Economic Espionage is the illegal targeting or acquisition of the trade secrets and other sensitive information that belongs to the United States government or a United States’ corporations, persons, or establishments.

Specifically, the act of economic espionage must be carried out by a foreign power or with the intention to benefit any foreign government, instrumentality, or agent. This theft can provide foreign entities with important economic information at a fraction of the cost of its actual research and development and can cause significant economic losses.

In this article, we will discuss:

  1. The elements of economic espionage;
  2. Crimes relating to economic espionage;
  3. Possible penalties of  economic espionage; and
  4. Potential defenses to charges of economic espionage.

Our attorneys focus on federal white collar crimes, like economic espionage and the related crimes listed below, and other types of government investigations. If you are charged with or are under investigation for, economic espionage contact an experienced federal attorney to ensure that your rights and interests are protected.

What is Economic Espionage?

The Economic Espionage Act of 1996 (EEA) – 18 U.S.C §§1831-1839

There are three key elements to federal economic espionage under the EEA.

First,  the defendant must knowingly take or receive the information. The attempt to take, or a conspiracy to take, the information also qualifies as economic espionage under the EEA.

Second, the information must be a trade secret.

Third, there must be an intention to or knowledge that the stolen information be sold or given to another in order to benefit a foreign instrumentality or a foreign agent.

 

You are knowingly taking or receiving

This element consists of stealing or without authorization:

  • Taking;
  • Carrying away;
  • Concealing, through fraud or deception;
  • Copying;
  • Sketching;
  • Photographing;
  • Downloading;
  • Altering;
  • Mailing;
  • Communicating;
  • Buying; or
  • Receiving

a trade secret.  

The attempt to do any of the above is considered an equivalent action under the law. Conspiring to do any of the above actions is considered an equivalent action under the law as well.

 

Trade Secrets – 18 U.S.C. §1839

In order for you to be convicted of economic espionage, the prosecution must prove that the information taken is a trade secret. “Trade secret” is defined, under 18 U.S.C. §1839, as any type or form of business, economic, financial, technical, scientific, or engineering information. More specifically, the information must be the kind that the owner has taken measures to keep secret.

The must also take “reasonable” precautions to protect the secret. These precautions could include keeping copies of sensitive information to a minimum, storing sensitive information in a protected area, or requiring employees to sign a non-disclosure agreement (NDA). The information must also be the kind that derives independent economic value from not being readily available to another person who could obtain economic value from the use of the information.

The owner of the trade secrets needs to aim to keep it from more than just the general public, as this is a poor benchmark. This is because, often, the general public does not have the appropriate knowledge to use trade secrets in an economically beneficial way. Some examples of trade secrets are recipe ingredients, like in Coca-Cola or Kentucky Fried Chicken, search algorithms, like Google’s or engineering plans, like those that belong to military planes and devices.

Examples of this information could include, but is not limited to:

  • patterns,
  • compilations,
  • program devices,
  • methods,
  • techniques,
  • codes, or
  • procedures.

Intention to sell or give in order to benefit a foreign entity

This element requires that the information in question is taken with the intent, or knowledge of the intent, that the information to be taken is used to benefit a foreign government, foreign instrumentality, or foreign agent. Intent as to a specific foreign entity is unnecessary. There must only be an intention for the information to be given to any foreign entity when it is taken.  

A “foreign instrumentality” is an agency, ministry, institution of a foreign government. It may also be any legal firm or business organization that is substantially owned, sponsored, or dominated by a foreign government.

A “foreign agent” is any person working as an officer, servant, delegate or representative of a foreign government.  

Crimes Relating to Economic Espionage

Theft of Trade Secrets – 18 U.S.C. §1832

Any person who knowingly steals, or without authorization takes, through whatever method, a trade secret that is intended for use in interstate or foreign commerce. In addition, that person must have the intent to convert that trade secret to anyone other than the owner with the further intent, or knowledge, that stealing the secret will harm the owner of the secret.

If convicted of this crime, an individual defendant shall face up to 10 years in prison, a fine of $250,000 or double the economic gain made from the offense, or economic loss by the victim, or both prison and a fine.

If the defendant is an organization, they may be fined up to $5 million or 3 times the value of the trade secret that had been stolen. This fine would include the expenses that research and design would have cost the company who received the stolen trade secret, had they not received it.  

Racketeering

If the act of criminal espionage is committed as a part of a larger ongoing criminal organization, you may be faced with additional racketeering charges.

Racketeering is when an organized group runs one, or many, illegal businesses.

Congress officially made economic espionage a predicate offense to racketeering in 2016, which means that it is one of the several smaller crimes that when committed through an enterprise add up to a potential charge of racketeering.

 

Other Related Offenses to Economic Espionage

In addition to the crimes above, the following are related to economic espionage but are not included in the EEA.

