Few employees realize that when they take their employers’ trade secrets with them when leaving their jobs they may be exposing themselves to criminal liability under the Economic Espionage Act, which makes it a crime to steal trade secrets when: (1) the information relates to a product in interstate or foreign commerce (which is virtually any product now days) or (2) the intended beneficiary is a foreign power.
Of course, the overwhelming majority of employees do not take trade secrets for the purpose of selling the information to a foreign government; however, they can still be guilty of trade secrets theft if they were aware that the misappropriation would injure their employer, as the owner of trade secrets, to the benefit of someone else.
When is Trade Secrets Theft a Crime?
Under the Economic Espionage Act, a criminal defendant is guilty of trade secrets theft and can be fined and imprisoned for up to 10 years if:
What is a “Trade Secret” Under the Statute?
The definition of a “trade secret” under the statute is very broad. It means all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if (A) the owner has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.
A recent indictment of six former and current Fitbit employees, who used to work for its rival Jawbone, demonstrates what conduct may result in criminal charges under the Economic Espionage Act. These six individuals were indicted on the grounds that they “knowingly received and possessed the Jawbone trade secrets, knowing them to have been stolen and appropriated, obtained, and converted without authorization, with the intent to convert the trade secrets to the economic benefit of someone other than Jawbone, and intending and knowing that the offense would injure Jawbone.”
Specifically, the indictment states that after these employees had resigned from Jawbone and signed certifications stating that they had returned all of Jawbone property, they continued to possess the following trade secrets – while working for Jawbone’s direct competitor – Fitbit:
BOTTOM LINE: Companies should educate themselves and their employees on what types of information such companies consider to be their trade secrets and educate employees on what consequences they will face if they take that information to the competitors. If a trade secrets theft is detected, companies should assess whether the theft is serious enough to pursue criminal charges against the thief.
Leiza co-chairs Trade Secrets and Non-Competes Disputes practice area at Lewis Brisbois Bisgaard & Smith LLP and represents companies in complex commercial and employment litigation. She can be contacted at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108 or by filling out the form below.