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On January 18, 2018, a former software developer for IBM Corp. was sentenced to five years in prison after he had pleaded guilty of theft of a trade secret and economic espionage.  As part of his work for IBM, Xu Jiaquiang had access to proprietary source code which facilitates faster computer performance by coordinating work…

In a press release last week, the U.S. Justice Department announced charges against a group of international conspirators for allegedly stealing trade secrets from an unidentified Houston company. Those charged include four U.S. citizens, two Chinese nationals, and a Canadian national. The beneficiary of the alleged theft appears to be a China-based company with funding from the Chinese government.

The trade secrets at issue concern a product known as “syntactic foam” – a material used in underwater military equipment (e.g. submarines) and other under water vehicles.  Sources report that the syntactic foam is rare, with only a handful of companies worldwide manufacturing the material.  Those same sources report high barriers to market entry: new market entrants need significant resources to develop the intellectual capital and technology to produce the foam. Here, the plot’s conspirators figured it easier to just steal the trade secrets.
Continue Reading U.S. Justice Department Announces Charges Against International Conspirators For Stealing Trade Secrets to Benefit China-based Company

Fig cookiesThe Criminal Court of Mechelen (Belgium) ruled in favor of Bofin Biscuits against a former production assistant accused of having stolen the assistant director of the cookie baker’s laptop. The laptop allegedly contained the secret recipes of all the cookies produced by Bofin Biscuits. This case is interesting because of the nature of the secrets and also when compared to that of the “fig spread”-case discussed here two weeks ago. It also confirms that trade secret misappropriation cases do not necessary only involve complex matters on state of the art technology owned by large multinationals.

The facts of the case are rather straight-forward. On November 12, 2013 the assistant-director of Bofin Biscuits noticed that his laptop had gone missing during his absence from November 6 to November 11. Images from the surveillance video system of Bofin Biscuits showed that the actual taking of the laptop had not been filmed. The camera hanging outside the assistant-director’s office did show a production assistant walking down the hallway where the office was located, entering it and leaving with something clearly hidden under his coat. During the trial the production-assistant did not contradict that he was the person that had been filmed, but he denied that he had taken the laptop. When asked what he then was hiding under his coat, he claimed not to recall anything.

For the public prosecutor this was a clear cut case and he requested the court to sentence the former production assistant to a six month effective prison sentence and a 4.800 EUR fine. Bofin Biscuits, who had joined the proceedings by suing its now ex-employee for civil injury, requested 1.500 EUR for the still missing laptop, 2.500 EUR for the time spent on recovering the information stored on the laptop, 500 EUR moral damages and a provisional damages amount of 25.000 EUR for having stolen the secret cookie recipes.Continue Reading Employee Who Stole the Cookie Recipe From the Cookie Jar Fined €1 (Yes, that’s one single Euro)

On July 5, 2016, the Ninth Circuit affirmed the conviction of David Nosal, an ex-employee of Korn/Ferry, an executive search firm, who left to start a competing firm. With Nosal’s knowledge and encouragement, two other former employees of Korn/Ferry used a current employee’s credentials to gain access to the Korn/Ferry database and take confidential information. U.S. v. Nosal, No. 14-10037, 2016 WL 3608752 at 6 (9th Cir. July 5, 2016).

The prosecutors charged Nosal with violating section 1030 (a)(4) of the Computer Fraud and Abuse Act (“CFAA”), which criminalizes “knowingly and with intent to defraud, access[ing] a protected computer without authorization, or exceed[ing]authorized access, and by means of such conduct further[ing] the intended fraud and obtain[ing] anything of value.”1 Having failed to state an offense that Nosal “exceeded authorized access” by violating the company’s internal use restrictions (decided in Nosal I), the government filed a superseding indictment alleging Nosal violated the “without authorization” prong of the CFAA after his login credentials were revoked through his co-conspirators’ use of his former executive assistant’s login information to access Korn/Ferry’s database.

