To Prosecute Or Not To Prosecute? Limiting Exposure Of Trade Secrets During Criminal Prosecutions

by Orrick - Trade Secrets Group

Trade Secrets Watch previously outlined the benefits and potential risks of referring a case of trade secrets theft to the government for criminal prosecution.  One of the most important downsides to consider is that the victim loses control: once a case is referred, the prosecutor decides whether and when to drop charges or pursue conviction, what strategies to pursue, and generally how to run the case.  Part of this loss of control includes the possibility that the prosecutor may not sufficiently protect the secrecy of the trade secrets at issue.  If the secrets are publicly disclosed during the course of the criminal prosecution, their value as secrets may be lost forever.

A prosecutor could conceivably care more about getting a conviction for deterrent purposes than about safeguarding a particular trade secret.  Trade secrets may be disclosed during discovery, open court proceedings, or even sealed presentations to the jury.  In a criminal case, a defendant has particularly substantial constitutional rights to review the government’s evidence before trial.  Another potential concern for victims is that by disclosing trade secret materials to jurors in order to prove the existence of a trade secret, the secret may subsequently become publicly known.  This risk may be greater where a prosecutor has control over what evidence to introduce and faces a high burden of proof.

Despite these risks, prosecutors typically are sensitive to the importance of protecting the victim’s interests, and victims retain certain key protections.  For instance, a section of the U.S. Justice Department’s Criminal Resource Manual focuses on maintaining the confidentiality of trade secrets during prosecutions, including the availability of mechanisms to limit public access to sensitive evidence (indirectly referencing protective orders and under-seal filings).

The Economic Espionage Act of 1996 also includes a provision (18 U.S.C. § 1835) requiring courts in EEA actions to “enter such orders and take such other 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.”  In one case, the Third Circuit noted that Section 1835 “does not, of course, abrogate existing constitutional and statutory protections for criminal defendants.  It does, however, represent a clear indication from Congress that trade secrets are to be protected to the fullest extent during EEA litigation. . . . [T]he confidentiality provision aims to strike a balance between the protection of proprietary information and the unique considerations inherent in criminal prosecutions.”

In a 2010 opinion in U.S. v. Roberts, a case involving purported trade secrets of a Goodyear Tire Company “roll over-ply” device used to manufacture off-the-road tires, the Eastern District of Tennessee observed “that there is an apparent dearth of authority on the general protection of trade secrets during a jury trial.”  Finding that a “certain absurdity exists in requiring Goodyear to publicly disclose the trade secrets at issue in a prosecution of the alleged theft and disclosure of those same trade secrets,” the court held that the defendants’ constitutional rights were not infringed by restricting public access to the purportedly trade secret information — “seven photographs of Goodyear’s roll over-ply down machine.”  The court therefore ordered the photographs sealed such that only the court, the parties, and the jury could see them.  The judge also required the parties to take “all reasonable and appropriate efforts to maintain the secrecy of these photographs and to prevent the public display of these photographs in any manner.”

The problem of prosecutors disclosing the secret in order to prove it qualifies for trade secret protection may in some instances be dealt with by proving the existence of the secret via high-level descriptions.  Courts can also forbid jurors from taking any copies of evidence or notes with them after the trial.  And some courts have issued orders preventing jurors from discussing cases even after trial has concluded in various other contexts when important interests were at stake, although such orders may be challenged as unconstitutional prior restraints or on other grounds, particularly where they are of indefinite duration.

At bottom, there is likely a greater risk to trade secrecy during a criminal prosecution than a civil one due to the loss of control on the part of the victim and the substantial rights of a criminal defendant.  Thankfully for trade secrets owners, the EEA and the discretion of prosecutors inclined to protect secrets can go a long way toward ameliorating that danger.  Nevertheless, victims of trade secret theft should carefully weigh their options when determining whether to pursue civil or criminal remedies.

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.

© Orrick - Trade Secrets Group | Attorney Advertising

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Orrick - Trade Secrets Group

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