July 23, 2017

The Latest on the Economic Espionage Act

On January 13, 2012. a former Dow Chemical Co. scientist, David Liu, was sentenced to five years in prison under the Economic Espionage Act (EEA) for stealing trade secrets from Dow.  A jury found Liu guilty last February.  Liu came to the U.S. from China for graduate work and began working at Dow in 1965 and retired in 1992.  While at Dow, Liu had access to trade secrets and confidential and proprietary information relating to Dow’s chlorinated polyethlene, a rubber used in automotive and industrial hoses, electrical cable jackets and vinyl siding.  Liu traveled extensively in China to market the stolen information.

The Liu case highlights the danger to corporations posed by the theft of trade secrets, especially where the thief intended to benefit a foreign competitor.  The EEA was enacted in 1996  in response to concerns that foreign companies and countries were targeting U.S. companies.  Unfortunately, these concerns have been borne out.  Currently, I am analyzing the approximate 125 prosecutions that the government has brought to date under the EEA.  While my research is not complete, I have noticed a disturbing trend.  Many of the early prosecutions under the EEA, especially during the EEA’s first five years involved a single defendant, usually a U.S. citizen, who stole a corporation’s trade secrets with the intent to open his or her company.  More recently, however, an entirely new type of thief has emerged. Out of the 15 most recent prosecutions under the EEA, approximately 12 have involved defendants who, at least according to the U.S. government, were intending to start a foreign company or stole the trade secret to benefit a foreign company or entity.  For example, on September 28, 2011, Yuchun Yang was indicted for theft of trade secrets from his former employer,  CME Group.  Yang allegedly downloaded and removed computer source code and other proprietary information from CME while at the same pursuing business plans to improve an electronic trading exchange in China.  According to the indictment, Yang and two unnamed business partners, allegedly developed business plans to form a business referred to as the Tongmei (Gateway to America) Futures Exchange Software Technology Company (Gateway), with the purpose of increasing the trading volume at the Zhangjiagang, China, chemical electronic trading exchange (the Zhangjiagang Exchange).  Yang allegedly expected that Gateway would provide the Zhangjiagang Exchange with technology to allow for high trading volume, high trading speeds, and multiple trading functions.

These and other recent cases highlight the risk posed to U.S. companies by foreign theft of trade secrets and that the resulting loss of the information has never been higher.  If you want further information about how to better protect your trade secrets, please see my book,Intellectual Property & Computer Crime or contact me directly at www.ptoren@wmclaw.com.  My analysis of the EEA will also be available shortly.

 

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