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Most lawyers are familiar with the most well-publicized forms of intellectual property crime-the bootlegger who makes and sells illegal copies of DVD movies, or the computer pirate who distributes illegal copies of software on “warez” Web sites. What many of us don’t realize, however, is that federal intellectual property crimes can occur in the corporate world as well. The recent indictments of two former Boeing Co. managers for the theft of Lockheed Martin trade secrets should serve as a reminder to corporate counsel to pay close attention to the criminal implications of the acquisition and management of intellectual property and competitive information. On June 25, the U.S. government charged two former Boeing Co. managers, Kenneth Branch and William Erskine, with conspiring to steal Lockheed Martin trade secrets relating to a U.S. Air Force rocket program. See United States v. Branch and Erskine, No. 03-M-1453 (C.D. Calif.), at www.usdoj.gov/criminal/cybercrime/branchCharge.htm. According to an affidavit filed in support of the criminal complaint, Branch, then a Lockheed Martin engineer, was recruited by Erskine, then a Boeing engineer, to provide proprietary Lockheed Martin documents to Boeing in exchange for a better-paying job at Boeing. Branch allegedly accepted the offer and provided Boeing with confidential, proprietary Lockheed Martin documents pertaining to the Air Force rocket program on which both Boeing and Lockheed Martin were bidding. Boeing discovered the alleged misappropriation and terminated both employees. As a result of these events, the Air Force penalized Boeing by transferring $1 billion of rocket launch contracts to Lockheed Martin. The Economic Espionage Act Branch and Erskine were charged with violations of the Economic Espionage Act (EEA), 18 U.S.C. 1832. The EEA criminalizes the theft or misappropriation of trade secrets, as well as any attempt or conspiracy to steal or misappropriate trade secrets. (The EEA also criminalizes economic espionage for the benefit of foreign governments and their instrumentalities. 18 U.S.C. 1831.) The act was passed in 1996, in response to a perceived need to close a gap in federal criminal law to protect intellectual and intangible property. Congress determined that the then-existing criminal laws did not cover the “theft or improper transfer of proprietary information” and were “insufficient to protect this type of information”; it enacted the EEA to deter and punish this sort of crime. H.R. Rep. No. 104-788, reprinted in 1996 U.S.C.C.A.N. 4021, 4024, 4025. Prosecutions under the EEA started slowly, but the number of charged crimes has increased significantly in recent years. As of July 15, the U.S. Department of Justice reported 24 EEA prosecutions since 2000. See www.usdoj.gov/criminal/cybercrime/eeapub.htm. Some recent examples of EEA criminal cases include United States v. Kissane, No. 1:02CR626 (S.D.N.Y.), in which the defendant pleaded guilty to stealing the source code for software produced by his former employer and attempting to sell the code to two competitors of his former employer ( www.usdoj.gov/criminal/cybercrime/kissaneSent.htm); United States v. Morris, No. 02-CR-120 (D. Del.), in which the defendant pleaded guilty to attempting to steal and transmit to a competitor proprietary bid-pricing information belonging to his employer ( www.usdoj.gov/criminal/cybercrime/morrisPlea.htm); and United States v. Keppel, No. 3:02-CR-05719 (W.D. Wash.), in which the defendant pleaded guilty to selling the answers to Microsoft’s Certified Systems Engineer exams on the Internet. See www.usdoj.gov/criminal/cybercrime/keppelPlea.htm. ‘Trade secrets’ protected The threshold question in determining whether the EEA is implicated is whether the information appropriated qualifies as a “trade secret.” The act defines “trade secret” to include “all forms and types of financial, business, scientific, technical, economic, or engineering information” if “(A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the public.” 