Course No. 9200-704 (and 804)-801
ID No. 16545
MW 3:00 - 4:30 p.m.
Room 231D (IP Alcove)
|Copyright © 2000, 2002, 2003, 2006, 2008 Jay Dratler, Jr. For permission, see CMI.|
United States v. Hsu155 F.3d 189, 47 U.S.P.Q.2d (BNA) 1784 (3d Cir. 1998)
Before: Stapleton, Cowen, and Rendell, Circuit Judges.
[*191] Rendell, Circuit Judge:
On July 10, 1997, a federal grand jury indicted Kai-Lo Hsu, Chester S. Ho, and Jessica Chou (collectively, "the defendants") for their involvement in an alleged conspiracy to steal corporate trade secrets from Bristol-Myers Squibb. The indictment alleges that the defendants sought to obtain the [*192] processes, methods, and formulas for manufacturing Taxol, an anti-cancer drug produced by Bristol-Myers and regarded by the company as a highly valuable trade secret.(1)
of the Bristol-Myers Trade Secrets
Shortly after the indictment was returned, the defense requested in discovery a copy of the Bristol-Myers documents disclosed to Hsu and Ho at the [sting] meeting. However, on August 12, 1997, the government filed a motion pursuant to 18 U.S.C. § 1835 and Fed. R. Crim. P. 16(d)(1) for a protective order to prevent the disclosure of the Bristol-Myers trade secrets allegedly contained in those documents.(2) The government proposed that the district court enter an order under which the trial judge would review the documents and the proposed redactions by Bristol-Myers in camera, and would then permit redactions of proprietary secret information. The documents as redacted would be used at trial. The gravamen of the government's contention was that the defendants had no need for the actual trade secrets themselves, because they had been charged only with attempt and conspiracy to steal trade secrets, rather than with the actual theft of trade secrets, under the EEA.
The defendants maintained, though, that unique constitutional and procedural requirements of criminal prosecutions dictated full access to the documents shown to them during the investigation. The defendants also contended that they needed the documents to establish the defense of legal impossibility, arguing that they could not be convicted of attempting to steal trade secrets if the documents did not actually contain trade secrets. Therefore, they proposed an order under which the proprietary information in the Bristol-Myers documents would be disclosed, but only to select members of the defense team, such as the defendants' attorneys and trial experts, and under which the documents would be filed under seal and returned or destroyed at the end of the case.
The district court agreed with the defendants and adopted their version of the proposed protective order. . . . * * * [*194] * * *
The district court's opinion "encouraged" the government to file an interlocutory appeal to clarify the "unsettled and important questions of law" raised by this case. * * *(3)
II. THE ECONOMIC ESPIONAGE ACT OF 1996
The EEA became law in October 1996 against a backdrop of increasing threats to corporate security and a rising tide of international and domestic economic espionage. The end of the Cold War sent government spies scurrying to the private sector to perform illicit work for businesses and corporations, S. Rep. No. 104-359, at 7 (1996), and by 1996, studies revealed that nearly $ 24 billion of corporate intellectual property was being stolen each year. Richard J. Heffernan & Dan T. Swartwood, Trends in Intellectual Property Loss 4, 15 (1996). The problem was augmented by the absence of any comprehensive federal remedy targeting the theft of trade secrets, compelling prosecutors to shoehorn economic espionage crimes into statutes directed at other offenses.(4)
For example, the government often sought convictions under the National Stolen Property Act ("NSPA"), 18 U.S.C. § 2314, or the mail and wire fraud statutes, 18 U.S.C. § § 1341 and 1343. However, the NSPA "was drafted at a time when computers, biotechnology, and copy machines did not even [*195] exist," S. Rep. No. 104-359, at 10,(5) and industrial espionage often occurred without the use of mail or wire.(6) Consequently, it soon became clear to legislators and commentators alike that a new federal strategy was needed to combat the increasing prevalence of espionage in corporate America. Congress recognized "the importance of developing a systematic approach to the problem of economic espionage," H. Rep. No. 104-788, at 7 (1996), reprinted in 1996 U.S.C.C.A.N. 4021, 4025, and stressed that "only by adopting a national scheme to protect U.S. proprietary economic information can we hope to maintain our industrial and economic edge and thus safeguard our national security." S. Rep. No. 104-359, at 11. The House and Senate thus passed the Economic Espionage Act, and the President signed the bill into law on October 11, 1996.
