Indiana

Trade Secrets - Criminal Case and Interesting Issues

First, the facts:

According to the indictment, the defendants allegedly created a company, SICO Microsystems, "for the purpose of developing and marketing products derived from and using the stolen trade secrets," which were related to computer chip design and development. The defendants also allegedly sought to obtain venture capital funding for their company from the government of China, in particular the 863 Program and the General Armaments Department (GAD). The 863 program is a funding plan created and operated by the government of China. It was designed by leading Chinese scientists to develop and encourage the creation of technology in China, with an emphasis on military applications. Meanwhile, GAD of the People?s Liberation Army was responsible for the army, navy, and air force in China and oversaw the development of weapons systems used by the country. GAD had a regular role in, and was a major user of, the 863 program, according to the DoJ.
The case is being heard in US District Court for the Northern District of California and actually dates back some seven years when in 2002 the CEO of NetLogic received an e-mail from Ge's wife tipping him off to the alleged theft. She also made an anonymous call to the FBI, according to reports.

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According to reports, most of the documents found on Lee's and Ge's computers had to do with business agreements between SICO and China-based venture capital firms regarding the 863 program.
Prosecutors are relying on a somewhat rarely used provision of the Economic Espionage Act (EEA) of 1996, which deals with the theft of trade secrets for the benefit of a foreign nation. The EEA was passed to protect US trade secrets and IP from foreign government-sponsored theft, however, is difficult to prove in court. Indeed, only a handful of have been indicted under EEA, with less actually found guilty.

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It's a highly complicated case from both the legal argument and IP/entrepreneurial sides that will surely stump even the most law-savvy and technically astute member of the jury. That being so, the case could be seen as one that perhaps evidences that US laws don?t match or keep up with technology, so-called trade secrets or IP, and tech business practices. If these two engineers were indeed acting as spies for China and indisputably offering true trade secrets/IP that would not only hurt proprietary company information but also damage US security or ability to innovate, then off to jail they should go. There's no question about that. But if these engineers do turn out to be entrepreneurs who did not steal trade secrets/IP and were instead truly trying to build an honest start-up, with investment only from 863 no further government interference, then they have not gone wrong.

What do you think? Is this a case of espionage or a misinterpretation of tech industry business practices? What defines a trade secret? Will more cases like this come down the pike regarding IP rights?....

Full post as published by Indiana Civil & Business Lawyer on October 30, 2009 (boomark / email).