C. section 2511; definition of “knowingly” under Section 1832 of the EEA. [Read more…]

Trade Secret Fundamentals: What You Can and Can’t Do (D.C. Bar, Sept. 11, 2012)

I will be speaking on September 11, 2012, at continuing legal education program on Trade Secret Fundamentals: What You Can and Can’t Do, sponsored by the District of Columbia Bar: 6:00 p.m. – 9:15 p.m., D.C. Bar Conference Center, 1101 K Street, NW. Washington D.C. Enroll here.

The presentation will focus on a review of federal and state laws that protect trade secrets and steps that companies can take to protect their confidential business information. It will also draw on the first-ever analysis of the approximate 125 prosecutions that the government has brought under the Economic Espionage Act. Recent trade secret cases, such as Starwood v. Hilton, will also be used to illustrate the law and practical considerations, including the following:
• Key provisions in the Uniform Trade Secrets Act, Economic Espionage Act, and Computer Fraud and Abuse Act
• Best practices for an internal investigation
• The advantages and disadvantages of making a criminal referral in a trade secrets case.
• How companies can better protect their trade secrets
• How companies can avoid becoming unwitting criminal defendants in a trade secrets case

Why Apple Will Win!

The “patent trial of the century” between Apple and Samsung began on Monday in federal district court in San Jose, California. The press coverage has been extensive, probably far greater than any previous patent trial. The press has dutifully reported that Apple is seeking over $2 billion in damages, which can be trebled, and an injunction barring the sale of certain Samsung smart phones and tablets in the United States, which undeniably would increase Apple’s market share. However, very little has been written on how the case involves far more than Samsung’s alleged infringement of a number of highly technical patents. Apple’s litigation strategy reflects Steve Job’s core belief that Apple’s intellectual property was ripped off by its competitors. Indeed, from the beginning of this case, Apple has sought to turn what could otherwise have been a boring patent trial involving highly technical matters into an inquiry as to whether Samsung flagrantly copied the “look and feel” of the iPhone and iPad. In other words, Apple is likely to be successful if the trial comes down to simply a referendum on whether Samsung ripped off Apple’s intellectual property rights. Considering the similarity of the Apple and Samsung products, Samsung may have a difficult time convincing the jury that deciding the issue is not that easy and the similarity of the products can be explained away.

Apple’s claims against Samsung are far broader than simply a claim for infringement of highly technical computer software or hardware patent. Apple has also asserted claims of infringement of a number of design patents as well the trade dress of the iPad and iPhone. Apart from providing Apple with the basis for being able to tell the jury the “story” how Samsung allegedly ripped off Apple, it also involves claims that a jury can readily decide through a side-by-side comparison of the products in question without having to understand highly technical matters. That is not to say, that Samsung does not have a defense to Apple’s claims, but the design patents claims may give the jury a reason to avoid getting bogged down in complex technical details that they may or may not fully understand. As Judge Richard Posner recently wrote in an article about the shortfalls of the patent system, “judges have difficulty understanding modern technology and jurors have even greater difficulty.” It is one of the particularities of the U.S. patent system that, regardless of the complexity and technical nature of the patents, the jury ultimately determines the plaintiff has established that the defendant infringed its patents. It is commonly believed that the failure of a jury to fully understand the claims inures to the benefit of the defendant, in this case, Samsung. [Read more…]

Is the Time Finally Right? Congress Again Considers a Civil Federal Trade Secrets Law

On July 17, 2012, Senators Herb Kohl (D-WI), Chris Coons (D-DE) and Sheldon Whitehouse (D-RI) introduced the Protecting American Trade Secrets and Innovation Act of 2012. It is similar to a number of bill previously introduced by Sen. Kohl and would provide for a federal civil remedy for theft of trade secrets by amending the criminal Economic Espionage Act. According to Senator Kohl’s press release: “This legislation expands the legal options for victims of economic espionage and trade secret theft by allowing victims of trade secret theft to bring civil lawsuits against the offender in federal court. Today, companies that fall victim to economic espionage and trade secret theft often can only bring civil actions in state court, under a patchwork of state laws, to stop the harm or seek compensation for losses. While state courts may be a suitable venue in some cases, major trade secret cases will often require tools available more readily in Federal court, such as nationwide service of process for subpoenas, discovery and witness depositions. In addition for trade secret holders operating nationwide, a single federal statute can be more efficient than navigating 50 different state laws.”
Although the bill could be stronger and more clearly written, especially if it did not simply graft-warts and all-the civil remedies onto an existing federal criminal law, it is certainly a step in the right direction and, hopefully, Congress will consider this bill more seriously than it considered previous bills. There is no doubt that foreign economic espionage is increasing and that the federal government has neither the inclination, nor the resources to investigate and prosecute all cases that should be prosecuted. A federal law, especially one that provides for nationwide service of process may provide a better remedy to a victim of theft of trade secrets than the current patchwork of state laws.

Why You Should Care About Counterfeit Electronic Parts

What would you do if you found out, as you were getting on your next flight, that the airplane’s ice detector probe, which detects the buildup of ice on the aircraft’s exterior, contains a critical electronic part that was not new when installed, but instead may have been salvaged from an old plane. Many people would consider getting off and driving or taking a train instead. Sounds impossible or even farfetched – but it is more than possible, according to a recent report from the Senate Armed Services Committee that highlights the risk that counterfeit electronic components pose to military systems.
If you’re interested in learning more about this issue, click here to read my story in Forbes.

Don’t Wait for SOPA, You Can Act Now!

In an important and little noticed development, owners of brand products have successfully been able to take action against websites selling counterfeit items, even as the Stop Online Piracy Act (SOPA) is stuck in committee. A number of federal courts have recently issued remedies under existing trademark laws that are very similar to those remedies contained in SOPA. These cases may provide a good test of whether SOPA is truly needed or whether existing laws are sufficient to protect trademark owners. In any event, it is unlikely to result in the end of the Internet as some opponents of SOPA shrilly warned.

SOPA included provisions allowing courts to issue orders to bar advertising networks and payment facilities from conducting business with infringing websites and required Internet Service Providers to block access to such sites. Opponents of the bill claimed that it would end the Internet as we know it by closing popular Web sites. Wikipedia went dark for a day to protest SOPA. The bill has been dormant since a mid-December, 2011, Judiciary Committee markup.

A recent National Law Journal Article, “Counterfeit_battles_heat_up_on_Web,” reports that a number of courts have been regularly issuing orders as contemplated by SOPA. According to the article, so far this year, at least 18 orders affecting alleged infringers and domain-name registries, payment processors, search engines and ISPS have been issued by courts in the Northern District of Illinois, Southern District of Florida and Southern District of New York.

The orders issued by the courts go far beyond simply ordering domain registries to disable the domain names used to sell the counterfeits, but have required financial organizations, including PayPal, to stop the defendants from transferring or disposing of money and other assets. The orders further required a wide range of third parties to turn over records about the defendants.

For example, Adidas sued a number of individuals and partnerships, all believed to be based in China, in the Southern District of Florida. The complaint claimed the defendants were counterfeiting sports clothing and shoes, eyeglasses and sunglasses, watches, bags and a wide range of casual clothing and accessories. The court issued a TRO requiring unnamed domain-name registrars to transfer domain names to Adidas’s lawyer for the redistricting process. It also requires Western Union Financial Services, Inc. to hold money transfers to the named defendant and provide records of all past money transfers to the defendant.

Companies that have brought cases resulting in orders against third parties this year include Adidas, Gucci America, Inc., and Hermes International.