Economic Espionage Act of 1996

The Economic Espionage Act of 1996 (usc|18|1831|1839) makes the theft or misappropriation of a trade secret a federal crime.

This law contains two sections criminalizing two sorts of activity. The first, usc|18|1831(a), criminalizes the misappropriation of trade secrets (including conspiracy to misappropriate trade secrets and the subsequent acquisition of such misappropriated trade secrets) with the knowledge or intent that the theft will benefit a foreign power. Penalties for violation are fines of up to US$500,000 per offense and imprisonment of up to 15 years for individuals, and fines of up to US$10 million for organizations,

The second section, usc|18|1832, criminalizes the misappropriation of trade secrets related to or included in a product that is produced for or placed in interstate (including international) commerce, with the knowledge or intent that the misappropriation will injure the owner of the trade secret. Penalties for violation of section 1832 are imprisonment for up to 10 years for individuals (no fines) and fines of up to US$5 million for organizations.

In addition to these specific penalties, section 1834 of the EEA also requires criminal forfeiture of (1) any proceeds of the crime and property derived from proceeds of the crime and (2) any property used, or intended to be used, in commission of the crime.

The Act authorizes civil proceedings by the Department of Justice to enjoin violations of the Act, but does not create a private cause of action. Thus, victims or putative victims must work with the U.S. Attorney in order to obtain an injunction.

The "Economic Espionage Act, 1996" has extraterritorial jurisdiction where:
*The offender is a U.S. citizen or permanent resident; or
*The offender is an organization organized under the laws of the United States or any State or political subdivision thereof; or
*An act in furtherance of the offense was committed in the United States

"Trade secrets" are defined in the act consistent with generally accepted legal definitions such as those used in the Uniform Trade Secrets Act and state laws based on the UTSA, to refer broadly to information, whether in tangible or intangible form, that:
*is subject to reasonable measures to preserve its secrecy; and
*derives independent economic value from its not being generally known to or ascertainable by the public.

This legislation has created much debate within the business intelligence community regarding the legality and ethics of various forms of information gathering designed to provide business decision-makers with competitive advantages in areas such as strategy, marketing, research and development, or negotiationsFact|date=June 2008. Most business intelligence (also known as competitive intelligence practitioners) rely largely on the collection and analysis of open source information from which they identify events, patterns, and trends of actionable interest. However, some techniques focus on the collection of publicly available information that is in limited circulation. This may be obtained through a number of direct and indirect techniques that share common origins in the national intelligence community. The use of these techniques is often debated from legal and ethical standpoints based on this Act.

One such example is the collection and analysis of gray literature. The techniques for developing actionable intelligence from limited circulation / limited availability documents such as selected corporate publications can raise difficult legal and ethical questions under both intellectual property laws and the Economic Espionage Act.

The Society for Competitive Intelligence Professionals provides training and publications which outline a series of guidelines designed to support business intelligence professionals seeking to comply with both the legal restrictions of the EEA as well as the ethical considerations involved. In 1999, the Society of Competitive Intelligence Professionals published its "Policy Analysis on Competitive Intelligence and the Economic Espionage Act" which explained how the Economic Espionage Act will not affect legitimate competitive intelligence. [ [http://rhesq.com/CI/SCIP%20EEA%20Policy%20Analysis.pdf "Society of Competitive Intelligence Policy Analysis on Competitive Intelligence and the Economic Espionage Act, written by Richard Horowitz, Esq."] ] The "National Law Journal" of March 29, 2000, reviewed the Policy Analysis and reported that the Policy Analysis' conclusion was that the EEA's "impact on legitimate competitive intelligence would be negligible" and that "nearly four years" after the EEA's passage, "it appears that the [Policy Analysis'] predictions were on target." [ [http://rhesq.com/CI/National%20Law%20Journal.pdf Industry Spying Still Flourishes; Criminalizing Trade Secret Theft Hasn't Led to Mass Proseuctions," National Law Journal, March 29, 2000] ]

The EEA was developed on the basis of a national philosophy that emphasizes a "level playing field" for all business competitors that arose in no small part due to the size and diversity of the American private sector. Many other nations not only lack such legislation, but actively support industrial espionage using both their national intelligence services as well as less formal mechanisms including bribery and corruption. The United States Office of the National Counterintelligence Executive publishes an annual report on Foreign Economic Collection and Industrial Espionage mandated by the U.S. Congress which outlines these espionage activities of many foreign nations.

The United States does not publish records of its own indulgence in state-sanctioned industrial espionage. In 2000, the European Parliament voted to carry out an investigation into the international surveillance project ECHELON. That same year the French government also began an official investigation into allegations that several collaborating nations may be using the program for illegal purposes. U.S. Central Intelligence Agency documents had been revealed to the British press, showing that the U.S. has been using the technology to monitor European business communications. The French and European allegations centered on the suspicion that such information was being passed to U.S. firms.

In 2000, in response to European concerns, a former U.S. Director of Central Intelligence, James Woolsy, said (in the March 17, 2000 Wall Street Journal editorial) that if there is collection, it's usually focused on bribery by European companies, not on access to technologies. Woolsey said "most European technology just isn’t worth our stealing." However, Woolsey's intervention may have raised more concern than it quieted.

First conviction and sentence

After an August, 2007 plea of guilt for (one count) of violating the Economic Espionage Act and one count of violating the Arms Export Control Act, San Jose U.S. District Court Judge Jeremy Fogel sentenced Canadian citizen Xiaodong Sheldon Meng, 44, to 24 months in federal prison, 3 years of parole and a $10,000 fine, with forfeiture of computer equipment seized. Meng was indicted in December 2006, with 36 counts, "for stealing military software from a Silicon Valley defense contractor and trying to sell it to the Chinese military." The first to be convicted, Meng admitted "illegally obtaining a program used for military training from Quantum3D and later using the program in a demonstration to the Chinese navy after he no longer worked for the firm; he attempted to sell the fighter-pilot training software programs to the Royal Thai Air Force, the Royal Malaysian Air Force and the Navy Research Center in China." He paid $ 500,000 bond, for temporary liberty, until August 18 when he begins serving sentence. [ [http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/06/19/BARD11B9U7.DTL sfgate.com, Salesman gets 2 years for industrial spying] ] [ [http://ap.google.com/article/ALeqM5g1-Ie0sO9j4dfzcDflZEP8lyeX5wD91COKDG2 Afp.google.com, Engineer is first sentenced for economic espionage] ]

On June 18, 2008, Meng was the first individual sentenced under the Economic Espionage Act of 1996. Meng was the first person convicted of both the Economic Espionage Act of 1996 and the Arms Export Control Act. He received a 24 month sentence and $10,000 fine, which included a sentencing departure for cooperation, according to news reports. [http://www.law.com/jsp/article.jsp?id=1202422383228 ; http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/06/19/BARD11B9U7.DTL]

References