Economic Espionage Act Exposed - re Converting a Trade Secret
Addressing what the chairman of the House Judiciary Committee referred to as a “dangerous loophole that demands our attention,” President Obama enacted the Theft of Trade Secrets Clarification Act of 2012 (S. 3642). The legislation removes the apparent loophole in the Economic Espionage Act of 1996 (EEA), which restricted the government’s ability to prosecute theft of certain trade secrets. The bill was enacted in the wake of a controversial decision by the U.S. Court of Appeals for the Second Circuit in United States v. Aleynikov, in April of 2012. (See IP Update, Vol. 15, No. 5).
Under the old EEA, 18 U.S.C. § 1832(a), it is a criminal offense to intentionally “convert a trade secret, that is related to or included in a product that is produced for or placed in interstate or foreign commerce, to the economic benefit of anyone other than the owner.” The apparent flaw, which allowed a computer programmer to be found not guilty of theft after taking proprietary source code from his former employer to a new employer, hinged on the words “produced for or placed in” commerce. The 2d Circuit reasoned that the stolen code was used strictly internally and with no intention of selling or licensing it to anyone. Therefore, the 2d Circuit reasoned that under the facts of the Aleynikov case, the code was neither “produced for” nor “placed in” interstate or foreign commerce.
The new legislation replaces the language “a product that is produced for or placed in interstate” with “a product or service used in or intended for use in interstate or foreign commerce [. . .].” The bill was introduced by Sen. Patrick Leahy (D-Vt.) and Sen. Herbert Kohl (D-WI) on November 27, 2012 and quickly received the unanimous consent of the Senate, majority approval by the House of Representatives and the signature of the president.