The Economic Espionage Act protects trade secrets which include information that is not generally known or accessible to the public and the owner takes reasonable measures to maintain their secrecy. Economic espionage takes place when the culprit misappropriates a trade secret to benefit a foreign government, instrumentality, or agent. There have been cases where the foreign individual steals the trade secrets to directly compete with international competitors. The statute also criminalizes acts that do not benefit a foreign government, instrumentality, or agent. In other words, the bad actor may steal confidential information that benefits a domestic competitor.
18 U.S.C. Section 1831 states: If a person who knows the offense will benefit a foreign government, foreign, instrumentality, or foreign agent knowingly and intentionally steals or misappropriates a trade secret without authorization is in violation of the statute. This includes copying, duplicating, sketching, drawing, photographing, downloading, uploading, altering, destroying, or otherwise transferring the trade secret without authorization. This section also prohibits entering into a conspiracy with other persons to engage in economic espionage.
18 U.S.C. Section 1832 states: If a person who intends to convert a trade secret that is to be used in interstate or foreign commerce steals the trade secret from its owner to intentionally or knowingly injury its owner is in violation of the statute. This section prohibits any kind of taking, carrying, or concealing the trade secret. It also includes language about copying, duplicating, sketching, drawing, photographing, downloading, uploading, altering, destroying, or otherwise transferring the trade secret without authorization. This section also prohibits entering into a conspiracy with other persons to engage in economic espionage. The penalties for violating this section include a fine and prison up to 10 years.
These subsections prohibit the theft or misappropriation of any kind of “trade secret” including a formula, pattern, compilation, program, device, method, technique, or process that: (1) derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of reasonable efforts to maintain its secrecy.
The following elements must be present to qualify as a trade secret. First, the trade secret must include some kind of information. Second, the information must derive economic value. Third, the information cannot be known to the general public. Fourth, the information must be treated as a secret – i.e., the owner must take reasonable steps to prevent its disclosure. These reasonable steps may include identifying the confidential information and implementing preventive measures like a network firewall and encryption.
The Uniform Trade Secrets Act which is codified under California Civil Code §§ 3426, et seq. is the governing law. It states that a plaintiff may recover damages for the actual loss caused by misappropriation. A plaintiff can also recover for the unjust enrichment caused by misappropriation that is not considered in computing the damages. The court has the authority to order payment of reasonable royalties if damages or unjust enrichment can be proven by the plaintiff. The court may award exemplary damages if there is evidence of willful and malicious misappropriation. In addition, the court can award reasonable attorney’s fees and costs to the prevailing party. Finally, Civil Code Section 3426.6 imposes a 3-year statute of limitation which is a deadline to file a formal lawsuit.
In summary, business owners may fall victim to economic espionage when a competitor or disgruntled employee decides to steal trade secrets. It is crucial to implement preventive measures such as using the proper software and hardware to protect the confidential information. For example, a business owner should use intrusion detection software that evaluates network traffic and detects unauthorized access to sensitive information. A hardware or software firewall system can also be implemented on the network. Finally, if there is a breach or violation, it’s important to quickly investigate it and take appropriate legal action.