The Economic Espionage Act Of 1996 (EEA) is an act that makes theft or misappropriation of trade secrets, primarily through acts of industrial espionage, a federal crime.
What Is Industrial Espionage?
Industrial espionage happens when a person or party gains access to a company’s information that is illegal, unethical, or constitutes unlawful business practices. The term “espionage” is a synonym for “spying.” Therefore, industrial espionage includes illegal observation of business activity, unlawful listening (such as a wiretap), and illegal access to company information, which all constitute spying on the company.
Industrial espionage is often called economic espionage or corporate espionage to distinguish it from more traditional forms of national security espionage. Crimes such as identity theft, piracy, and computer fraud often involve some form of industrial espionage, wherein one country spies on another country. The federal and state governments govern corporations through various laws, such as the Economic Espionage Act of 1996.
What Are Some Examples of Industrial Espionage?
Industrial espionage can transpire through a person acting on their behalf. An example of this is when a dissatisfied worker breaks into the company records of their employer to cause harm to the business. The espionage can also appear on behalf of a competitor company. An example of acting on another company’s behalf is when a company hires an employee (or an outside party) to investigate their competitor’s business illegally.
Some typical examples of industrial espionage include:
- Breaking into company files or trespassing onto property without proper authorization
- Posing as a worker to learn company trade secrets or other confidential information
- Placing a wiretap on a competitor’s phone
- Hacking into computers
- Sending viruses or malware to a competitor’s website
In particular, technology-based companies are prone to industrial espionage matters, especially novel ideas or technology products. For example, biotechnology companies, software firms, and automobile companies tend to be the target of corporate espionage. Transferring stolen company property or stolen trade secrets can also be regarded as espionage.
How Are Industrial Espionage Incidents Remedied?
Industrial espionage violations can result in a combination of different legal consequences. For one, a court may issue civil remedies, including damages awards for lost profits or an injunction to return stolen property or information. If the culprit has been using stolen trade secrets or copyrighted materials, the court may also issue a cease and desist order for profit.
In addition to civil consequences, many industrial espionage cases also involve a criminal aspect. This is particularly true if criminal activity such as breaking or trespassing is at play. Espionage can also involve several white-collar crimes, such as changing company records or conducting insider trading. Individuals charged with corporate espionage may also face criminal consequences, such as jail/prison sentences or fines.
Liability may also depend on whether the person was acting out of their initiative or under company authorities’ direct instructions.
What Are White Collar Crimes?
White-collar crimes are a variety of nonviolent crimes usually committed in commercial or business situations for financial gain. Most of these crimes are prosecuted by the federal government and are very serious. The term “white collar” refers to individuals who commit these crimes are usually high-powered professionals instead of “Blue-Collar” laborers.
How Do Businesses Protect Their Trade Secrets?
Companies can legally protect their trade secrets by adding specific terms to employment contracts. Non-Disclosure Agreements (NDA) are the most specific protection. An NDA requires workers to keep company information secret. Companies can also use Non-Compete Covenants to prevent ex-employees from revealing trade secrets to competitors.
Companies can also design policies and procedures for workers using the trade secret and communications regarding the trade secret. Companies can address these policies in training or orientations as soon as the worker is hired. The company should convey its intention to preserve the confidentiality of the trade secret.
What Activities Are Punishable under the Economic Espionage Act of 1996?
The Economic Espionage Act of 1996 penalizes deliberate trade secret misappropriation. A person is guilty under the EEA if they:
- Steals, or without authorization, takes, carries away, or by fraud obtains a trade secret
- Without authorization, copies, downloads, uploads, changes, destroys, transmits, or conveys a trade secret,
- Receives, purchases, or possesses a trade secret, knowing that the trade secret has been stolen or acquired wrongfully
- Attempts to do any of the activities mentioned above. Attempts to commit economic espionage are punishable under the same penalties
The EEA is quite severe with individuals or corporations who embezzle trade secrets to benefit foreign countries or foreign agents.
What Remedies Are Available under the Economic Espionage Act of 1996?
The Economic Espionage Act gives the U.S. Attorney General the right to prosecute any individual or organization that steals trade secrets. The penalties under the EEA are severe:
- A person who is found guilty under the Economic Espionage Act can be fined up to $500,000 and face up to 10 years in jail
- A corporation that is found guilty can be fined up to $5,000,000
- If the trade secret theft benefits a foreign country or foreign agent, the fines for a corporation can increase up to $10,000,000, and jail time for both an individual and a corporation can increase to up to 15 years
- The individual or corporation has to give up all profits and property acquired through the theft of the trade secret
What Defenses Are Available?
The Economic Espionage Act does lend itself to several defenses. Some of the most standard ways you could defend yourself are:
- You did not know that the information was supposed to be kept secret
- You did not steal the trade secret to benefit economically: If you use trade secret information to enhance your reputation, you may not disobey the EEA
- The information you took was not a trade secret: To be a trade secret under the EEA, the data must have economic value to its owner, it must be not commonly known to others, and it must be under reasonable security
Should I Consult a Trade Secret Lawyer?
If you have questions about the Economic Espionage Act of 1996, you may want to consult an intellectual property lawyer experienced in trade secrets. An experienced trade secret lawyer will be able to explain your rights under the EEA to you and will defend you accordingly.
Intellectual property (IP) is an area of law that encompasses basic ownership rights over inventions, creative works, unique names, ideas, industrial processes, business models, and computer program code. The intention behind intellectual property protection is to protect the works of creatives and inventors while allowing the public access to those works without the threat of theft.
Intellectual property lawyers help their clients by establishing and protecting intellectual capital. In practice, an IP attorney assists clients with copyrights, patents, trademarks, licensing, franchising, trade secrets, technology transfers, and distribution issues. Drafting licensing agreements, performing due diligence, and negotiating IP settlements are common practices for intellectual property attorneys.
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