The Rising Threat Of Trade Secrets Theft

by Michael Volkov
Contact

trade secretsOne of the drawbacks of a global economy is the rise in trade secret theft.  In the absence of a seamless global enforcement infrastructure foreign actors have had little fear of being caught and suffering any consequences.  When competition gets tough, some bad actors – foreign governments or company employees — like to steal trade secrets in an attempt to catch up in the marketplace.

The FBI has now listed economic espionage and trade thefts as its second law enforcement priority just below terrorism.  That is quite a statement when you think about the increasing amount of white collar fraud and other economic crimes.

There is little doubt that the Justice Department is increasing its focus on criminal trade secret prosecutions. Companies need to act quickly in response to a possible misappropriation of trade secrets.  Almost all of the cases involve employees or other parties who have authorized access to the information and then steal it.

One significant case last year was the case, US v. Alenyikov, where the Second Circuit reversed Alenyikov’s conviction for stealing source code for Goldman Sach’s high frequency trading program because of a limitation in the statute.  Congress quickly responded by amending the statute to clarify that the theft of products “used in” interstate or foreign commerce fell within the statute.trade secret

The Justice Department had some significant wins in the prosecution of an individual for stealing information regarding chemical compounds developed by her former employer, Sanofi Aventis; an ex-Motorola employee’s theft of confidential documents on her way to China to start a new job; a project engineer who accessed a supplier’s trade secrets and downloaded them onto his laptop; a senior scientist who accessed his company’s chemical resource notebook and copies the formula for a product and sent it to his brother-in-law who was setting up a competing pharmaceutical company; a contract employee for the Federal Reserve Bank of New York who downloaded proprietary software code owned by the US government; an ex-software engineer who downloaded  trade secrets and source code from his company used as a trading platform; a former GM engineer who stole trade secret information about hybrid vehicles and used it with her husband when starting a new company which was engaged in the same business.

On the civil side, trade secret litigation stretched  into the purview of the Computer Fraud and Abuse Act and social media, raising interesting issues of concern for companies.  A civil cause of action under the CFAA hinges on proving “unauthorized access” (or “exceeding authorized access”) to a computer.  Applying that term in today’s information world is very difficult and courts continue to struggle with the meaning of the term.  The split in circuits centers on whether unauthorized access by itself without any improper use of the information is itself actionable or whether the unauthorized user has to breach a duty to the victim of the intrusion.

imagesCA5DG9T3In the social media realm, many states have prohibited employers from requiring their employees to provide them with passwords to their social media accounts.  Employers claim that they need access to such accounts to ensure that trade secrets are not disclosed by employees on their social media networks.  This tension has led to numerous civil actions where employee discipline actions are based on trade secret claims and employees counter with privacy and labor relations claims.

Courts are starting to impose requirements on plaintiff companies to identify with particularity the trade secret at issue early in the litigation proceeding.  Courts are reluctant to rely on bare claims or general claims of trade secret protection.  Companies have to navigate difficult pleading and disclosure rules to protect their trade secrets while at the same time claiming that they acted out of fear of losing their trade secrets.

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.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

Written by:

Michael Volkov
Contact
more
less

The Volkov Law Group on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!