18 U.S.C. 1839(3). The act’s definition of “trade secret” is similar to, though somewhat broader than, that of the civil Uniform Trade Secrets Act, as “the EEA protects a wider variety of technological and intangible information . . . includ[ing] programs and codes.” United States v. Hsu, 155 F.3d 189, 196 (3d Cir. 1998). EEA prosecutions have been based on the misappropriation of-or on attempts or conspiracies to misappropriate-various types of trade secrets including: proprietary corporate documents (as has been alleged in the case with Branch and Erskine); technical reports ( United States v. Yang, 281 F.3d 534 (6th Cir. 2002), cert. denied, 123 S. Ct. 1015 (2003)); documents reflecting the processes, methods and formulas for manufacturing the drug Taxol ( Hsu, 155 F.3d at 191-92); computer data detailing the specifications for aircraft replacement parts ( United States v. Lange, 312 F.3d 263, 264-65 (7th Cir. 2002)); proprietary pricing information ( United States v. Morris, supra); and proprietary customer information. ( United States v. Chang, No. 00-CR-20203 (N.D. Calif.), at www.usdoj.gov/criminal/cybercrime/chang_sent.htm). The EEA’s misappropriation prohibitions are also very broad. Congress made it clear that the act’s misappropriation provisions were intended “to ensure that the theft of intangible information is prohibited in the same way that theft of physical items are protected.” S. Rep. No. 104-359, 1996 WL 497065 (Leg. Hist.), at 15. Prohibited conduct includes theft; unauthorized appropriation; the obtaining by fraud, artifice or deceit; copying or duplicating; and transmission, conveyance, reception or possession of trade secrets. See 18 U.S.C. 1832(a)(1)(3). Like most federal criminal statutes, the EEA is a specific-intent crime. It requires that a person intends to convert a trade secret, intends or knows that the offense will injure the owner of the trade secret, knowingly receives or possesses the information that constitutes a trade secret and knows that the information was stolen or misappropriated. 18 U.S.C. 1832. To show that the defendant believed the information to be a trade secret, the government need only establish that the defendant was aware that the information at issue had the attributes of a trade secret; it is not necessary to show that the defendant knew the information satisfied the legal definition of a trade secret. According to the U.S. Department of Justice Intellectual Property Manual, “the knowledge element of this statute is satisfied if the government can prove that the defendant knew or had a firm belief that the information to be taken had the attributes of a trade secret . . . that is, the defendant believed that the information was valuable to its owner because it was not generally known to the public and that its owner had taken measures to protect it . . . .It is not necessary that the defendant himself have drawn the conclusion that the information was a trade secret.” See U.S. Department of Justice, Prosecuting Intellectual Property Crimes, Section VIII, “Theft of Commercial Trade Secrets,” � B.2.b. To establish that the defendant intended to injure the owner of the trade secret, the government must show “merely that the actor knew or was aware to a practical certainty that his conduct would cause some disadvantage to the rightful owner.” H.R. Rep. No. 104-788, 1996 WL 532685 (Leg. Hist.), at 12; see also United States v. Martin, 228 F.3d 1, 12 (1st Cir. 2000). As with other federal crimes, a person acts “knowingly” for purposes of the EEA if he knows that there is a high probability that he has taken, received or possesses a misappropriated trade secret. Further, a person may act knowingly if he has a particularized suspicion that he has received or possesses a misappropriated trade secret and fails to learn the truth about the ownership of the technology. As one court interpreting the same knowledge requirement explained, the “rule is that if a party has his suspicion aroused but then deliberately omits to make further enquiries, because he wishes to remain in ignorance, he is deemed to have knowledge.” United States v. Jewell, 532 F.2d 697, 700 (9th Cir. 1976). Although the EEA’s intent element is usually not an issue in the types of outright trade secret thefts that have been prosecuted to date, this element may operate to preclude criminal prosecution of corporations in less obvious cases of trade secret misappropriation. Thus, for example, if a corporation receives competitive information that does not appear to be secret or that was arguably voluntarily disclosed by a competitor, the misappropriation may not have been done “knowingly.” Indeed, the U.S. Department of Justice Intellectual Property Manual directs prosecutors not to bring EEA charges if there is a legitimate dispute over the ownership of the intellectual property at issue, and suggests that civil resolution of such disputes is more appropriate, especially if the party obtains and relies on the advice of counsel. See U.S. Intellectual Property Manual � VIII.B.6.e. Other federal IP crimes The