The EEA criminalizes two principal categories of corporate espionage, including "Economic espionage" as defined by 18 U.S.C. § 1831, and the "Theft of trade secrets" as defined by § 1832.(7) The former provision punishes those who knowingly misappropriate, or attempt or conspire to misappropriate, trade secrets with the intent or knowledge that their offense will benefit a foreign government, foreign instrumentality, or foreign agent. The legislative history indicates that § 1831 is designed to apply only when there is "evidence of foreign government sponsored or coordinated intelligence activity." 142 Cong. Rec. S12,212 (daily ed. Oct. 2, 1996) (Managers' Statement for H.R. 3723). By contrast, § 1832, the section under which the defendants are charged, is a general criminal trade secrets provision. It applies to anyone who knowingly engages in the theft of trade secrets, or an attempt or conspiracy to do so, "with intent to convert a trade secret, that is related to or included in a product that is produced for or placed in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will, injure any owner of that trade secret." Section 1832(a) makes clear that attempt and conspiracy are distinct offenses, and it lists them separately from those acts that constitute completed crimes under the statute.
Section 1832 also contains at least three additional limitations not found in § 1831. First, a defendant charged under § 1832 must intend to convert a trade secret "to the economic benefit of anyone other than the owner thereof," including the defendant himself. This "economic benefit" requirement differs from § 1831, which states merely that [*196] the offense "benefit," in any manner, a foreign [**18] government, instrumentality, or agent. Therefore, prosecutions under § 1832 uniquely require that the defendant intend to confer an economic benefit on the defendant or another person or entity. Second, § 1832 states that the defendant must intend or know that the offense will injure an owner of the trade secret, a restriction not found in § 1831. The legislative history indicates that this requires "that the actor knew or was aware to a practical certainty that his conduct would cause such a result." S. Rep. No. 104-359, at 15. Finally, unlike § 1831, § 1832 also requires that the trade secret be "related to or included in a product that is produced for or placed in interstate or foreign commerce."(8)
The EEA's definition of a "trade secret" is similar to that found in a number of state civil statutes and the Uniform Trade Secrets Act ("UTSA"), a model ordinance which permits civil actions for the misappropriation of trade secrets. There are, though, several critical differences which serve to broaden the EEA's scope. First, and most importantly, the EEA protects a wider variety of technological and intangible information than current civil laws. Trade secrets are no longer restricted to formulas, patterns, and compilations, but now include programs and codes, "whether tangible or intangible, and whether or how stored." Second, the EEA alters the relevant party from whom proprietary information must be kept confidential. Under the UTSA, information classified as a "trade secret" cannot be generally known by business persons or competitors of the trade secret owner. UTSA § 1(4). The EEA, however, indicates that a trade secret must not be generally known to, or readily ascertainable by, the general public, rather than simply those who can obtain economic value from the secret's disclosure or use. Finally, the EEA contains a definition crafted to reach only illicit behavior. Although legislators eliminated language providing that general knowledge, skills, and experience are not "trade secrets," 142 Cong. Rec. S12,213 (daily ed. Oct. 2, 1996) (Managers' Statement), it is clear that Congress did not intend the definition of a trade secret to be so broad as [*197] to prohibit lawful competition such as the use of general skills or parallel development of a similar product. See, e.g., id. at S12,212 (noting that "this legislation does not in any way prohibit companies, manufacturers, or inventors from using their skills, knowledge and experience to solve a problem or invent a product that they know someone else is working on").
The EEA also contains a provision designed to preserve the confidentiality of trade secrets during criminal prosecutions. 18 U.S.C. § 1835 states that a court:
This section does not, of course, abrogate existing constitutional and statutory protections for criminal defendants. It does, however, represent a clear indication from Congress that trade secrets are to be protected to the fullest extent during EEA litigation. Moreover, it further encourages enforcement actions by protecting owners who might otherwise "be reluctant to cooperate in prosecutions for fear of further exposing their trade secrets to public view, thus further devaluing or even destroying their [**23] worth." H.R. Rep. No. 104-788, at 13, 1996 U.S.C.C.A.N. at 4032. Therefore, as with the definition of trade secrets, the confidentiality provision aims to strike a balance between the protection of proprietary information and the unique considerations inherent in criminal prosecutions.
* * * [T]he defendants are not charged with the completed offense of theft of trade secrets. They have been indicted only for attempting to steal, and conspiring to steal, trade secrets pursuant to §§ 1832(a)(4) and (a)(5). Therefore, our task is to examine the defendants' entitlement to the information they seek, as defending against the attempt and conspiracy provisions of the EEA, rather than the completed theft provisions. We need not decide, as the district court did, whether a failure to disclose trade secrets would undermine the constitutional rights of defendants charged with a completed offense under the statute.
