In November 2011, the US National Intellectual Property Rights Coordination Center released its assessment of threats to United States IP; and in January 2012, a scientist was sentenced to five years in prison for stealing IP from his longtime employer and then lying about the theft under oath.
These developments illustrate not only that IP violations can be crimes but also that US law enforcement agencies are ready, willing and able to send people to jail for IP crimes. This article discusses those developments and sets out three simple steps that IP and tech businesses can take to maximize the possibility that, if they are ever victims of an IP crime, the crime will be prosecuted successfully to the fullest extent of the law.
IP crime threat assessment
This past November, the National Intellectual Property Rights Coordination Center released a report entitled, Intellectual Property Rights Violations: A Report on Threats to United States Interests at Home and Abroad.1 The 99-page report details the threat from criminal IPR violations – copyright, trademark, and theft of trade secret offenses – that pose a danger to US interests, particularly those of US rights holders.
The report provides support for many people's suspicions about the current state of IP crimes.
Among its key findings:
Already immense threats to US IP are growing
The products being counterfeited and the techniques used are becoming more sophisticated
The role of criminal organizations, including organized crime and violent gangs, has substantially increased
China-based offenders are "the dominant threat and dwarf all other international threat"
Most thefts of trade secrets are committed within the US by US actors
This last finding is by far the most intriguing and is, actually, cause for optimism. It creates hope that US companies may be able to deter future thefts by convincing US law enforcement authorities to aggressively prosecute historic thefts.
According to the report, "One of the most common methods for stealing trade secrets from United States rights holders is a current or former employee of a United States company transferring files containing the company's trade secrets or other proprietary information onto a portable storage device, such as a USB drive or CD." Thus, working within your company to reduce the risk that one of your employees will walk off with company secrets on a memory stick is a good place to start.
Stealing from Dow
The breadth of US IP laws was on view earlier this year when a federal judge sentenced Wen Chyu Liu, aka David W. Liou, to 60 months in prison for stealing trade secrets from his employer, Dow Chemical Company, and selling them to companies in the People's Republic of China. That sentence included a term of two years of supervised release and an order to forfeit US$600,000 and pay a US$25,000 fine.
Liu came to the US from China for graduate studies, began working for Dow in 1965 and retired in 1992. While employed at Dow, he worked as a research scientist on the development and manufacture of Dow elastomers, with access to trade secrets and confidential proprietary information in the production of elastomeric polymer chlorinated polyethylene (CPE). Dow is a leading producer of CPE, which has numerous industrial applications, from car hoses to vinyl siding.
Trial evidence established Liu had conspired with at least four current and former Dow employees to misappropriate Dow trade secrets and sell them to Chinese companies. Evidence showed he traveled extensively throughout China to market the stolen information, and he paid current and former Dow employees for Dow's CPE-related information.
Liu's prosecution, which has received worldwide attention, illustrates how a well-placed and motivated insider can scheme to obtain key company IP and then shop those secrets to the highest bidder.
The stiff sentence Liu received not only demonstrates the seriousness of the offense but also creates an example for potential miscreants in the IP sector. The threat of punishment is one of the best deterrents around. But, just as much, taking steps to minimize the risk of employee IP theft and assisting with the prosecution of any theft will also serve to protect your company's IP.
Best practices to do now
In light of these developments, companies should consider taking these steps:
Assess the top threats to your IP, with particular attention to insiders as potential IP thieves (this is not the same thing as treating employees as criminals)
Update your policies and procedures to minimize threats; set out actions to take if threat becomes reality
Educate yourself – get to know the basic criminal IP laws that could apply to your company and get to know individuals at relevant law enforcement agencies. If a crime takes place, you will know whom to call
Regarding the last recommendation, the federal government has had in place since the late 1990s several laws to punish economic espionage. One of the most widely known is the Economic Espionage Act,2 which criminalizes the misappropriation of trade secrets carried out with knowledge or intent to benefit a foreign power; and the more general misappropriation of trade secrets that injure the trade secret's owner. As the distinction has blurred between multinationals and governments, the most common trade secret theft and economic espionage cases have fallen into one or both of these scenarios.
The US Department of Justice has put together terrific summaries of the myriad criminal IP laws, showing which office within the federal government is responsible for enforcing and/or interpreting a particular IP crime.3
Finally, educate your employees about your company's commitment to work with law enforcement to see such crimes prosecuted. Use their eyes too. It just might deter an IP crime.
1 See here.
2 18 U.S.C. § 1831 et seq.
3 See here and here.