Trade Secret Theft Could Bring DOJ, In-House Counsel Closer
The National Law Journal
As the White House unveiled a new comprehensive strategy to combat U.S. trade secret theft February 20, lawyers and business leaders suggested the plan could lead to more collaboration between the Department of Justice and corporations.
Attorney General Eric Holder Jr. said Wednesday at the White House that DOJ will continue to make investigations and prosecutions of intellectual property crimes a top priority. He listed the steps the department has already taken to combat the problem. "This work is more important than it ever has been before," Holder said.
The ubiquity of the Internet has made it easier to steal secrets from American companies, such as software code from a company in Virginia, without ever having to leave a desk, Holder said. The high value of the trade secrets, sometimes more than $1 billion, also means that there is incentive for disgruntled employees to take advantage of access to those trade secrets.
Like the Internet boom in the late 1990s that brought more intellectual property theft, the number of smart phones will double from 2010 to 2015 and more companies will use cloud computing to store files, meaning "more access points and vulnerabilities," Holder said.
The DOJ's continued effort will be part of a broader effort that includes diplomatic engagement in countries where there are high incidents of trade secret theft. The strategy also calls on industries to develop best practices to protect trade secrets and encourage companies to share with each other.
Several representatives of large companies offered insight during the announcement about how their in-house counsel can protect intellectual property and how the new strategy could help in the battle. Dean Garfield, the chief executive officer for the Information Technology Industry Council, said the new push could mean a better understanding of when companies could go to federal law enforcement instead of pursuing trade theft through the civil courts.
"I think part of the benefit of this is we'll have greater clarity around what it takes to advance a criminal case," Garfield said. "As a general matter, there isn't a great understanding of the thresholds, for instance, on when the U.S. government will pursue a case or not."
Lanny Breuer, the assistant attorney general for DOJ's Criminal Division who was moderating the discussion, responded that there has historically been reticence to come forward because of concerns about how the market would respond to trade secret theft. "One of our real goals is to encourage the private sector to come forward," Breuer said.
"We have to figure out how to deal with insiders who are bribed, hackers who come in and take what is not theirs," Breuer said. "Prosecuting these cases is very important, but it's only one part of the solution. We can't prosecute our way out of this problem."
After the announcement, Richard Shea, the chair of Covington & Burling's employee benefits practice, said that corporate in-house counsel must be aware when monitoring internal threats of intellectual property theft.
"Addressing the internal threat requires procedures and approaches that are simultaneously different from and complementary to a company's technical defenses from external threats," said Shea. "Knowing how far a company can go in restricting and monitoring its employees' behavior and communications requires close attention to the law, often across multiple jurisdictions."
Karan Bhatia, a former Wilmer Cutler Pickering Hale and Dorr partner who is now vice president senior counsel of global government affairs for General Electric, said there are three avenues his company follows to prevent intellectual property theft.
First, General Electric makes sure its contractual obligations with partners and suppliers protect the company's trade secrets. Then the company focuses on statutory registrations like copyrights.
And last, the company established the right sets of processes to restrict access to core intellectual properties, from both internal and external threats. That has three parts: Identify the crown jewels of the company, monitor both the physical and digital environments, and look for suspicious patterns of behavior and suspicious activities and downloads.
"We take action where warranted," Bhatia said. "And where warranted, we work closely with law enforcement."
This article originally appeared in The National Law Journal.