The defendants argue that unfettered access to confidential documents is required even in EEA prosecutions for attempt and conspiracy. They assert that documents containing trade secrets are "material to the preparation of the defendant's defense," and therefore, that they must be disclosed consistent with the terms of Fed. R. Crim. P. 16(a)(1)(C).(9) In particular, they contend that [*198] disclosure is warranted by (1) the availability of a legal impossibility defense, and (2) their need for access to the proprietary information as it relates to their defense of the allegations of the indictment and other defenses to the crimes charged.(10)
* * * The [district] court premised its view on the fact that the existence of a trade secret was an element of the offense, and that the defendants thus had a constitutional right to access the alleged secrets based on the due process and fair trial guarantees of the Fifth and Sixth Amendments.(11) We need not determine whether the district court was correct in its ruling, because the crimes actually charged do not include the substantive offense of theft of trade secrets. Rather, the crimes charged—attempt and conspiracy—do not require proof of the existence of an actual trade secret, but, rather, proof only of one's attempt or conspiracy with intent to steal a trade secret. 18 U.S.C. § 1832(a).(12) * * *
* * * If the defense of legal impossibility is viable—that is, if the defendants are not guilty of attempt if the material is not truly a trade secret—then it could matter, and the defendants' constitutional or statutory rights could be implicated. If the defense of legal impossibility is not cognizable, then the existence or non-existence of an actual trade secret is of little consequence for an attempt or conspiracy crime. Thus, we will first address the threshold question of whether legal impossibility is a defense to crimes of attempt and conspiracy, as this discussion frames the remainder of our analysis.(13)
The common law distinguishes between two types of impossibilities—legal and factual—and provides that the former is a defense while the latter is not. In this regard, "legal impossibility is said to occur where the intended acts, even if completed, would not amount to a crime." United States v. Berrigan, 482 F.2d 171, 188 (3d Cir. 1973).(14)
By contrast, "factual impossibility is said to occur when extraneous circumstances unknown to the actor or beyond his control prevent consummation of the intended crime." Id. For example, legal impossibility occurs when A shoots a corpse believing it to be alive and intending to commit murder; the attempt does not amount to murder even if completed. Factual impossibility occurs when A fires a gun at a bed intending to kill V, and V is not on the bed; the crime cannot be completed because of extraneous factors beyond A's control.
The difficulty, of course, is that the distinction between factual and legal impossibility is essentially a matter of semantics, for every case of legal impossibility can reasonably be characterized as a factual impossibility. For instance, the fact that A shoots a corpse, rather than a person, is also a product of circumstances beyond A's control; A did not commit murder because the person he intended to kill was already dead. Likewise, in the case at bar, the defendants argue that their crimes would have been legally impossible if the redacted portions of the June 14 documents did not contain trade secrets. Yet this could just as easily be characterized as a factual impossibility, because extraneous circumstances unknown to the defendants, i.e., that documents they believed to contain trade secrets really did not, would have prevented the consummation of their crime.
As a result, the great majority of jurisdictions have now recognized that legal and factual impossibility are "logically indistinguishable," United States v. Darnell, 545 F.2d 595, 597 (8th Cir. 1976), and have abolished impossibility as a defense. See, e.g., United States v. Quijada, 588 F.2d 1253, 1255 (9th Cir. 1978) (eschewing any effort to distinguish between the two concepts); United States v. Duran, 884 F. Supp. 577, 580 n.5 (D.D.C. 1995) (noting that "categorizing a case as involving legal versus factual impossibility is difficult, if not pointless."), aff'd , 321 U.S. App. D.C. 47, 96 F.3d 1495 (D.C. Cir. 1996).
In fact, we are the only circuit which continues to recognize a common law defense [*200] of legal impossibility. We established its validity in United States v. Berrigan, 482 F.2d at 190, where we held that legal impossibility is a defense to certain crimes of attempt. Berrigan involved a federal prisoner convicted of attempting to smuggle letters in and out of a federal prison without the knowledge and consent of the warden . . . . The evidence showed that the defendant used another prisoner on study-release as a courier for his mail, believing all along that the warden was not aware of the duo's scheme. However, the warden had learned of the defendant's first correspondence, and, working with the police, he allowed the courier to carry all subsequent letters with his knowledge and consent. Thus, the defendant argued that his crime was legally impossible; he had been charged with attempt to smuggle letters without the warden's knowledge and consent, and yet the warden both knew and consented to the crime.
On appeal, we agreed with the defendant and held that his crime was legally impossible. We recognized that "elimination of impossibility as a defense . . . is consistent with the overwhelming modern view," 482 F.2d at 186 (quotation omitted), but we concluded that legal impossibility remains a valid defense to common law crimes of attempt in this circuit. Emphasizing that "federal criminal law is purely statutory," we wrote that we had no choice but to recognize a defense of legal impossibility in the absence of a federal statute providing otherwise. Therefore, we stated, "attempting to do that which is not a crime is not attempting to commit a crime."
