Call us today: 646-820-0224

Theft of Trade Secrets

Economic Espionage

Theft of trade secrets, also called economic espionage, is being used more and more by the United States and private companies, through reference to the U.S. Attorney’s office and in civil actions, to combat corporate espionage and the loss of valuable corporate information.  Trade secret crimes span the unauthorized taking of physical objects to proprietary algorithms and computer information.  The objective of the crime is to prevent U.S. companies from losing valuable innovation advances to other countries and to competitors domestically.  As enforcement increases, so does the risk to individuals who are subject to corporate policies prohibiting the storage or transfer of information to home computers, portable hard drives or other ways of accessing information outside company directives.

The white collar defense attorneys at The Henry Law Firm PLLC have represented individuals charged with theft of trade secrets in both the criminal and civil context. These cases are extremely complex, often involve huge amounts of information and are subject to difficult definitions and interpretations of what actually constitutes a trade secret. A theft of trade secret charge can carry severe jail sentences, result in deportation, loss of employment and include huge financial penalties. The penalties may be substantially increased if the trade secrets are stolen with the intent to benefit a foreign government. Theft of trade secrets is a very serious crime and may include charges related to the Computer Fraud and Abuse Act, aggravated identity theft and other federal crimes.

What is a Trade Secret

18 U.S.C. 1839 defines a trade secret as:

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 thereof 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

The definition provided by the statute is very broad and is dependent on a number of subjective determinations about whether “reasonable measures” have been taken to protect the information and whether that information has value related to its’ secrecy. As a practical matter this is an area ripe for litigation and can be the difference in conviction or acquittal. Ultimately the determinations in relation to certain trade secrets depends on the company’s valuation of the information, their policies and procedures in relation to secrecy of the information and the judgment of expert witnesses.

In attempting to further define a trade secret, comparison has been drawn to patents that require novel ideas that are a step beyond “prior art.” But, in the context of trade secrets the United States Supreme Court has said that trade secrets must be only “minimally novel.” Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 476 (1974). A trade secret must involve information or ideas that are not known or that set it apart from what is generally known.

Congress, while debating the EEA said, “[w]hile we do not strictly impose a novelty or inventiveness requirement in order for material to be considered a trade secret, looking at the novelty or uniqueness of a piece of information or knowledge should inform courts in determining whether something is a matter of general knowledge, skill or experience.” A person may not be prosecuted for using general knowledge and skills or experience that they obtain while working for a company, even if they start a competitor company, but may only be prosecuted if the government can show they stole or misappropriated a particular trade secret.

Criminal Acts

The theft of trade secrets is prohibited federally by the Economic Espionage Act (“EEA”) which is found at 18 U.S.C. 1831 through 1839. 47 U.S. states and several U.S. territories have also enacted the Uniform Trade Secrets Act consistent with Article 39 of the World Trade Organization’s Agreement on Trade Related Aspects of Intellectual Property Rights (“TRIPS”) and Article 2 of the Japanese Unfair Competition Prevention Act. The EEA contains two separate provisions that criminalize the theft or misappropriation of trade secrets. The first provision, codified at 18 U.S.C. 1831, is directed towards foreign economic espionage and requires that the theft of the trade secret be done to benefit a foreign government, instrumentality or agent. The second provision makes criminal the more common commercial theft of trade secrets, regardless of who benefits. 18 U.S.C. 1832.

For the government to bring an action under 18 U.S.C. 1831, approval should be obtained from the Assistant Attorney General for the National Security Division, through the Counterintelligence and Export Control Section. While that mandate does not apply to actions brought under 18 U.S.C. 1832 prosecutors are strongly encouraged to consult with the Computer Crime and Intellectual Property Section prior to filing criminal charges.  In other words, bringing a charge under either statute is a serious decision made at the highest levels of the Department of Justice.

18 U.S.C. 1831

A violation of 18 U.S.C. 1831 requires that the government prove the following elements:

(1) the defendant stole or, without authorization of the owner, obtained, destroyed or conveyed information; (2) the defendant knew this information was proprietary; (3) the information was in fact a trade secret; and (4) the defendant knew the offense would benefit or was intended to benefit a foreign government, foreign instrumentality, or foreign agent.

