- - Wednesday, August 6, 2014


Two years ago, a Motorola software engineer named Hanjuan Jin was sentenced to four years in prison after she was caught boarding a Beijing-bound flight from Chicago with $30,000 in cash and a carry-on bag full of Motorola documents marked “confidential and proprietary information.”

“In today’s world, the most valuable thing that anyone has is technology,” said US. District Court Judge Ruben Castillo in a sobering conclusion. “The most important thing this country can do is protect its trade secrets.”

This case was fairly straightforward, but it illustrates the growing danger to U.S. companies in an era of digital technology and international competition. Today, trade secrets are more vulnerable than ever to cyber-attacks and state-sponsored theft.

Thankfully, Congress has started working to address the problem. Bipartisan coalitions in both chambers have introduced legislation to provide a nationwide legal framework for the protection of U.S. trade secrets. In the House, Reps. George Holding, Howard Coble, John Conyers Jr., Steve Chabot, Jerrold Nadler and Hakeem Jeffries recently introduced the Trade Secrets Protection Act of 2014, which mirrors the 2014 Defend Trade Secrets Act earlier introduced by Sens. Chris Coons and Orrin G. Hatch.

Trade secrets differ from other forms of intellectual property, such as patents, copyrights and trademarks, in that they are not shared with the government in order to secure legal protection. The formula for Coca-Cola, for example, is one of the most famous trade secrets. However, because the information in trade secrets is not shared with a governing body and must have a reasonable degree of protection from the holder, they are inherently more difficult to protect from a legal standpoint.

This secretive nature, however, means that they are both profoundly valuable and, given the difficulties of prosecuting, ripe targets for theft. According to an estimate in an industry coalition letter supporting the Senate’s 2014 Defend Trade Secrets Act, trade-secret misappropriations account for up to two-thirds of the value of companies’ information portfolios. This value appears even more significant when considered in light of how much trade-secret theft costs U.S. companies.

David Kappos, a former director of the U.S. Patent and Trademark Office, notes that estimated costs of misappropriated trade secrets range from $160 billion to $480 billion each year. Admittedly, this is a broad range. Even though it’s hard to make an accurate projection nationwide, there is no doubt that trade-secret theft for individual companies can be devastating, easily reaching into eight figures.

Right now trade secrets are protected by two laws. The Economic Espionage Act of 1996 made stealing trade secrets a federal crime, and in the 1980s, under a growing awareness of the interstate nature of trade-secret misappropriation, the Uniform Trade Secrets Act helped state laws generally align with each other. The Uniform Trade Secrets Act laws are fine when, say, a disgruntled employee takes his boss’ secrets into the next state, but a hacked computer file presents another problem entirely.

The weakness of these laws is that there is no overarching legal framework at the federal level to account for both the sophistication and international nature of new threats. As Mr. Kappos noted, even the government is bound by finite resources in its efforts to protect companies, evidenced by the fact that under the Economic Espionage Act, the Department of Justice initiated only 25 cases of trade-secret theft last year.

What is needed is a way for the private sector to guard itself through civil enforcement. The proposed bills would strengthen this weak point by giving companies the legal space to take initiative in defending themselves in instances of theft rather than waiting for the government to take action on their behalf.

This is not a partisan or ideological issue. Congress has a chance here to help businesses save money by protecting their competitive edge in the global economy. “At the end of the day, no one — not even our international competition — is harmed by adoption of an efficient national and global mechanism for enforcing honest behavior,” said Bruce Lehman, former commissioner of patents and trademarks and president of the International Intellectual Property Institute. “No one can make money and create jobs where there is anarchy in the marketplace.”

Put another way, a more vigilant protection of trade secrets leads to a rare trifecta where American politicians, businesses and consumers all win.

Erik Telford is senior vice president at the Franklin Center for Government and Public Integrity.

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