EEA is not the only federal statute that addresses intellectual property crime. If, for instance, a corporate executive had been accused of absconding with the source code to Adobe Acrobat (rather than with Lockheed Martin’s proprietary bid documents, as Branch and Erskine have been charged) the Copyright Act’s criminal provisions might be implicated. Federal law makes it a felony willfully to infringe a copyrighted work by unauthorized reproduction or distribution, if the defendant infringed at least 10 copies of copyrighted works with a total retail value of more than $2,500 within a 180-day period. See 17 U.S.C. 506; 18 U.S.C. 2319. “Willful,” for purposes of the criminal copyright laws, means the voluntary, intentional violation of a known right. See, e.g., United States v. Cross, 816 F.2d 297, 300 (7th Cir. 1987); United States v. Moran, 757 F. Supp. 1046, 1049 (D. Neb. 1991). Thus, if a defendant reproduces or distributes the requisite quantity and value of copyrighted computer software, knowing that this reproduction or distribution is prohibited by a valid copyright, he is susceptible to federal criminal charges. Alternatively, if a corporate executive had obtained the Adobe Acrobat software, and the software was encrypted so as to prevent unauthorized use, the Digital Millennium Copyright Act (DMCA) could come into play. The DMCA makes it a crime to circumvent technological measures that effectively control access to protected copyrighted works, willfully, and for the purpose of commercial advantage or private financial gain. See 17 U.S.C. 1201(a)(1)(A), 1204(a). Congress described the DMCA’s anti-circumvention provision as “the electronic equivalent of breaking into a locked room in order to obtain a copy of a book.” H.R. Rep. No. 105-551(I), 1998 WL 261605 (Leg Hist.), at 17. The legislative history of the DMCA suggests that most technical efforts to defeat or bypass measures designed to limit access to copyrighted works will be implicated by this law, including copyrighted works protected “through use of a password” (see S. Rep. No. 105-190, 1998 WL 239623 (Leg. Hist.), at 11), or through “the use of a ‘key’ provided by a copyright owner to gain access to a work.” H.R. Rep. No. 105-551(II), 1998 WL 414916 (Leg. Hist.), at 39. Although the DMCA is a relatively new statute, the federal government has initiated several prosecutions in recent years. For example, in United States v. Elcom Ltd., 203 F. Supp. 2d 1111 (N.D. Calif.), Elcom and Dmitry Sklyarov were charged under the DMCA with trafficking in and marketing a software program, the primary purpose of which was to remove limitations imposed by the publisher of an “e-book” on the purchaser’s ability to copy, distribute or print the book. (Charges against Sklyarov were later dropped and Elcom was acquitted.) In United States v. Rocci, No. 02-CR-634 (E.D. Va.), the defendant pleaded guilty to conspiring to import, market and sell circumvention devices known as modification (or “mod”) chips, which were designed to circumvent copyright protections built into game consoles such as Microsoft Xbox and Sony PlayStation 2 and, once installed, allow unlimited play of pirated games on the consoles. See www.usdoj.gov/criminal/cybercrime/rocciPlea.htm. Still other federal statutes can be used by prosecutors to address intellectual property crimes. If a corporate executive had been accused of hacking Lockheed Martin’s computer system to obtain proprietary and valuable information, 18 U.S.C. 1030, which prohibits obtaining information or committing fraud through unauthorized access to a computer, could apply. The federal mail fraud and wire fraud statutes, 18 U.S.C. 1341 and 1343, can, and often are, used to prosecute intellectual property crimes. These statutes prohibit the use of the mail or telephone wires in furtherance of a “scheme to defraud,” which has been interpreted to include a scheme to defraud the owner of confidential information of the value or that information. See United States v. Wang, 898 F. Supp. 758, 760-61 (D. Colo. 1995). Companies must take care to ensure that legitimate competitive information gathering does not cross the line into criminal conduct. Theft or misappropriation of intellectual property can be a federal crime, and federal law enforcement authorities are increasingly willing to prosecute such conduct. David W. Simon is a partner in the Milwaukee office of Foley & Lardner and a member of the firm’s litigation department (compliance, counseling and government enforcement practice group).

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