While commonly called “theft” of trade secrets, the EEA does not require the actual theft or taking away of information or a tangible object. It is enough to violate the statute if a person copies, duplicates, sketches, draws, photographs, replicates, transmits, delivers, sends, mails, communicates, or conveys the trade secret without authorization. Legislative history describes authorization as, “the permission, approval, consent or sanction of the owner” to obtain, destroy or convey the trade secret. It is important to note that while an employee or other individual may have authority to access or obtain a trade secret, they may be prohibited from conveying or duplicating the information.

In order for the government to prove a violation of the EEA, it must show that the person charged “knew or had a firm belief that the information he or she was taking was proprietary” and that they “knew that the object [they] stole was property that [they] had no lawful right to convert to [their] personal use.” A person who takes a trade secret because of ignorance, mistake or accident cannot be prosecuted.  However, many companies go to great lengths to protect their information by marking it “proprietary”, instituting security controls and having employees read policies and procedures and sign confidentiality agreements.

The ultimate question of what constitutes a trade secret is that the information, idea, object, program, formula or other item is actually a secret. It is the government’s burden to prove that a person stole or misappropriated a trade secret, and it is a question of fact for a jury to decide. The information cannot be known and may not have been disclosed in technical journals or in other ways.

What sets 18 U.S.C. 1831 apart from 1832 is the intent element requiring the actor to have known the offense would benefit “foreign government, foreign instrumentality, or foreign agent.”

“[B]enefit” is a question that must be interpreted broadly and is not limited to an economic benefit, but includes a “reputational, strategic, or tactical benefit.”

“Foreign instrumentality” means:

any agency, bureau, component, institution, association, or any legal, commercial, or business organization, firm, or entity that is substantially owned, controlled, sponsored, commanded, managed, or dominated by a foreign government. 18 U.S.C. § 1839(2).

“Foreign agent” means:

any officer, employee, proxy, servant, delegate, or representative of a foreign government. 18 U.S.C. § 1839(1).

However, a person can violate this provision through a foreign entity when this “entity” is not, per se, a government entity (i.e. private company) if it can be proven that there is foreign government sponsorship or “coordinated intelligence activity.”

The punishment under 18 U.S.C. 1831 is more harsh than under 1832.  A violation of 1831 carries a fine of not more than $5,000,000 or imprisonment not more than 15 years, or both.  If a company or organization is charged and convicted it “shall be fined not more than the greater of $10,000,000 or 3 times the value of the stolen trade secret to the organization, including expenses for research and design and other costs of reproducing the trade secret that the organization has thereby avoided.”

18 U.S.C. 1832

18 U.S.C. 1832 says that a person has violated the EEA if the government can prove the following elements:

(1) the defendant stole, or without authorization of the owner, obtained, destroyed or conveyed information; (2) the defendant knew this information was proprietary; (3) the information was in fact a trade secret; (4) the defendant intended to convert the trade secret to the economic benefit of anyone other than the owner; (5) the defendant knew or intended that the owner of the trade secret would be injured; and (6) the trade secret was related to or was included in a product that was produced or placed in interstate or foreign commerce.

The first three elements are identical to 18 U.S.C. 1831. However, the addition of elements four through six create a different set of issues when evaluating domestic and other trade secret issues. A person who intends to benefit a foreign company that is not considered a government agent or instrumentality may be properly prosecuted under this section.

In order to violate the statute a person must intend that the theft or misappropriation of the trade secret benefit someone other than the rightful owner.  That benefit must be economic and cannot be some intangible or unquantifiable benefit.  Additionally, a person to steals of misappropriates a trade secret without intend for anyone else to gain economically does not violate the statute.

In addition, the government must also prove that not only did the person intend to benefit another economically, they must have intended to “injure” the owner the trade secret.  The government does not have to prove specific malicious intent necessarily, just some practical certainty that a harm of some kind would come to the rightful owner.

The finally element requires that the government prove that the trade secret was “related to or included in a product that is produced for or placed in interstate or foreign commerce.” The easiest way to prove this elements is when a product that is being sold in states other the the state of production. This elements becomes more complicated; however, when the trade secret is an idea, is still in development, or is otherwise intangible.

