In a Blockbuster Economic Espionage Act Prosecution, an Attempt by the Government to Hide the Ball?

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Orrick - Trade Secrets Group

An ongoing, headline-grabbing trade secret theft prosecution against a Chinese spy is also quietly presenting a, say, disquieting attempt by prosecutors to stretch the law on what it is required to plead and prove.  On the civil side, when a plaintiff sues for trade secret theft, there’s almost always a hotly contested point of proof on whether the alleged stolen material is really a trade secret.  It’s well-established, though, that when the government charges a defendant criminally with the inchoate forms of trade secret theft—attempt or conspiracy being the two spelled out under the Economic Espionage Act—the government has no burden to prove that the underlying information was actually a trade secret.  (Loyal readers will recall our recent post on United States v. O’Rourke, where the defendant tried to argue otherwise at sentencing.)  Now, in a brief filed just last week, the government seems to be taking this one step further and arguing that it has no duty even to identify the trade secrets at issue.

The case involves Yanjun Xu, the deputy division director at China’s Ministry of State Security (“MSS”), who was arrested back in late October 2018 after a sting operation in Belgium and extradited to the United States to face charges.  (The MSS has been described as the Chinese equivalent of the CIA and the FBI combined.)  The indictment charged Xu with two counts of conspiracy to violate the EEA and attempt to steal trade secrets from leading companies in the field of aviation technology.  The indictment also included two similar counts specific to fan blade-related information belonging to “Victim Company A,” where Xu was alleged to have embedded himself as an employee.  Along with the Huawei prosecution, Xu is but one of an escalating series of high-profile investigations and prosecutions targeting Chinese nationals and companies with charges of trade secret theft, culminating in the DOJ’s announced “China Initiative” earlier this year.

Xu is currently fighting back with a motion to dismiss half of the indictment as impermissibly vague, including a challenge for failure to identify the trade secrets with particularity.  Instead of pointing to specific documents or information that Xu was allegedly targeting, as the government did for the Victim Company A charges, the trade secrets underlying Counts I and II were described in almost comically vague terms like, “system specification, design process,” “a list of technical topics,” and “design related” information from the general aviation industry.  Xu argued that this was constitutionally insufficient to put him on notice of what information he was alleged to have attempted or conspired to steal, citing United States v. Case, where an indictment was dismissed on similar grounds.

The government’s opposition counters that because Xu was charged only with attempt and conspiracy, it has no burden to prove the trade secrets and, as a result, it need not identify the trade secrets, contending, “[i]n conspiracy and attempt cases, the law does not require the government prove, much less identify, specific trade secrets that were targeted or stolen.”  But “identify” is obviously a lower bar to clear than “prove”—the government’s sentence here is logically upside-down—and the brief also doesn’t cite any law that supports this.  Most strikingly, the government doesn’t even try to explain why it’s good policy, let alone legally or constitutionally proper, that prosecutors can avoid identifying the trade secrets that form the basis of their attempt and conspiracy charges.

The government’s effort to move the goalposts ignores the due process concerns raised by Case and has troubling implications for future trade secret theft prosecutions.  How can a defendant mount a defense that he did not have the intent to steal information that he believed to be a trade secret (which is still a requirement for conspiracy or attempt) if the government doesn’t have to identify the information at issue?  While it is of obvious critical economic and national security importance to enforce and protect against trade secret theft and economic espionage, our criminal justice system should not condone a free-for-all where prosecutors can choose to hide the ball from defendants.  That being said, it remains to be seen how Southern District of Ohio will react to the government’s arguments.  Stay tuned.

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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