Corporate Espionage

Factual Questions
1

To what extent is corporate espionage illegal? It is certainly a crime to steal intellectual property, but what if you send your agent to wine and dine or whatever a well-placed engineer and get him to give up company secrets? It would be illegal to bribe or blackmail him into doing so, but what about tricking him? Presumably, he has signed an NDA, but is it all on him if he can’t keep his mouth shut? Also, to what extent are firms protected from the predations of foreign firms? Presumably, there are treaties regarding corporate espionage, but I am willing to bet that enforcement varies.

Thanks,
Rob

2

Any information the engineer would divulge would we protected under IP laws/NDA agreements.

So, it would be legal I guess for you to get the information from him, but it would be illegal to implement/profit from it. Not to mention, you would get the guy fired.

3

Once you understand what constitutes intellectual property you should understand that obtaining IP that belongs to someone else without permission is a crime - no matter how you get it as long as it is without the permission of the entity that owns the IP.

Business Plans and manufacturing processes can be intellectual property. Just because the president of a company spills his guts, doesn’t give you the right to that property. He may not be authorized to give you that information.

4

So why wouldn’t the company’s recourse be civil with the president for violating his confidentiality agreement? What’s the specific criminal law violated by knowing something a corporation wanted to be a secret?

5

IP relates to copyright and patents and trademarks. Unless you publish the results, where’s the violation? Patent violations occur in using a patented process or producing a patented item; but the patent is a matter of ublic record, so why pay anyone except the USPO for it?

Espionage as portrayed in “Duplicity” is illegal on so many levels it’s just fiction. From the start (just ask Pelicano) bugs or recording private conversations without the consent of the parties involved - or at least one - is a pretty serious offence in US law. Breaking into someone else’s computer system is too. Breaking and entering - including using fraud to get into a building - is illegal.

Is bribing someone to obtain data illegal? Certainly, paying bribes is illegal for corporations and individual, but usually that refers to paying government officials; not sure if paying money to someone else’s employee is. Higher-up employees or those with specific knowledge of a company have an implied duty or obligation to their company. Taking a bribe to subvert that duty is a violation of an engineer’s or accountant’s or lawyer’s professional ethics, and probably conspiring to do so is illegal. Profiting from insider information involving selling or buying shares or options is illegal.

Whether it’s illegal to change your marketing plans for you new soap because you know what your competitor is doing? Who knows. Good question. If you have stock options in your company that make you money because of what you changed from a competitor’s inside information - good question. That’s why we have lawyers.

And if they can’t get you on that, the DA will nail you for obstruction or fraud for trying to cover up what you’ve done. Better get a good lawyer if you show up on law enforcement’s radar.

6

The crime the OP is looking for is “Misappropriation of a Trade Secret.” Trade Secrets are a form of intellectual property governed by state law, not federal law as for patents, copyrights and trademarks. Google the Uniform Trade Secrets Act for more information. Even in the few states where the UTSA has not been adopted, such as Texas, there generally exists some form of trade secret protection, see for example “Texas theft of trade secrets overview”.

The crime here is misappropriating the trade secret. And it can be an actual crime, not just a civil injury. In Texas, the relevant statute is Texas Penal Code section 31.05, which is a 3rd degree felony if violated.

What’s misappropriation? Look to the relevant state statute and case law. From the UTSA with 1985 amendments I found here, misappropriation means:

*(i) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

(ii) disclosure or use of a trade secret of another without express or implied consent by a person who

(A) used improper means to acquire knowledge of the trade secret; or

(B) at the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was

(I) derived from or through a person who had utilized improper means to acquire it;

(II) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or

(III) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or

(C) before a material change of his [or her] position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.
*
“Improper means” is a term of art including the following acts: “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.” Other acts may constitute improper means too.

Usually, independent discovery of the trade secret, whether through reverse engineering or just coming up with it on your own, is by itself, not misappropriation. However, was the discovery truly independent of information acquired from the trade secret holder? Or was the discovery assisted by information misappropriated from the holder? What little I remember from the trade secret class I took awhile ago is that these cases can be quite fact-specific.

I am certainly not an attorney, you aren’t my client, and this isn’t legal advice.
As always, it’s best to contact a local attorney, in this case one specializing in trade secret law and unfair competition law, if you think you may be involved in a situation such as this and have further questions.