Defenses

It is a defense a defense to a theft of trade secret charge if you have reverse engineered the trade secret. The Supreme Court made clear in Kewanee Oil Co., 416 U.S. at 476, that the law does not protect the owner of a trade secret from “discovery by fair and honest means, such as independent invention, accidental disclosure, or by so-called reverse engineering.” Parallel development of a product or idea is also not a theft of trade secret violation.

Forfeiture

A person convicted under the EEA is subject to mandatory forfeiture of any proceeds or property derived from violation. The court has no discretion in this circumstance and must order forfeiture. However, the court may, but does not have to order forfeiture of any property used to commit or to facilitate the commission of the crime.

Civil Enforcement

Many companies who have discovered a theft of trade secrets take two steps. First, the company will investigate and file a civil action. Second, the company will refer the violation to the U.S. Attorney’s office for possible prosecution. As part of the civil action, the company will seek an injunction that prevents further disclosure of items or information that have been stolen or misappropriated. In most instances, the civil action will be held in abeyance while the criminal action proceeds. Ultimately, the company is entitled to recover money value of the damage caused either in the civil case or through restitution in the criminal context, but not both.

Before a company decides to file an action or refer the case to the U.S. Attorney, they must consider the confidentiality of the trade secret. Congress has addressed that concern in Section 1835 which provides that the court “shall enter such orders and take such action as may be necessary and appropriate to preserve the confidentiality of trade secrets, consistent with the requirements of the Federal Rules of Criminal and Civil Procedure, the Federal Rules of Evidence, and all other applicable laws.” Additionally, courts may limit or close potions of a trial and presentation of evidence without violating a person’s 6th Amendment right to a public trial in some instances. The Second Circuit specifically held:

[B]ased on a compelling claim, a district court may partially limit the public’s access if the court determines that (1) a party is likely to suffer irreparable injury if access to the proceedings is not limited, and (2) protection of the party’s secrets can be achieved “with minimal disruption of the criminal proceedings.” Stamicarbon, N.V. v. American Cyanamid Co., 506 F.2d 532 (2d Cir. 1974).

Conduct Outside the U.S.

18 U.S.C. 1837 made clear that the EEA extends to conduct that occurs outside the United States.  This concept of extraterritoriality is generally prohibited unless specifically addressed within the statute.  Here, Congress clearly intended to extend its reach beyond U.S. borders, but two things must be considered:

(1) the offender is a citizen or permanent resident alien of the United States, or an organization organized under the laws of the United States or a State or political subdivision thereof; or (2) an act in furtherance of the offense was committed in the United States. 18 U.S.C. § 1837.

How Can We Help

Economic espionage is a serious matter. Trade secrets are highly prized and valuable items, and the government has a vested interest in keeping them safe. As a result, the government prosecutes these cases aggressively from the outset.  The white collar criminal defense attorneys at The Henry Law Firm PLLC have handled theft of trade secret cases and have successfully argued for reduced charges and significantly reduced penalties. We understand the inner workings of corporations, the steps they take to protect trade secrets and have access to a network of experts who can evaluate whether an item is a trade secret and its value. If you have been contacted about or charged with a theft of trade secrets case, call immediately at 646-820-0224. Early intervention is extremely important. Let the innovative federal criminal defense attorneys at The Henry Law Firm PLLC provide you with the defense you deserve.

What Does it Mean to Have “Constructive Possession” of a Firearm in New York?

Although we often hear about a lack of gun control in the U.S., federal agents arrest around 7,000 individuals for firearms violations every year, and many more arrests are made at the state level. While the Second Amendment and current federal regulations do allow for legal ownership of a wide variety of firearms, you can face stiff criminal penalties if arrested for possession of an illegal weapon. Furthermore, felony convicts and others who have had their gun ownership rights revoked also face arrest, which are among the most common type of federal firearms. States and localities such as New York do go further than federal law in regulating firearms, requiring permits for pistol ownership and outlawing assault rifles. But what does it mean to have possession of a firearm in New York? Under the concept of “constructive possession,” defendants in firearms crime cases face legal challenges in asserting their criminal defense in New York.

Possession and Constructive Possession Defined

First off, it should be understood that possession is not the same as ownership. If you are holding a firearm, you are possessing it, regardless of whether someone loaned it to you even for a brief moment, you are transferring it to someone else, or you simply found it.

