Business Law Intellectual Property

Economic Espionage

Economic espionage sounds somewhat exciting and maybe even a bit sexy. Kind of a James Bond of the business world. But the consequences are hardly glamorous for anyone involved.

The FBI estimates that every year billions of U.S. dollars are lost to competitors who target economic intelligence in U.S. industries and technologies and “cull intelligence out of shelved technologies by exploiting open source information and company trade secrets.”

To combat this problem, Congress enacted the Economic Espionage Act of 1996 (EEA) (18 USC §§1831-1839). The Act makes it a crime to intentionally “convert,” i.e., misappropriate, a trade secret that is “related to or included in a product.”  Violation of the Act is punishable by a fine or imprisonment up to 15 years, or both, for an individual and up to $5 million for an organization. 18 USC §1832(b). In addition, property used in or resulting from the theft is subject to forfeiture to the government.

If the recently introduced Economic Espionage Penalty Enhancement Act of 2011 becomes law, these penalties could be significantly increased.

But with the benefits of global economic espionage so huge and the likehood of prosecution relatively small, this legislative action may not provide much comfort. Instead, businesses need to take steps to protect themselves from espionage.

The FBI suggests that businesses take the following six steps to protect themselves:

  1. Recognize there is an insider and outsider threat to your company.
  2. Identify and valuate trade secrets.
  3. Implement a proactive plan for safeguarding trade secrets.
  4. Secure physical and electronic versions of your trade secrets.
  5. Confine intellectual knowledge on a “need-to-know” basis.
  6. Provide training to employees about your company’s intellectual property plan and security.

 For more on the Economic Espionage Act and protecting trade secrets of all kinds, go to CEB’s books Trade Secrets Practice in California and Internet Law and Practice in California, chap 2.  Also check out CEB programs Protecting Trade Secrets Before and During Litigation and TRADE SECRET LITIGATION IN CALIFORNIA: Current Issues and Cutting Edge Strategies, both available On Demand.

© The Regents of the University of California, 2011. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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