Tougher Penalties for Corporate Espionage: A New Model?

Foley & Lardner LLP

Foley & Lardner LLPIn this divided political age, it is rare that a legislative body can agree on anything. It is rarer still to pass something unanimously. But the Florida Legislature found something ALL 145 members could agree on: the “Combating Corporate Espionage in Florida Act.”  The law takes effect on October 1, 2021, and provides additional means to help protect trade secrets. This should generally be good news for employers but may pose some new risks as well, since employers may face more challenges based on information that comes with new employees.

Once in effect, the law does the following:

1.)  Increases the offense severity for stealing a trade secret, thus increasing the potential criminal term to five years in prison. (Theft of a trade secret is currently a third-degree felony and that provision remains intact.) 

2.)  Amends the definition of “trade secret” to include any method of storage (physical, electronic, writing, etc.) as being within the scope of a protectable secret. This change ensures protection for items stored “in the cloud.” 

3.) Creates a new penalty for anyone who traffics or attempts to traffic trade secrets it knew or should have known were obtained without authorization. Because trafficking is a second-degree felony and a level five offense on the offense severity ranking chart, the penalty could be up to 15 years in prison.

4.)  Increases penalties in any situation involving actors who intend to benefit a foreign government, foreign agent, or foreign instrumentality. A person who steals or traffics trade secrets for these purposes will find the offense reclassified “up” one degree.  For instance, a third-degree felony for theft becomes a second-degree felony. A second-degree felony for trafficking becomes a first-degree felony, etc.  And the felony offense severity ranking can also be increased.

While the specific criminal penalties can be confusing, the law clearly demonstrates the state’s desire to crack down hard on corporate espionage. This could lead to having an ex-employee charged with a felony for taking the trade secret and the new employer being charged with a felony for obtaining the material, even if the material is not used. 

As mentioned above, the penalties increase when a foreign actor or influence is involved. Practically, this means employees must be extremely careful about removal of any information and employers must weigh the risk of criminal sanctions when receiving information from a new hire. If this development increases litigation (or threats of litigation) against individuals as they change companies and against their new employers, it may also decrease employment mobility.

It is too soon to tell if the Florida law is the start of a larger trend. But, given the unanimous support of the Florida Legislature, it bears watching to see whether and when other states take similar steps, as well as how it may be used both in favor of and against employers.

[View source.]

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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