Constructive possession takes the concept of possession a step further. It says that a person can be considered to have possessed a firearm – and thus run afoul of any relevant firearm laws – even if the firearm was not literally in their possession. Specifically, New York courts have held that: a defendant has property in his or her constructive possession when that defendant:

  • exercises a level of control over the area in which the property is found, OR
  • exercises control over the person from whom the property is seized, AND
  • this control was sufficient to give the defendant the ability to use or dispose of the property

New York legal authorities have also said that two people can both have constructive possession over contraband when: “they each exercise dominion or control over the property by a sufficient level of control over the area in which the property is found.”

Defending Against Constructive Possession Charges

Taking the above definition, this means that prosecutors can bring charges for illegal possession of a firearm when the defendant is not literally possessing the firearm on his body or in his personal belongings, but where a gun is simply found on a person over whom he has control (e.g. a spouse, a child, a subordinate, etc.) or in property he possesses, such as a shared home, vehicle, or business.

That said, it is important to remember that prosecutors must prove every element of a firearms charge beyond a reasonable doubt, and an experienced criminal defense attorney can cast doubt and present contrary arguments against the prosecutor’s allegations.

Such defenses can take any number of specific forms, but might include questioning whether a defendant did in fact have control over the person or the property on which the firearm was found or whether the defendant was even aware of the presence of the firearm. Talk to an experienced criminal defense attorney about the best defense in your particular circumstance.

Contact a New York Defense Attorney Today

The Henry Law Firm PLLC provides criminal defense to individuals and businesses throughout New York in all state and federal investigations and prosecutions. If you believe you may be under investigation for any state or federal crime, do not hesitate to contact us today to schedule a confidential consultation regarding your matter.

Are There Legal Defenses to Extortion/Blackmail?

Extortion and blackmail crimes both involve threats made against another person to do violence to that person or their property – which can include publicizing facts about that person to damage his or her reputation – for the purpose of extracting money or other property from the person. Under both state and federal law, an extortion conviction is a felony that can mean many years in prison, fines, as well as a ruined personal and professional reputation. But sometimes people are investigated and/or charged with extortion based on exaggerations or statements taken out of context. If you are under investigation for extortion, it is important to obtain experienced legal counsel to present your best defenses to the potential charges.

Lack of Evidence to Support an Extortion Charge

Extortion statutes may vary across states and at the federal level, but in general they require that the defendant have knowingly made a threat to damage the person, property, or reputation of a victim with the purpose of obtaining money or other property from the victim.

When a disagreement between parties gets out of control, an extortion or blackmail allegation may arise based on what has actually just heated negotiations and discussions which should not be taken literally or which were not based on an actual intent to threaten another person. Your defense attorney can assess all of the available evidence for relevance and strength and cast doubt on the prosecutor’s allegations in this regard, as the prosecutor is required to prove your intent beyond a reasonable doubt.

Lack of Admissible Evidence

Even where evidence may support elements of an extortion or blackmail charge, that evidence can only be used against you where it is admissible based on being legally obtained by police and other government agents.

If evidence was obtained through illegal means – including custodial interrogations that did not include Miranda warnings, detainments not supported by reasonable suspicion, questionings that did not honor your right to counsel, searches not conducted via a warrant or a warrant exception – your attorney can successfully argue that such evidence should not presented to a jury and that charges should be dismissed.

Attempted Extortion or Conspiracy to Commit Extortion

When no money or property was actually obtained in response to an alleged extortion threat, prosecutors may still try to bring charges based on an attempt to extort or even a conspiracy (agreement) to commit conspiracy. In such cases, your attorney can argue that you did not have the requisite intent for either an attempt or conspiracy and/or that no significant steps were actually taken in furtherance of committing extortion.

Other Defenses to Extortion

Other defenses that your attorney may raise to an extortion charge could include:

  • You performed illegal acts under duress
  • You were voluntarily or involuntarily intoxicated at the time, negating the mental intent
  • You otherwise lacked the mental capacity to commit extortion

Speak to an experienced defense attorney at the first sign of an extortion investigation to begin mounting your best defense to all potential charges.

