Sunday, October 25, 2009

Trade Secret Prosecution Begins Under Federal Statute

By John L. Watkins

The protection of trade secrets through litigation has generally been limited to civil lawsuits, typically filed under state law statutory or common law provisions. This is true even though federal and state statutes have provided criminal penalties for trade secret misappropriation. The conventional wisdom was that prosecutors preferred pursuing more traditional crimes, perhaps lacked the resources to pursue trade secret violations, and preferred to leave enforcement to the aggrieved party's civil attorneys.

This approach and attitude may be changing. Last week, prosecutors in California began a trial against two individuals. The charges allege violation of the Economic Espionage Act, a federal statute adopted in 1996. According to press reports, the case involves the first jury trial in a case brought under the Act.

The Economic Espionage Act, 18 U.S.C. Section 1831, et seq. resembles many state trade secret statutes and provides broad criminal penalties for trade secret violations. Another federal statute that provides criminal and civil remedies, the Computer Fraud and Abuse Act, 18 U.S.C. Section 1030, et seq., may also come into play in trade secret cases. State statutes may also provide criminal remedies.

The increasing involvement of government authorities in enforcing remedies involving trade secrets certainly signals a new level of risk for those who may be considering taking or copying trade secrets. Many trade secret cases are brought against former employees who have left a company to join a competitor or to start a new business. The short answer for persons leaving a company is to be very careful and to have a very clear understanding with the employer about what can and cannot be taken.

I doubt, however, that the primary enforcement activity will shift from a company's civil litigation attorneys. Quite simply, the issue is one of control. In civil litigation, a company can decide whether to enforce its trade secret rights through litigation, the legal theories to be advanced, and can have a direct role in any resolution.

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