After reviewing the legislative history of the EEA, we conclude that Congress did not intend to allow legal impossibility to be asserted as a defense to attempt crimes created by its terms. Congress never spoke [*201] directly as to why it used the term "attempt," or as to the issue of legal impossibility, in any of the reports or debates on the statute. We find, however, that, as we held in Everett, the underlying purposes of the law provide substantial evidence of a congressional intent that the defense of legal impossibility should not apply.
One of the key findings in Everett was that the Drug Control Act was designed to offer a "comprehensive" solution to narcotics offenses. We concluded from this that Congress could not have intended to adopt the impossibility defense, "whose viability at common law was questionable at best," because doing so would only "hamper federal efforts to enforce the drug laws."
Here, the very same goals, and the very same language, appear throughout the legislative history of the EEA. Just as the Drug Control Act embraced a "comprehensive" solution for drug trafficking, so too does the EEA attempt to provide a "comprehensive" mechanism for curtailing the escalating threat of corporate espionage. The Senate Report includes an entire section entitled "Need for a Comprehensive Federal Law," and "underscores the importance of developing a systematic approach to the problem of economic espionage." S. Rep. No. 104-359, at 11. The Report notes that "a Federal criminal statute will provide a comprehensive approach to [the theft of trade secrets]—with clear extraterritoriality, criminal forfeiture, and import-export sanction provisions." Id. at 12. Likewise, the House Report states that the EEA is designed to provide a "systematic approach" to trade secret theft, and asserts that "a comprehensive federal criminal statute will better facilitate the investigation and prosecution of this crime." H.R. Rep. No. 104-788, at 7, 1996 U.S.C.C.A.N. at 4025. The House also explained that the EEA was crafted to punish virtually every form of illegal industrial espionage, "from the foreign government that uses its classic espionage apparatus to spy on a company, to the two American companies that are attempting to uncover each other's bid proposals, or to the disgruntled former employee who walks out of his former company with a computer diskette full of engineering schematics." Id. at 5, 1996 U.S.C.C.A.N. at 4024.(15)
In an effort to undermine this evidence of intent, the defendants offer the statement of Senator Herbert Kohl, a co-sponsor of the trade secrets legislation, who commented that the EEA should "only be used in flagrant and egregious cases of information theft." 142 Cong. Rec. S12,212 (daily ed. Oct. 2, 1996). The defendants contend that this demonstrates an intent to limit the statute's reach. However, the Senator's remarks are taken out of context. His entire statement reads, in pertinent part, as follows:
We also find it significant, as Everett did, that the statute we are considering was drafted at a time when "the doctrine of impossibility had become mired in fine distinctions and had lost whatever acceptance at common law it may have possessed when the statute considered in Berrigan was first enacted in 1930." The EEA was drafted in 1996, more than twenty-five years after the National Commission on Reform of the Federal Criminal Laws had concluded that the abolition of legal impossibility was already "the overwhelming modern position." In fact, to this day, "aside from the Third Circuit in Berrigan, every Circuit that has considered the defense of impossibility has rejected it." Duran, 884 F. Supp. at 580 (emphasis added). Thus, we doubt that Congress meant to permit legal impossibility to be asserted as a defense to EEA crimes.
Finally, we are mindful, as Everett was, of the potential damage that the defendants' position could work on law enforcement under the statute. If we were to hold that legal impossibility is a defense to the attempted theft of trade secrets, the government would be compelled to use actual trade secrets during undercover operations in order to obtain convictions under § 1832(a)(4).(16)
Aside from the logistical difficulties this would create, it would also have the bizarre effect of forcing the government to disclose trade secrets to the very persons suspected of trying to steal them, thus gutting enforcement efforts under the EEA. We believe Congress could not have intended such a result, inasmuch as it was striving to prevent economic espionage and to maintain the confidentiality of trade secrets. Therefore, given the strong indicia of legislative intent, and given the practical import of a contrary finding, we conclude that Congress could not have intended EEA attempt crimes to be subject to the somewhat obscure and rarely used common law defense of legal impossibility.
