Theft of Trade Secrets & Economic Espionage Matt Parrella Computer Hacking/Intellectual Property (CHIP) Unit Chief Northern District of California (408) 535-5042 matthew.parrella@usdoj.gov

Theft of Trade Secrets & Economic Espionage Theft of Trade Secrets (18 USC 1832) : Prohibits theft, possession, alteration, etc of IP w/o owner’s authorization if: The information is a trade secret The defendant intended to convert the trade secret to the economic benefit of a non-owner The defendant intended or knew that the owner would be injured The trade secret was related to a product produced or intended for interstate or foreign commerce Economic Espionage (18 USC 1831): Includes element of intent to benefit foreign government, instrumentality, or agent

Trade Secret 18 USC 1839(3) Trade Secret defined as: ALL forms and types of: Business, scientific, technical, economic, or engineering information, including: Patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes Whether tangible or intangible, and Whether or how stored, compiled, or memorialized Physically, electronically, graphically, photographically, or in writing, if:

Trade Secret 18 USC 1839(3) The owner has taken reasonable measures to keep such information secret, and The information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means, by the public

Interests: LE v. Private Law Enforcement: National Security Collect evidence Prove elements (intent/knowledge) Conviction/Sentence Prevent Further Dissemination Recover Stolen Info

Interests: LE v. Private Private Industry: Recover Stolen IP Prevent Further Dissemination of IP Control Public Information Victim Co. Position w/in Industry

Advantages/Disadvantages of Criminal and Civil Process Advantages of pursuing criminal process Significantly enhanced investigation methods Search warrants/GJ Subpoenas Agent interviews of witnesses and suspects Border searches Arrest/incarceration of suspects Ability to interact with international law enforcement agencies

Advantages/Disadvantages (continued) A range of criminal statutes to pursue Expertise of LE Agencies, forensic analysts, and DOJ No onerous civil lawsuit requirements (written disclosure of trade secrets; delays in ability to conduct discovery; limitations of discovery mechanisms; depositions of client’s experts and employees, etc.)

Advantages/Disadvantages (continued) Disadvantages of pursuing criminal process -Loss of control over matter -Risk that LE will not pursue -No control over timing of events in the case -No direct control over the ultimate case resolution -Charging/Plea decisions need early valuation of TS’s -Client commitment to case: people go to jail -LE may publicize the case for deterrent purposes

Trade Secret Themes Prepare to be a Good Victim Trade Secret status: Secrecy and Economic Benefit from same Reasonable measures taken to keep secret Value of TS After theft: Evidence collection (logs, emails, employment agreements, NDAs, etc.) Use of TS

Economic Espionage Case (U.S. v. Fei Ye, et al.) First conviction in the nation under 18 USC 1831 – Economic Espionage: defendants stole TSs relating to integrated circuit design from Sun Microsystems and Transmeta Corp. Project, known as “Supervision,” to produce and sell microprocessors for benefit of PRC admitted that their company had applied for funding from the National High Technology Research and Development Program of China, commonly known as the “863 Program.” Some of the TSs seized from defendants at SFO Defendants PG to 1831.

Theft of Trade Secrets Case (U.S. v. Woodard) Defendant was IT Director at Lightwave Microsystems (LWM) When LWM ceased operations, defendant stole the system backup tapes, which contained all proprietary IP Defendant attempted to sell the tapes to LWM’s competitor FBI alerted, UCO begun, resulting in defendant’s arrest and seizure of tapes Defendant PG, sentenced to 24 months imprisonment, followed by 3 years supervised release.

Assistant United States Attorney Matt Parrella Assistant United States Attorney Computer Hacking/Intellectual Property (CHIP) Unit Chief United States Attorney’s Office Northern District of California (408) 535-5042 matthew.parrella@usdoj.gov