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Sixth Circuit Considers Criminal Trade Secrets Case

Posted in Recent Cases

Many of us have dealt with trade secret disputes of varying types, but the Sixth Circuit earlier this week addressed a criminal trade secrets prosecution under 18 U.S.C. § 1832(a).  In United States v. Howley, the Sixth Circuit affirmed the conviction of two individuals who had been convicted of stealing trade secrets and engaging in wire fraud. 

The case involved engineers working for a company that supplied Goodyear with various parts for its tire assembly machines.  The individuals signed secrecy agreements pledging not to disclose trade secrets, but surreptitiously brought a camera into the plant in order to take pictures of trade secret protected materials.  The Sixth Circuit had little trouble concluding that the evidence before the jury sufficed to establish a trade secret violation and that the defendants had stolen or photographed without authorization a trade secret intending or knowing that the offense will injure the owner of the trade secret.  The Court found that Goodyear took reasonable security precautions to protect the trade secrets and that the behavior of the individuals reflected their understanding that what they were doing was wrong. 

After affirming the conviction, the Sixth Circuit turned to consider the sentence of the individuals.  The district judge sentenced both men to four months of home confinement and 150 hours of community service.  The government cross-appealed the sentence, claiming that they were procedurally unreasonable, and the Sixth Circuit agreed, acknowledging that determining the value of the trade secret (which impacts the appropriateness of the sentence) “is no easy task,” and therefore a reasonable estimate would suffice.  The Sixth Circuit determined that the district court did not adequately support its decision to sentence the individuals for what appeared to be less time than would be required  under the guideline range (which could range between 4 and 46 months, depending on a variety of factors).  Therefore, it vacated the sentences and remanded for resentencing.  

This case provides a cautionary tale concerning trade secrets disputes, and illustrates how even prototypical commercial disputes can go awry and lead to criminal repercussions.  It is certainly worth a careful read by anyone dealing with trade secret disputes