Accordingly, we hold that legal impossibility is not a defense to a charge of attempted misappropriation of trade secrets in violation of 18 U.S.C. § 1832(a)(4). We agree with the district court's conclusion that a charge of "attempt" under the EEA requires proof of the same elements used in other modern attempt statutes, including the Model Penal Code. A defendant is guilty of attempting to misappropriate trade secrets if, "acting with the kind of culpability otherwise required for commission of the crime, he . . . purposely does or omits to do anything that, under the circumstances as he believes them to be, is an act or omission constituting a substantial step in a course of conduct planned to culminate in his commission of the crime." Model Penal Code § 5.01(1)(c) (1985).(17) Thus, the defendant must (1) have the intent needed to commit a crime defined by the EEA, and must (2) perform an act amounting to a "substantial step" toward the commission of that crime. . . . [*203] . . . .
It naturally follows that the government need not prove that an actual trade secret was used during an EEA investigation, because a defendant's culpability for a charge of attempt depends only on "the circumstances as he believes them to be," not as they really are. The government can satisfy its burden under § 1832(a)(4) by proving beyond a reasonable doubt that the defendant sought to acquire information which he or she believed to be a trade secret, regardless of whether the information actually qualified as such. Consequently, in the instant case, the defendants have no arguable constitutional or statutory right to view the unredacted portion of the Taxol documents in order to defend against charges of attempt on the basis of legal impossibility.
We also hold that the defendants have no need for the Taxol documents to defend against the government's charges of conspiracy, because we conclude that legal impossibility is not a defense to conspiracy. Although we have stated that impossibility may be a valid defense to attempt crimes, . . .we have never recognized the defense for conspiracy charges, and we are persuaded by the views of our district courts, and by the decisions of our sister circuits, that the impossibility of achieving the goal of a conspiracy is irrelevant to the crime itself. See, e.g., United States v. Wallach, 935 F.2d 445, 470 (2d Cir. 1991); United States v. LaBudda, 882 F.2d 244, 248 (7th Cir. 1989); United States v. Petit, 841 F.2d 1546, 1550 (11th Cir. 1988); United States v. Everett, 692 F.2d 596, 599 (9th Cir. 1982) . . . .
It is well-settled that conspiracy and attempt serve different roles in the criminal law. The law of attempts was traditionally viewed as a way "to deal with conduct which created a risk of immediate harmful consequences." Wayne R. LaFave & Austin W. Scott, Jr., Substantive Criminal Law, § 6.5(b), at 91 (2d ed. 1986). Even under the modern view, attempt prosecutions generally proceed only against those who have taken a "substantial step" toward commission of a substantive crime. See Model Penal Code § 5.01(1)(c) (1985). However, the law of conspiracy is much more preventive, aiming to nip criminal conduct in the bud before it has the chance to flourish into more ominous behavior. . . . As the Supreme Court has written,
It is thus the conspiratorial agreement itself, and not the underlying substantive acts, that forms the basis for conspiracy charges. . . . The illegality of the agreement does not depend on the achievement of its ends, and it is irrelevant that the ends of the conspiracy were from the very inception of the agreement objectively unattainable. . . .
Consequently, it is equally irrelevant that the commission of a substantive offense may have been legally impossible for the conspiracy to achieve all along. We therefore join our sister circuits, and the district courts in our own circuit, in squarely [*204] holding that legal impossibility is not a defense to conspiracy.(18)
As a result, the Taxol trade secrets in the Bristol-Myers documents are not "material" to the preparation of the defendants' impossibility defense, because proof that the defendants sought to steal actual trade secrets is not an element of the crimes of attempt or conspiracy under the EEA. A defendant can be convicted of attempt or conspiracy pursuant to 18 U.S.C. § § 1832(a)(4) or (a)(5) even if his intended acts were legally impossible.
Having concluded that the defendants' right to access actual trade secrets is not required in order to defend against an element of the government's case, the question remains whether the defendants' right of access to the information as it relates to other defenses passes muster under the test of materiality. The defendants argue that the unredacted documents are also material to the preparation of the potential defenses of entrapment, outrageous government conduct, and jurisdiction, and contend that the documents are needed to defend against the elements of attempt and conspiracy, the allegations of the indictment, and the evidence that the government intends to introduce at trial.
