Illegal Competition and Stealing Trade Secrets
At what point can normal competition, including hiring employees from competitors, cross the line and expose the company and its officers to actual prosecution? The Economic Espionage Act (“EEA”) enacted in 1996 provides that stealing trade secrets is a violation of the Federal criminal statutes. The penalties are substantial; up to 10 years in prison, a fine of $250,000 for an individual (and for a company a fine up to $5,000,000) as well as forfeiture of any proceeds achieved by such theft.
To be guilty of the crime the Government must prove the following:
- The defendant stole, attempted to steal, or conspired with someone else (that would include the company he/she went to work for) to steal;
- A trade secret;
- Relating to or included in a product that is produced for or placed in interstate or foreign commerce (that includes nearly everything);
- Knowing the object of the crime was a trade secret;
- With the intent to convert a trade secret to the economic benefit of anyone other than the owner of the trade secret; and
- Intending or knowing the offense would injure any owner of the trade secret.
Trade secrets can be a formula or recipe, a program or technique, a compilation of data or a process. This can include everything from the Colonel’s secret recipe to pricing information to customer lists to marketing plans, so long as efforts were made to keep it secret.
This is a crime that businesses need to be aware of as employees who may have had access to their former employer’s confidential data are hired. These cases are normally investigated in response to complaints by former employers who believe ex-employees have pilfered data on their way out the door. So employers need to have procedures and policies in place to minimize the risk that new employees bring their former employers' secrets to your company. And if you find you or your company is under investigation for stealing trade secrets immediate steps need to be taken to understand the basis for the investigation and minimize the potential consequences.