Contact a New York Extortion Defense Attorney Today

The Henry Law Firm PLLC provides criminal defense to individuals and businesses throughout New York in all state and federal investigations and prosecutions. If you believe you may be under investigation for any state or federal crime, do not hesitate to contact us today to schedule a confidential consultation regarding your matter.  

Can Criminal Liability Exist Even if You Were “Ignorant” to Criminal Activity?

One of the first responses many people have when confronted by law enforcement over their allegedly illegal activity (or by internal investigators on the job) is to say “I didn’t think I was doing anything wrong.” This is highly problematic for several reasons. First, for reasons that will be explained more in-depth below, whether you thought you were committing an illegal act is often completely irrelevant to whether you might have criminal liability for that act. Second, a statement that you did commit an act that you did not think was illegal (but which in fact was) is essentially the same as admitting to authorities, “I committed an illegal act.”

Whether or not you did in fact commit an illegal act can be the basis of analysis and arguments between your defense attorney and prosecutors, but you should never attempt to do this on your own in front of investigators without speaking first to an experienced criminal defense attorney who can assess the facts and the applicable law and formulate the best strategies and defenses on your behalf.

Is Ignorance of the Law Really “No Defense?”

The phrase “ignorance of the law is no defense” is based in truth, but there are ways in which it can be misapplied to a situation. The phrase is truthful in the sense that a person’s failure to know that a certain criminal law exists does not make them innocent for violating the law. For example, if you possess a certain synthetic drug that was recently made illegal by state or federal law, you can be criminally charged for possession nonetheless.

That said, some criminal laws include knowledge or mens rea requirements, and your knowledge of what you were doing when you committed the allegedly illegal act (as opposed to your knowledge of the law itself) can come into play as a defense.

Specific intent crimes require prosecutors to prove your intent to commit a specific act. For example, larceny crimes often require an intent to deprive another person of property, and accidentally taking property you thought was yours could be a valid defense.

General intent crimes, on the other hand, do not require a specific intent to bring about a result, but rather a lower standard of knowledge of what one was doing. Examples include certain arson and rape crimes.

For strict liability crimes, such as statutory rape, a person can be criminally charged even if they thought they were committing a legal act (e.g. believed a sexual partner to be of the age of consent).

Aiding and Abetting / Accomplice Liability

Another common issue that arises with individuals being charged with crimes for which they lacked full knowledge is in the area of accomplice liability, otherwise known as aiding and abetting. With accomplice liability, a person can be charged with a crime that he did not actually take the action to commit if he provided assistance or encouragement in the commission of that criminal act, even without full knowledge of the criminal nature of the actions.

Common scenarios that criminal accomplice liability can attach include:

  • Providing assistance in engaging in a criminal transaction (e.g. money laundering)
  • Providing otherwise legal tools to aid another in committing a crime
  • Providing support, encouragement, assistance, or shelter in preparation of a crime or to help evade arrest
  • Assistance in planning a crime or in evading arrest

In such situations, prosecutors can sometimes use the concept of “willful blindness” to charge an individual who lacked full knowledge of criminal activity if it is determined that the individual had reason to suspect criminal activity was afoot but willfully avoided learning about the criminal nature of the matter.

In all cases, individuals under criminal investigation or who suspect they may soon be under investigation should contact a criminal defense lawyer to assess their potential liability and strategize their defense.

Contact a New York Defense Attorney Today

The Henry Law Firm PLLC provides criminal defense to individuals and businesses throughout New York in all state and federal investigations and prosecutions. If you believe you may be under investigation for any state or federal crime, do not hesitate to contact us today to schedule a confidential consultation regarding your matter.  

Other Practice Areas

White Collar Defense and Regulatory Enforcement

We defend public officials, executives, board members, securities brokers, traders, law enforcement personnel, and employees facing criminal charges, internal investigations and regulatory enforcement actions.

learn more

Criminal Appeals

Our attorneys have successfully appealed to The United States Supreme Court and other federal appellate courts throughout the country.

learn more

Federal Criminal Defense

We represent individuals who have been charged with or are being investigated for a full range of federal crimes nationwide.

learn more

Contact Us

address

535 Fifth Avenue

Suite 2520

New York, NY, 10017

social channels

  • twitter-icon
  • in-icon
  • in-icon

ATTORNEY ADVERTISING.

The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship. Prior results do not guarantee future outcomes.