Don’t Photograph the Machines! Re: Trade Secrets Misappropriation Litigation
Speaking to the Economic Espionage Act, 18 U.S.C., the U.S. Court of Appeals for the Sixth Circuit affirmed the convictions but reversed the sentences as too modest in United States v. Howley, Case Nos. 11-6040; -6071; -6194 (6th Cir., Feb. 4, 2013) (Sutton, J.)
Clark Roberts and Sean Howley worked as engineers at Wyko Tire Technology. In November 2006, Wyko entered a deal to supply tire parts to Haohua South China Rubber Company. However, Wyko had never previously made the Haohua parts. Goodyear, a Wyko customer, used machines just like the ones Wyko needed to produce the subject tire parts. Around the same time that Wyko was struggling to design and make the Haohua parts, Goodyear asked Wyko to send a technician to repair some of its tire-assembly machines. Wyko decided to send Roberts and Howley, the two engineers who happened to be assigned to the Haohua tire part project. Both men signed confidentiality agreements before their visit, acknowledging that they might be given access to Goodyear’s trade secrets and agreeing that they would not use or disclose that information. Roberts and Howley were reminded that no cameras were allowed and were escorted by Goodyear employees while they were at the plant. At one point, Roberts and Howley were briefly left unescorted. During that time, they took seven photos of Goodyear’s machines. That night, Howley sent the photos to his Wyko e-mail account and then forwarded the pictures to Roberts. Roberts forwarded them to other members of the Wyko team. A few weeks later a Wyko IT manager found the pictures and anonymously forwarded the photos to Goodyear, which notified the Federal Bureau of Investigations. Roberts and Howley were subsequently convicted of theft of trade secrets and wire fraud, and were sentenced to four months of home confinement, 150 hours of community service and four years of probation.
The Economic Espionage Act protects information as trade secret if its owner has taken “reasonable measures to keep it secret and the information derives independent economic value, actual or potential, from not being ascertainable through proper means by the public.” 18 U.S.C. § 1839(3). A defendant violates the act if he or she “steals or without authorization photographs a trade secret, intending or knowing that the offense will . . . injure the owner of that trade secret.”
The Sixth Circuit found Goodyear took reasonable measures to keep the design of its tire machines secret. The Court noted that that Roberts and Howley were required to obtain advance permission from Goodyear to visit the factory, sign confidentiality agreements and agree not to take photographs. The Court affirmed the convictions.
However, the Sixth Circuit reversed the sentences imposed by the district court. The Court noted that a district court need not reach an exact value of the lost trade secret, but explained that it must at least establish a “reasonable estimate.” In this case, the district court rejected the government’s asserted value of the trade secret but provided no explanation for its finding of zero economic loss for Goodyear. The Court found this conclusion to be at odds with Roberts and Howley’s convictions for theft of property with “independent economic value.” The Court noted that an estimate of monetary loss to Goodyear would “necessarily” increase the sentence according to the sentencing guidelines, but also noted that the district court has discretion in deciding the actual sentence to impose.