Companies Have a Friend in Economic Espionage Act

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Earlier this month, Walter Liew, his company, USA Performance Technology, Inc., and Robert Maegerle were found guilty of economic espionage and theft of trade secrets, among other crimes, for participating in a scheme to steal E.I. du Pont de Nemours & Company’s (DuPont’s) method for making titanium dioxide in order to sell that method to a company affiliated with the Chinese government.

Mr. Liew’s conviction, publicized by the federal government as the first federal jury conviction under the Economic Espionage Act (EEA), reflects a growing trend of federal prosecutions premised on economic espionage and theft of trade secrets, both under the EEA and the Computer Fraud and Abuse Act (CFAA). With the federal government dedicating more resources to prosecuting these cases, companies should take this opportunity to evaluate whether the EEA can assist them in protecting their intellectual property.

In United States v. Liew, the defendants were found guilty of stealing the following trade secrets: a drawing of a plant system, an internal report about a computer model for a chemical process, a plant flow sheet, and a basic data document containing the process and equipment needed to design a titanium dioxide production line. Titanium dioxide, which has global annual sales of $12 billion to $17 billion, is a chemical used to whiten paints, plastics, and paper, among other things. Mr. Maegerle was a former DuPont engineer who obtained the trade secrets and provided them to Mr. Liew, who then sold the trade secrets to Pangang Group, a Chinese state-owned company, for $28 million.

Following the verdict in Liew, Acting Assistant Attorney General John Carlin said: “This case shows that we will not hesitate to pursue and prosecute those who steal from American businesses.” Indeed, in recent years, the U.S. Department of Justice has charged approximately 20 people with stealing U.S. technology for China. Last year, the Obama administration released the “Administration Strategy on Mitigating the Theft of U.S. Trade Secrets,” which is the government’s comprehensive plan for combating foreign competitors’ and foreign governments’ theft of trade secrets.

Companies looking to protect their trade secrets or obtain remedies for theft of trade secrets should consider whether federal prosecutors can help them. With the assistance of prosecutorial resources, companies not only may be able to stop the bleeding more quickly, but they may be able to recover their “secret sauce” before it is too late. Further, referring a trade secret case to the authorities does not prohibit a company from seeking civil relief on a parallel track. Coordination of investigations and court proceedings poses challenges that should be considered at the outset, however.

Topics:  China, Economic Espionage Act, Trade Secrets

Published In: Criminal Law Updates, Intellectual Property Updates, International Trade Updates, Science, Computers & Technology Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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