State-Sponsored Misappropriation

Trade Secrets Watch 2013 Year-in-Review

It’s been a hot year in the trade secrets field, with some huge verdicts and settlements, a renewed spotlight on cyberattacks, and an unusual flurry of trade secrets legislation.  Trade Secrets Watch’s 2013 Year-in-Review highlights the notable trade secrets activity from the past year. READ MORE

LEGISLATIVE UPDATE: Senator Proposes New Bill to Create Civil Cause of Action for Foreign Theft of Trade Secrets

Just before the Thanksgiving holiday last week, Senator Jeff Flake (R-Ariz.) introduced the Future of American Innovation and Research Act, a new trade secrets bill that would allow American trade secrets owners to sue entities who misappropriate trade secrets outside the United States, or who misappropriate trade secrets on behalf of foreign entities.  The bill tracks the Uniform Trade Secret Act’s definitions of “trade secret” and “misappropriation,” and includes standard remedies of damages and injunctive relief.  One interesting addition is that it would READ MORE

CYBERSECURITY UPDATE: New Rules Require Defense Contractors to Protect Technical Information

The U.S. Department of Defense issued final rulemaking on November 18, 2013 that will require DOD contractors to protect from attack confidential technical information on their computer systems, and to report and cooperate with DOD in the event that this information is compromised through a cyberattack.  The rules come nearly two years after draft rules were first announced and in the midst of continuing public concern about the threat of state-sponsored trade secrets theft. READ MORE

The “I Was Just Trying to Land a New Job” Defense to Criminal Trade Secret Theft Charges

On February 28, 2008, Hanjuan Jin, a Chinese-born former software engineer for Motorola, arrived at Chicago O’Hare Airport en route to Beijing.  During a random customs check, officials discovered that she had a one-way ticket to China, $31,252 in cash, thousands of confidential documents regarding Motorola’s iDEN cell phone technology, and ties to the Chinese military.  Her excuse for travelling with thousands of confidential and proprietary Motorola documents in her suitcase?  Jin said that she planned to refresh her knowledge of the work she had done over the past years with Motorola, “so that I can prepare myself for further career going [sic].” READ MORE

The Spies Who Loved Me (And My Trade Secrets): A Brief History of Industrial Espionage

With Chinese cyber attacks, data security, and industrial espionage occupying more and more space in the headlines, companies are re-evaluating their strategies for guarding sensitive information. There is certain to be more coverage of these issues in the weeks and months ahead — and as usual, we’ll bring you the news and our take on it as it breaks. But as regular Trade Secrets Watch readers know, we also sometimes like to look back at how we got to where we are today. This post examines the historical roots of industrial espionage to offer context on a hot and ever-changing area of concern for trade secrets owners.

Interestingly, the first reported case of industrial espionage involved trade secrets stolen from China, when in 1712 a Jesuit priest discovered the Chinese secret for manufacturing porcelain. He promptly sent the manufacturing details and materials samples to Europe, where they were shared with European merchants.

Another early example of industrial espionage came about in the late eighteenth century, when France found itself attempting to compete with the emerging industrial strength of Great Britain. The French government surreptitiously placed apprentices in English iron and steel yards to abscond with production formulas. To maintain its market dominance, Britain became the first country to pass legislation aimed at preventing industrial espionage.

In the United States, READ MORE

HTC Execs Arrested for Allegedly Selling Trade Secrets to China: Why U.S. Companies Should Take Note

The recent arrest and likely prosecution of three executives at Taiwanese smartphone giant HTC Corporation may foreshadow an era of tougher prosecutions under Taiwan’s newly amended Trade Secrets Act. Although the arrests allegedly target the leaking of Taiwanese trade secrets to China, the case could also signal changes for U.S. companies seeking to recruit talent from Taiwan.

On August 31, 2013, three top HTC product designers were arrested in Taiwan on suspicion of stealing trade secrets and submitting fraudulent expense claims after HTC filed a complaint with the Taiwan Investigation Bureau. The trio allegedly planned to set up a competing design company and stole trade secrets related to HTC’s upcoming “Sense 6.0 UI” design. In addition, they allegedly submitted false commission fees from an external design firm, although the design work was performed in-house.

An additional layer of intrigue and scandal came to light when reports surfaced that the arrested executives were allegedly passing on the confidential information to READ MORE

AGs to the Front Lines: State Attorneys General Begin Wielding Unfair Competition Laws against Foreign IP Thieves

Companies victimized by intellectual property theft may have a new weapon: asking state attorneys general for civil prosecution under unfair competition laws.  Three states have used this tactic already—each time directed at foreign entities.

shutterstock_135611783Massachusetts Attorney General Martha Coakley brought the first action in 2012.  The case alleged that Narong Seafood, a Thai seafood-processing company operating worldwide, was using unlicensed software programs, giving Narong an unfair advantage over local businesses.  In response to this action, Narong signed an “Assurance of Discontinuance,” paid a $10,000 penalty to the Commonwealth of Massachusetts, and agreed to comply with the Massachusetts unfair competition statute.

shutterstock_112353011California joined Massachusetts in early 2013, when Attorney General Kamala Harris sued two foreign apparel manufacturers — one Indian and one Chinese — under the state’s unfair competition statute.  The complaints allege that the companies use pirated computer software programs as part of their manufacturing process, and that this piracy allows the foreign companies to save costs and gain a substantial and unfair advantage over competitors in California who pay for the software they use.  READ MORE

It’s Not Just for Patents Anymore: Using the ITC to Combat Theft of Trade Secrets

Trade secret theft knows no borders in an age of cybertheft and global corporate espionage.  But U.S. district courts are often too slow and procedurally ill-equipped to help in cases of international misappropriation, with several recent cases never getting off the ground because of problems serving foreign defendants.  Increasingly, victims of foreign misappropriation are turning to the U.S. International Trade Commission — a body armed to hit back at trade secret thieves anywhere in the world.

For companies seeking to remedy the theft of trade secrets by overseas perpetrators, the options have been limited, especially if the thief or the products the thief produces are outside of the United States.  Procedural hurdles like obtaining jurisdiction over a foreign company, or the perpetrator’s resident country being inhospitable to claims by an American victim, can thwart an American corporation’s ability to prosecute the foreign theft of its own trade secrets.

An ITC action doesn’t present these obstacles.  READ MORE

The Real Lesson of Chinese Cyberhacking

The Real Lesson of Chinese Cyberhacking

There’s been a lot of news lately about the Chinese military allegedly launching cyber attacks to steal U.S. trade secrets.  This has gotten people riled up, including the President of the United States, who issued a 5-point plan for protecting American trade secrets.  The White House called on the public to make suggestions for new federal legislation to combat this growing threat.  (Submissions were due April 22, 2013.)

This is a time of great opportunity to do something big to protect U.S. trade secrets.  Unfortunately, some proposed solutions aren’t taking advantage of this opportunity.  Some industry groups, for example, have suggested adopting new federal trade secret legislation that would not preempt state laws and only cover cases of “international misappropriation,” or only cover misappropriation by or for the benefit of foreign governments, companies, or individuals.

Respectfully, measures of this type don’t address the real issue and aren’t seizing the moment.  The real lesson of Chinese cyberhacking is not that China has hackers targeting America, but that U.S. companies’ trade secrets are READ MORE