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When James Pooley approached federal prosecutors on the East Coast with evidence for a possible criminal trade secrets case a few years ago, the Feds seemed less than enthusiastic. “The attitude of the prosecutor was pretty blase. His response to me was, ‘Have you considered the civil remedies?’ He just wasn’t interested,” said Pooley, a partner with Gray Cary Ware & Freidenrich. However, the outcome of the high-profile Avant criminal trade secrets case could warm prosecutors and corporate America to the prospect of criminal remedies in trade secret disputes. As jury selection was progressing Tuesday, Fremont, Calif.-based Avant Corp. and seven individuals pleaded no contest to trade secrets theft and agreed to pay $35 million in fines plus an undetermined amount in restitution to victim corporation Cadence Design Systems Inc., based in San Jose, Calif. Five individuals could face jail or prison terms. Almost from the start, the prosecution billed the case as an important test of criminal trade secrets statutes, while the defense painted it as a commercial dispute that belonged in a civil — not criminal — courtroom. A day after the plea agreement, legal scholars and trade secrets litigators following the case said they agree with the prosecution. They view a plea agreement that includes jail time as a victory for the Santa Clara, Calif., district attorney’s office that could make criminal trade secrets prosecutions more common. “As a result more cases will get referred, and more cases will get prosecuted,” said Pooley, who also teaches a trade secrets course at U.C. Berkeley’s Boalt Hall School of Law. “There are basically two groups of people that matter here. One group is the people who consider themselves victims of trade secrets theft. That group of companies will be encouraged. The other group is prosecutors — state and federal — who are considering whether to take on these cases,” Pooley said. Gary Weiss, partner-in-charge for Orrick Herrington & Sutcliffe’s Silicon Valley office, said the Avant prosecution is really part of a larger government movement to protect trade secrets. Weiss points to the 1996 passage of the federal Economic Espionage Act that made it a crime to misappropriate trade secrets. “Before, if the federal government wanted to prosecute a case, it had to shoehorn it into other crimes like interstate mail fraud and wire fraud,” Weiss said. Recent amendments to California criminal trade statutes which added nontechnical information to the law are another indicator that government understands the economic value of protecting trade secrets. The outcome of the Avant case provides some proof that criminal prosecutions can be successful without compromising a victim company’s trade secrets. “It shows the system could work,” Weiss said. The plea deal also vindicates the Santa Clara district attorney’s decision to stick with the four-year prosecution, despite a myriad of twists, turns and delays, attorneys said. “I think it clearly was a success for the prosecution,” said Edward Anderson, managing partner at Skjerven Morrill MacPherson. “The fact that the district attorney’s office is willing to make it a priority does send a message.” The high-profile nature of the dispute between Avant and Cadence also is something of a parable for other Silicon Valley companies and employees and could mean companies will tread more carefully, attorneys said. And the usually quicker pace of criminal as opposed to civil matters may also make companies more cooperative with criminal prosecutions. “People who have legitimate complaints tend to rather see speedier justice,” Anderson said. Several of the legal issues that often delayed the Avant case shouldn’t deter prosecutors from pursuing similar prosecutions, Pooley contends. The defense’s repeated attempts to recuse the prosecution for accepting assistance from the victim corporation and the statute of limitations issue that defense attorneys repeatedly raised won’t necessarily surface in other cases. “In every trade secrets case you have to have some assistance from the victim, or the prosecutor is not going to understand what’s at stake,” Pooley said. “It’s not some off-the-shelf item you can buy at Kmart.”

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