As an initial matter, we note that we are skeptical of the materiality, let alone relevance, of the redacted trade secret information to these issues. For example, the defendants argue that they need the unredacted documents to disprove the intent and "substantial step" elements of attempt and the "overt act" requirement of conspiracy.(19) However, proof of these factors is necessarily independent of any trade secrets contained in the Bristol-Myers documents, because the defendants can be guilty of attempt and conspiracy to steal trade secrets even if the documents contained no confidential information at all. See MPC § 5.01(1)(c) (attempt), § 5.02(1)(a) (conspiracy).(20) [*205]
However, we will not address defendants' claim of need for the redactions as to any other defense or aspect of the case for two reasons. First, the defendants never raised the materiality of the redacted information as to any other defenses before the district court, and the court never addressed these other arguments in its opinion. The defendants' briefs to the district court argued only that the government must prove the existence of an actual trade secret in a prosecution for attempt and conspiracy and that legal impossibility remains a viable defense. We will not examine other contentions as to the materiality or relevance of trade secret information that are being raised for the first time on appeal. . . .(21)
Further, no one —not this Court, not the district court, not even the parties themselves—knows the content of the redacted Bristol-Myers documents at issue in this case. It was stated at oral argument that the documents have been reviewed and edited for trade secrets by Bristol-Myers employees alone, without any oversight by the court, the government, or the defense. Thus, while we might be skeptical of the defendants' asserted need for this information, we will not decide whether they have a right to access documents that could conceivably reveal information needed to preserve their rights to a fair trial. Only defense counsel know the precise contours of the defendants' case, and we are not in a position to make judgments about the impact of the redacted material without having seen the material ourselves.
Accordingly, we will remand this action to the district court. If the defendants raise before the district court the additional arguments that they have urged on appeal, we would expect the district court to conduct an in camera review to determine whether the documents have been properly redacted to exclude only confidential information and to assess whether what was redacted is "material" to the defense.
In such event, because "public policy requires protection of portions of a document, . . . in camera inspection by the trial judge or magistrate is unavoidable." Bogosian v. Gulf Oil Corp., 738 F.2d 587, 596 (3d Cir. 1984). Even if proof of an actual trade secret is not an element of §§ 1832(a)(4) and (a)(5), an independent assessment of whether materials are nonetheless discoverable is anticipated in the language of § 1835, which provides that the district court "shall enter such orders and take such other action as may be necessary and appropriate to preserve the confidentiality of trade secrets, consistent with the requirements of the Federal Rules of Criminal and Civil Procedure, the Federal Rules of Evidence, and all other applicable laws." Rule 16(a)(1)(C) of the Federal Rules of Criminal Procedure enables the defendants to obtain documents in the government's possession that are material to the preparation of their defense, or are intended for use by the government as evidence in chief at trial. These principles suggest that the district court should examine the relevant portions of the Bristol-Myers documents to assess the materiality of those portions of the documents sought to be withheld. . . . [*206] . . . We leave to the district court the ultimate resolution of these issues if raised on remand by the defendants.
The district court's Order dated October 27, 1997, will be reversed, and the cause will be remanded for further proceedings consistent with this opinion.
1. [court's footnote 1] The factual
summary that follows is based entirely on the as yet unproven allegations
in the July 1997 indictment. Because this is an interlocutory appeal,
the record is not complete, discovery has not concluded, and no determination
of the facts has yet occurred. Therefore, we offer these facts as
averred to provide a context for the issues on appeal, without vouching
for the truth of any of the facts we recite.
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2. [court's footnote 3] Section 1835
is part of the EEA and provides, inter alia, that "in any prosecution
or other proceeding under this chapter, the court shall enter such orders
and take such other action as may be necessary and appropriate to preserve
the confidentiality of trade secrets, consistent with the requirements
of the Federal Rules of Criminal and Civil Procedure, the Federal Rules
of Evidence, and all other applicable laws." Rule 16(d)(1) [of the
Federal Rules of Criminal Procedure] provides in relevant part that "upon
a sufficient showing the court may at any time order that the discovery
or inspection be denied, restricted, or deferred, or make such other order
as is appropriate."
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3. [court's footnote 4] The issues
are "novel" in part because this is a matter of first impression in the
federal courts. Only five EEA prosecutions were publicly announced
in the first eighteen months of the statute's existence, and none had
proceeded to trial as of March 1998. See Lorin L. Reisner, Criminal
Prosecution of Trade Secret Theft, N.Y.L.J., March 30, 1998, at 1. Furthermore,
EEA prosecutions are likely to remain infrequent in the near future, because
the Attorney General of the United States has pledged that the government
will not, until October 2001, pursue charges under the EEA "without the
personal approval of the Attorney General, the Deputy Attorney General,
or the Assistant Attorney General for the Criminal Division (or the acting
official in each of these positions if a position is filled by an acting
official)." 142 Cong. Rec. S12,214 (daily ed. Oct. 2, 1996) (letter
of Janet Reno).
4. [court's footnote 5] Prior to the
passage of the EEA, the only federal statute directly prohibiting economic
espionage was the Trade Secrets Act, 18 U.S.C. § 1905, which forbids the
unauthorized disclosure of confidential government information, including
trade secrets, by a government employee. See, e.g., United States v.
