3 Key Elements of the U.S. Government’s Fight to Protect Corporate Trade Secrets

The theft of trade secrets is a significant problem for American corporations. And a costly one, writes Sophie Yu at law firm Orrick:

“In 2009, U.S. firms lost at least $1.1 billion from the misappropriation of trade secrets to China alone. Russia is also an aggressive collector of sensitive U.S. economic information and technologies, especially in cyberspace.”

To help level the playing field, the federal government has adopted an increasingly aggressive stance on protecting the trade secrets of U.S. corporations that includes:

1. A comprehensive, multi-agency protection strategy:

Kevin Jackson (Snell & Wilmer): “Over the past few years, trade secret theft has increasingly gained international attention and led the federal government to develop a comprehensive strategy to protect against trade secret theft. What is clear from the report, Administration Strategy on Mitigating the Theft of U.S. Trade Secrets, however, is that while public policies aimed at protecting the nation’s economy through protection of trade secrets are part of the equation, an equal—and arguably more vital—component of that protection comes from the private sector. Read more>>

Joshua Rich (MBHB): “The Administration Strategy is a five-pronged approach, coordinated by the IPEC and involving many of the executive branch departments. First, the Strategy calls for the White House to focus diplomatic efforts to protect trade secrets overseas. […] Second, the Strategy calls for the U.S. IPEC to promote voluntary best practices by private industry to protect trade secrets. […] Third, the Strategy calls for the enhancement of domestic law enforcement operations […] Fourth, the Strategy calls for the Administration to improve domestic legislation. […] Finally, the Strategy calls for various departments in the Administration to increase efforts to develop public awareness and engage in stakeholder outreach.” Read more>>

2. New legislation that targets industrial cyber espionage:

Kenneth Vanko (Clingen Callow & McLean): “Last month, a group of bipartisan senators introduced the Deter Cyber Theft Act […] which would (if enacted) require the Director of National Intelligence to create a foreign watch list, identifying countries that engage in industrial or economic espionage… The centerpiece of the law is the import ban. The Act would require the President to direct U.S. Customs to exclude from entry into the United States any article that incorporates misappropriated technology or ‘to protect the Department of Defense supply chain.’ Finally, the law is broad enough to extend beyond trade secrets, and expressly includes ‘proprietary information.’” Read more>>

Robert Isackson (Orrick): “… the bill would require the Director of National Intelligence (DNI) to develop and maintain watch lists of foreign countries ‘that engage in economic or industrial espionage in cyberspace with respect to United States trade secrets or proprietary information,’ and provide a report of these lists annually to the appropriate congressional committees. By identifying the DNI as point person, Levin is making a strong statement that he regards trade secret theft via computers as a major national security threat: the DNI post was established as a response to the September 11 attacks, and the DNI’s job is to integrate the federal government’s intelligence-gathering and analysis across all agencies. The DNI is also the principal intelligence advisor to the President.” Read more>>

3. The prosecution of trade secret theft as a federal crime:

Mona Amer and Mark Mermelstein (Orrick): “You’ve just discovered that an employee who recently left your company took your company’s valuable trade secrets with him to his new employer. What are your options? The conventional approach is to file a lawsuit seeking an injunction, recovery of your trade secrets and recovery of damages, if possible. That approach may not work in every situation. For example, the employer may have trouble obtaining evidence, may perceive that civil litigation would not provide a sufficient deterrent to other potentially thieving employees, or may conclude it would not be cost-effective to sue the departed employee. There is another option, however – a criminal referral.

This is what happened in the recently decided Nosal case that resulted in the conviction of former Korn/Ferry recruiter David Nosal on six counts of violating the federal Computer Fraud and Abuse Act. The conviction, following a multi-year investigation, has Mr. Nosal looking at multiple years in prison and hundreds of thousands of dollars in fines. The case was referred to the government by Korn/Ferry after a forensic audit of Nosal by Korn/Ferry and its outside counsel.” Read more>>

The updates:

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