The jury convicted Nosal on all counts. On appeal, the Ninth Circuit analyzed the meaning of the words “without authorization.” The Court held that the phrase was unambiguous and its plain meaning encompassed the situation in this case where the employer rescinded permission to access a computer and the defendant accessed the computer anyway.Continue Reading United States v. Nosal: Keep Your Friends Close, but Your Passwords Even Closer

Companies sometimes discover warning signs or clear activity of trade secret theft but do not know how to deal with the issue right away.  Whether it is a current employee who remotely accesses company trade secret information while on vacation, or a departing employee who conveniently failed to return a company laptop, that company may be heading toward eventual trade secret litigation. But the immediate path forward seems unclear and presents so many options of what to do. Because the hours and days after discovery of a potential trade secret theft are extremely important, we suggest a simple set of best practices for responding to that potential trade secret theft: 1) understand the issue, 2) contain the issue, 3) exhaust the issue, and 4) consider bringing the issue to court.
Continue Reading Best Practices for Responding to Potential Trade Secret Theft

Late last month, the U.S. Attorney’s Office for the Eastern District of Pennsylvania announced the indictments of GlaxoSmithKline (GSK) scientists Yu Xue and Lucy Xi, as well as three of their associates for trade secrets theft, wire fraud, and conspiracies to commit both crimes. The indictment accuses the scientists of transmitting proprietary GSK data to their associates and co-conspirators at a Chinese startup called Renopharma, a firm that focuses on providing products and services to support drug discovery programs.

The allegedly misappropriated data relates to research into monoclonal antibody treatment for cancer which, if brought to market, “should represent [a] ‘bio-better and bio-superior’ system in comparison to existing competitors,” according to GSK documents cited in the indictment. The government alleges that Ms. Xue, Ms. Xi, and their associates hoped to profit from the data by virtue of their ownership interests in Renopharma. Ms. Xue is quoted in the indictment via email, stating that she “ha[s] absolute control of [the] company” with ownership of “the highest stock share which is 30%.”

The charges against Ms. Xue and Ms. Xi come on the heels of an earlier high profile case investigated by the same FBI agent and brought by the same Philadelphia U.S. Attorney’s Office against a Chinese naturalized American. In that case, the U.S. Attorney charged Dr. Xi Xiaoxing
Continue Reading Chinese Scientists Accused of Trade Secret Theft in Recent DOJ Indictment

Capitol Buidling 1
[via Flickr user Glyn Lowe Photoworks]

On Monday November 30, the House demonstrated its resolve to fight high-tech crime such as trade secret theft by passing the Strengthening State and Local Cyber Crime Fighting Act (H.R. 3490). The Act formally establishes the National Computer Forensics Institute, which is located in Hoover, Alabama and has been operating since 2008. Under the Act, the Institute will:

  • Educate law enforcement officers, prosecutors, and judges on (i) cyber and electronic crimes; (ii) methods for investigating such crimes, including forensically examining computers and mobile devices; and (iii) prosecutorial and judicial challenges related to such crimes and forensic examinations; and
  • Train law enforcement officers to (i) investigate cyber and electronic crimes; (ii) forensically examine computers and mobile devices; and (iii) respond to network intrusions.

Continue Reading Keeping Up with Cybercriminals: House Passes Bill to Formally Establish National Computer Forensics Institute

Crowell & Moring’s work on the DuPont v. Kolon matter, one of the largest trade secrets cases of its kind, was recognized at The American Lawyer’s third annual Global Legal Awards, winning “Global Dispute of the Year: U.S. Litigation.” The firm represented DuPont in recovering Kevlar® trade secrets stolen by a South Korean conglomerate. After …

Sergey Aleynikov, the ex-Goldman Sachs computer programmer convicted of stealing high-frequency trading source code, has once again succeeded in reversing a criminal conviction related to his infamous code-copying acts. Federal prosecutors had previously charged, tried, and won a conviction of Aleynikov for violations of the federal National Stolen Property Act (NSPA) (18 USC § 2314) and Economic Espionage Act (18 USC § 1832). However, in 2012, the Second Circuit reversed both convictions. See United States v. Aleynikov, 676 F.3d 71 (2d Cir. 2012). That in turn prompted Congress to amend the Economic Espionage Act to close the loophole that allowed Aleynikov to walk.
Continue Reading Twice Convicted, Twice Reversed: Another Aleynikov Code Theft Conviction Overturned