Wallington, 889 F.2d 573 (5th Cir. 1989) (upholding a defendant's
conviction under § 1905 for running background checks on persons whom
the defendant's friend suspected of trafficking in narcotics). However,
the Trade Secrets Act was of limited value, because it did not apply to
private sector employees and it provided only minor criminal sanctions
of a fine and not more than one year in prison.
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5. [court's footnote 6] In fact, several
cases cast serious doubt as to whether the NSPA even applies to the type
of intangible information involved in modern schemes of corporate espionage.
See, e.g., Dowling v. United States, 473 U.S. 207, 216, 87 L. Ed.
2d 152, 105 S. Ct. 3127 (1985) (stating that the NSPA "seems clearly to
contemplate a physical identity between the items unlawfully obtained
and those eventually transported, and hence some prior physical taking
of the subject goods"); United States v. Brown, 925 F.2d 1301,
1307-08 (10th Cir. 1991) (holding that the theft of purely intellectual
property is not punishable by the NSPA because it is not physical property
within the meaning of the statute).
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6. [court's footnote 7] State remedies
were also of little assistance. As of 1996, at least twenty-four
states had criminal statutes directed at the theft of trade secrets, James
H.A. Pooley, et al., Understanding the Economic Espionage Act of 1996,
5 Tex. Intell. Prop. L.J. 177, 186 (1997), and forty-four states and the
District of Columbia had adopted some form of the Uniform Trade Secrets
Act, which permits civil actions to enjoin and obtain damages for actual
and attempted misappropriation of trade secrets. Victoria A. Cundiff,
The Economic Espionage Act and You, 490 PLI/Pat 9, 27 (1997). Yet
the states often lacked sufficient resources to pursue espionage prosecutions,
. . . and corporations eschewed bringing civil lawsuits, because they
had to shoulder their own litigation costs, individual defendants were
frequently judgment proof, and it proved difficult for the state courts
to exercise jurisdiction over lawsuits involving out-of-state defendants.
. . .
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8. [court's footnote 9] Section 1832
also imposes more lenient punishments than § 1831. Under § 1832,
individuals can be sentenced to ten years in prison and/or fined $ 250,000,
and organizations can be fined up to $ 5 million. Section 1831,
however, provides that individuals can be imprisoned for fifteen years
and/or fined $ 500,000, and organizations can be fined a maximum of $
10 million. Moreover, under both sections, defendants are subject
to criminal forfeiture pursuant to 18 U.S.C. § 1834, which states that
a person or entity shall forfeit any property constituting, or derived
from, the proceeds of an EEA crime, and, if the sentencing court "in its
discretion so determines," any property used, or intended to be used,
to commit or facilitate an EEA offense.
9. [court's footnote 11] It should be noted that the information sought to be disclosed here includes those portions of the documents used at the June 14 meeting which Bristol-Myers redacted before providing them to anyone, including their counsel. The district court did not examine the redactions or assess their true materiality. We have been advised by counsel for the government that the redactions consist of technical information that constitutes trade secrets under any definition.
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10. [court's footnote 12] The defendants
also argue that disclosure is warranted because the government has not
met its burden of proving the need for a protective order precluding discovery
of the documents. However, their argument is based entirely on the
language of Federal Rule of Civil Procedure 26(c) and on the cases interpreting
its requirements in civil actions. See, e.g., Smith v. BIC Corp.,
869 F.2d 194, 199 (3d Cir. 1989). No such burden-shifting or elements
of proof exist under the facts of this case, where the government seeks
to protect trade secrets in a criminal prosecution under the provisions
of the EEA.
11. [court's footnote 13] Although
seeking to address the government's interests in the confidentiality of
trade secrets, the district court concentrated on the defendants' rights
and did not engage in any discussion of the relationship between the two.
12. [court's footnote 14] See, e.g.,
Model Penal Code § 5.01(1)(c) (declaring a defendant guilty of attempt
when, "acting with the kind of culpability otherwise required for commission
of the crime, he . . . purposely does or omits to do anything that, under
the circumstances as he believes them to be, is an act or omission constituting
a substantial step in a course of conduct planned to culminate in his
commission of the crime"); id. at § 5.02(1)(a) (stating that a
defendant is guilty of conspiracy with other persons if, "with the purpose
of promoting or facilitating [the crime's] commission he agrees with such
other person or persons that they or one or more of them will engage in
conduct which constitutes such crime or an attempt or solicitation to
commit such crime").
