Course No. 9200-704 (& 804)-801
ID No. 85737 & 85736
Time: W 6:30 - 9:30 p.m.
Room Across from 231D (IP Alcove)
|Copyright © 2000, 2002, 2003, 2006, 2008, 2010 Jay Dratler, Jr. For permission, see CMI.|
Questions and Notes on Economic Espionage Act of 1996, Hsu and Martin
1. The word "espionage" evokes images of James Bond, foreign spies, and international intrigue. Certainly the 1996 Act was intended to address those concerns. As the House Report notes, Congress feared that spy agencies such as the KGB, having little to do after the end of the Cold War, would turn their talents to industrial spying with international implications. But is that all that the 1996 Act addresses? Take a close look at the operative language of the two basic substantive sections of the 1996 Act, 18 U.S.C. §§ 1831 and 1832. Are the crimes defined in those sections limited to international spying? What specific words and phrases in the statute's language provide the answers? Are the answers the same for both sections? Or does one section appear to make trade-secret misappropriation a federal criminal offense without many apparent limits?
What are the primary substantive differences between the offenses described in the two sections? Which section defines offenses that are easier to prove and why? Under which section are the penalties stricter? Are the answers to these two questions consistent with logic and good policy?
2. The 1996 Act is also of interest with regard to the specific acts that it covers. As we have seen, the Uniform Trade Secrets Act focuses on unauthorized use and disclosure of a trade secret involving improper means. See UTSA § 1(2) (definition of "misappropriation"). It does not generally cover mere acquisition of a secret without use or disclosure. (Recall Fourtek and Smith International's nonuse, due to economic conditions, of the oven containing the plaintiff's trade secrets.)
Can the same be said about the 1996 Act? Is the language of 18 U.S.C. §§ 1831 and 1832 limited to wrongful acquisition and use of trade secrets? Or can it be construed to extend to unauthorized acquisition? What if a defendant causes harm to a trade secret without acquiring it, for example, by hacking into the plaintiff's computer system and deleting records of the trade secret? Does the UTSA cover that sort of activity? Does 18 U.S.C. §1831? Does 18 U.S.C. §1832?
3. As the 1996 Act itself states explicitly, its sanctions apply not only to completed offenses, but to attempts and conspiracies as well. Indeed, both of our cases, Hsu and Martin, involve so-called "inchoate" offenses. Which is easier to prove, a complete offense under the 1996 Act, or an attempt or conspiracy, and why?
4. Both of our cases arose in the Third Circuit. Does the Hsu decision suggest why?
As the Hsu court notes, the Third Circuit was for a long time the lone "holdout" among the federal circuit courts of appeals in refusing to abandon the defense of "impossibility" for attempt crimes. How might that fact have affected criminal charges brought in other circuits? Might criminal defendants in other circuits, charged with crimes under the 1996 Act, be more or less likely to plea-bargain than those charged in the Third Circuit while it recognized impossibility as a defense?
5. What is the doctrine of "impossibility" as applied to an "attempt" offense in criminal law? What are its chief variants"legal" impossibility, "factual" impossibility, and "hybrid" impossibility? If there any clear line between "legal" and "factual" impossibility? Which, if any, of these defenses is still recognized after Hsu and Martin?
6. In Hsu, all the individual defendants worked for a Taiwanese paper company, a foreign actor. Why then was the case brought under Section 1832, and not under Section 1831, which covers foreign espionage?
What specific words and phrases in Section 1831 might have presented difficulty for a prosecution in this case? How might those same words and phrases apply if the corporation was a state-controlled firm run by the Communist Party in (Mainland) China? Do the definitions in Section 1839 provide any answers?
7. The Hsu court ultimately decides that it doesn't matter what was in the documents presented at the FBI-arranged "sting" meeting in Philadelphia. As long as the defendants believed they contained trade secrets, that should be enough to convict them, at least of the inchoate offenses of attempt and conspiracy. What legal doctrine supports this conclusion? What policy rationale? Are there any countervailing considerations in law or policy?
Hsu was a preliminary decision. It merely upheld the protective order granted the government and denied the defendants discovery of the materials that allegedly contained trade secrets. Insofar as the facts are concerned, the court relied entirely on the indictment; the prosecution still had to prove its case at trial. Do you think the prosecution would have difficulty doing so? If you represented the defendants after the Third Circuit's decision in Hsu, would you prepare for trial or advise your clients to strike the best plea bargain that they could? Would it be easy for the defendants to disprove an agreement to violate the law? an overt act in furtherance of that agreement?
8. Unlike Hsu, Martin is a fully tried case. The appeal was from a jury's verdict finding Martin guilty of various crimes.
After Hsu, did Martin have any real hope of challenging the jury's verdict that he conspired with Camp to violate the 1996 Act? What was the key factual issue on which the jury had to (and did) rule in his case, and how close an issue was it? Could the jury have found Martin innocent on the same facts? If it had, could the government has gotten a reversal?
9. Martin is of interest in part because of the stolen-property and wire-fraud counts. These counts illustrate an important trend in criminal law as applied to intellectual property: the willingness of courts to "stretch" statutes originally intended to cover crimes involving tangible property in order to reach crimes involving intangible intellectual property.
As the Martin court notes, the Supreme Court refused to extend the federal stolen-property statute to cover what would now be criminal copyright infringement in the case of Dowling v. United States, 473 U.S. 207, 228-229, 105 S.Ct. 3127, 87 L. Ed. 2d 152 (1985) (reversing conviction, under federal statute criminalizing interstate transportation of stolen goods, for interstate distribution of "bootleg" phonorecords). Yet here the court extended the same statute to cover interstate transmission of materials containing misappropriated trade secrets, which, like copyrights, are intangible property.
In each case, the statutory hurdle was the same: whether anything characterizable as stollen "goods, wares, [or] merchandise" was transported. See 18 U.S.C. 2314, quoted in Martin, n.5. Can you articulate a distinction between Martin and Dowling, which involved the interstate transportation of "bootleg" (unauthorized) recordings made by the defendant? Is the distinction principled, or does it involved a minor factual difference without particular significance in policy? What were the stolen "goods, wares, [or] merchandise" in each case?
10. Martin also illustrates the potential for stretching the federal wire-fraud statutes to cover intellectual property crimes. In the case of those statutes, however, the stretching process is better founded.
The stretching started when prosecutors began using the wire-fraud statute to go after crooked public officials for bribery and corruption. Their theory was that taking bribes deprived the public of officials' "honest services" and therefore constituted a "scheme or artifice to defraud" the public (their employer) within the meaning of the statute. See 18 U.S.C. §§ 1341, 1343, quoted in relevant part in Martin, n.11. In McNulty (cited in Martin) the Supreme Court put a halt to this stretching by deciding it was too much for the statute's plain language to bear. Yet Congress validated the stretching by enacting 18 U.S.C. § 1346 (also quoted in Martin n.11), explicitly defining "scheme or artifice to defraud" as including "a scheme or artifice to deprive another of the intangible right of honest services." Whose "honest services" were at issue in Martin, and what were those services? Does the alleged conspiracy comfortably fit within the notion of deprivation of honest services as defined in the amended statute?
11. Under Hsu and Martin, a defendant can be convicted of violating the 1996 Act because he thinks he is buying someone's trade secrets even if he is not. How would/should that fact affect your practical advice to clients?
Suppose a client says that she is about to pay money for access to information that she needs to succeed in competition in her business. What questions would you ask her to determine whether she has potential exposure to criminal liability? Are there any practical steps that she might take to reduce that exposure?