13. [court's footnote 15] We emphasize
that we need not reach, and are not determining, the issue addressed by
the district court of whether the disclosure of trade secrets is mandated
by the Constitution or the Federal Rules of Criminal Procedure if a defendant
is charged with the actual theft of trade secrets. This is a complex
issue. For one thing, whether information qualifies as an actual
"trade secret" is precisely defined by the EEA, and centers on such factual
questions as how the information has been guarded by its owner and whether
it is ascertainable by the public, rather than on the content of the secret
or the defendant's requests as such. This raises an issue as to
whether the information or formula itself is in fact material to the existence
of the trade secret. In addition, the other elements of the offense,
and the available defenses, may differ significantly if the defendant
is accused of a completed crime rather than a crime of attempt or conspiracy.
14. [court's footnote 16] This type
of legal impossibility is actually what some commentators have termed
"hybrid" legal impossibility, because the actor's goal is illegal, but
commission of the offense is somehow rendered impossible by attendant
circumstances. See, e.g., Joshua Dressler, Understanding Criminal
Law, § 27.07[D], at 372 (2d ed. 1995). Another type of legal
impossibility— "pure" legal impossibility—occurs when the law does not
even "proscribe the goal that the defendant sought to achieve." Ira
P. Robbins, Attempting the Impossible: The Emerging Consensus, 23 Harv.
J. on Legis. 377, 389 (1986). Pure legal impossibility is always
a defense. For example, a hunter cannot be convicted of attempting
to shoot a deer if the law does not prohibit shooting deer in the first
place. Therefore, we make clear that our discussion refers only
to "hybrid" legal impossibility as we have defined it.
15. [court's footnote 17] Individual
legislators echoed these goals as well, declaring that the EEA would serve
as a "comprehensive statute" to combat corporate espionage. 142 Cong.
Rec. H10,461 (daily ed. Sept. 17, 1996) (statement of Rep. Hyde). Even
the President himself stated upon signing the bill that "this Act establishes
a comprehensive and systematic approach to trade secret theft and economic
espionage." Statement by President William J. Clinton Upon Signing
H.R. 3723, reprinted in 1996 U.S.C.C.A.N. 4034, 4034.
16. [court's footnote 18] The government
claims that it used documents containing actual trade secrets in this
case, only "because of the difficulty in preparing on short notice documents
which appeared to be authentic for presentation to the trained scientists
brought to the meeting by Hsu."
17. [court's footnote 19] We adopt
the Model Penal Code ("MPC") test for attempt because it is consistent
with our own case law and with the great weight of modern precedent. We
have indicated that the MPC constitutes "well-settled principles of the
law of attempt," United States v. Kikumura, 918 F.2d 1084, 1108
(3d Cir. 1990), we have found that it "is logical and in conformity with
the purposes of the criminal law," United States v. Cruz-Jiminez,
977 F.2d 95, 102 n.10 (3d Cir. 1992), and we have employed its principles
on several occasions. . . . Moreover, the majority of federal courts
have now embraced the MPC test for attempts as well. See Cruz-Jiminez,
977 F.2d at 102 n.8 (citing cases); Dressler, supra [note 15],
at § 27.09[A].
18. [court's footnote 20] We are aware of only three federal appellate decisions even implying that legal impossibility is a defense to conspiracy, but none of these cases is probative of the issue before us. . . .
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19. [court's footnote 21] Conspiracy
charges under § 1832 require both an agreement and an "overt act" in furtherance
of the conspiratorial objective. See 18 U.S.C. § 1832(a)(5) (providing
that a defendant is guilty of conspiracy if he "conspires with one or
more other persons" to commit an offense proscribed by §1832, and if "one
or more of such persons do any act to effect the object of the conspiracy").
20. [court's footnote 22] Moreover,
the government has assured us that it has no intention to use or refer
to the alleged trade secrets at trial. The government intends to
prove its allegations instead by using other materials that reflect an
attempt and a conspiracy to violate the EEA. For example, the government
has stated that it may offer the e-mail list that Chou allegedly sent
to Hartmann on March 13, 1997, outlining the "core technology" that [the
Taiwanese paper company] would need to complete a deal. By this
list the government intends to prove that the defendants attempted to
steal what they believed to be "trade secrets" without ever revealing
the actual trade secrets themselves. The jury will thus never learn—and
will have no reason to learn—of the content of the redacted material.
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21. [court's footnote 23] In some
situations, we provide direction to the parties by addressing issues that
are certain to arise upon a remand of the case, even if the issues were
not discussed initially by the district court. . . . Here, however,
we are unable to offer informed guidance, because we are without the benefit
of a full review of the redacted materials. The complete breadth
of the defendants' arguments cannot be determined unless and until this
case is remanded and the district court examines the potential defenses
in light of the content of the Bristol-Myers documents.