  • Bribery
  • Data Theft
  • Grand Larceny
  • Hacking
  • Industrial Espionage

Investigation and Enforcement

Several federal government agencies work together to investigate suspicions of economic espionage as well as educate companies on how to be proactive against it. These agencies include, but are not limited to:

  • National Counterintelligence and Security Center (NCSC);
  • Federal Bureau of Investigation (FBI);
  • United States Department of Justice (US DOJ);
  • United States Attorney General’s Office (USAG); and
  • Various Military Investigative Offices.

In addition, many employers will come forward in order to spark an investigation if they believe an employee, or employees, have stolen trade secrets in order to sell to someone. They may also participate in the investigation itself.

Under the EEA there is a “whistleblower provision” that aims to protect individuals who come forward with information that relates to a suspected crime and reveal it, in confidence, to a government official.

 

Penalties for Committing Economic Espionage

In an economic espionage case, the level of punishment depends on the type of defendant.

If the defendant is an individual, the punishment may be up to $5 million in fines, a prison term of a maximum of 15 years, or both.

If the defendant is an organization, they will face a fine. The fine will be the greater of either $10 million or 3 times the value of the stolen secrets to the defendant organization, including the amount of money the company avoided in research and design costs.

 

Other Penalties if Convicted of Economic Espionage

Along with federal charges of economic espionage, you may also face a civil case and the resulting penalties.

In 2016, Congress enacted the Defend Trade Secrets Act which amended the original EEA. This act provided an ability for private civil actions including an ex parte (one-sided) order that provides for the seizure of any property necessary to prevent the further spread of the trade secret at the heart of the case.

The company from which the trade secrets had been stolen may also sue, in a private action, based on several different civil law theories. If you are a former employee of the company that the secrets had been stolen from, the company may sue you on a breach of contract theory. At the beginning of your employment, you may have signed an NDA that prohibited you from revealing specific information to competitors. This form would become the basis of the company’s civil claim.

 

Potential Defenses to Charges of Economic Espionage

Economic espionage is a serious charge that carries with it a possibility of serious penalties. As with any serious criminal offense, a good defense is essential to ensure that your rights and interests are adequately protected.

Some defenses may result in an acquittal from all charges while others may result in a lessening of charges which carry lesser penalties.  

Every criminal case is different, and every case will require a personalized defense individually tailored to it. An attorney who is experienced with the federal criminal court system can craft the best defense for your case.

False Accusations

Lack of Necessary Intent

A key element of economic espionage is that the defendant needs to have the intent to pass the information along to a foreign entity. Intent means mental desire and will to act in a certain way. A person can lack the intent necessary to commit a crime in several different ways. For economic espionage, in particular, the prosecution needs to prove that the defendant had the specific intent to sell the trade secret to a foreign entity when the trade secret was stolen.

An affirmative defense of insanity is one defense to the intent element of economic espionage.  With an insanity defense, the defense team claims that due to mental disease or defect the defendant was unable to appreciate the consequences and illegality of his or her actions.

The cause of this mental disease or defect may be an episodic or persistent psychiatric disease.

Another lack of intent defense may indicate simply that the defendant had no intent to give the information away. This defense involves admitting that the defendant took trade secrets but had no intention to do anything with them.

 

Economic Espionage in the News

Chinese National Sentenced for Economic Espionage and Theft of a Trade Secret from a U.S. Company

In January 2018, a Xu Jiaqiang, a Chinese national who was living in the United States was sentenced to 5 years in prison for charges of economic espionage and theft of a trade secret. Xu worked for 4 years for the victim company as a developer. As a developer, Xu had access to proprietary software and proprietary source code.

The company had taken significant precautions to protect the source code including storing it behind a firewall that was only accessible by a few employees. At the beginning and end of employment at the victim company employees were made to agree in writing to keep the proprietary information confidential. In 2014, after Xu resigned from the victim company, he began communications with an undercover FBI agent who was posing as a financial investor.

During his communications with the undercover agent, Xu stated that he could give the agent the proprietary code and later uploaded a version of the proprietary software to a network set up by the FBI. In further communications, Xu bragged about other clients with whom he had shared the proprietary software and source code. These other clients included the National Health and Family Planning Commission of the People’s Republic of China. Xu pleaded guilty to all crimes against him.

To read the entire US DOJ press release, click this link or copy and paste the URL below.

https://www.justice.gov/opa/pr/chinese-national-sentenced-economic-espionage-and-theft-trade-secret-us-company

 

Inside Sentenced for Economic Espionage – California Engineer Sold Satellite Secrets to “Foreign Agent”

In July 2016, Gregory Allen Justice, an engineer for a cleared government contractor, was arrested for selling sensitive information to someone whom he had believed to be a Russian agent. Justice had, on six different occasions, met with an undercover FBI agent posing as a Russian agent. On each occasion, Justice had given the FBI agent a thumb drive of files he had downloaded from his employer’s computer network.

In all Justice received $3,500 in cash in return for the thumb drives. Justice, during the conversations, even suggested that some of the documents could be used to intercept, or substitute sensitive communications.  He was also completely aware that the information he was providing would be going to Moscow.

Along with the FBI, the Air Force Office of Special Investigations and the United States Attorney’s office participated in the investigation. Justice pled guilty to all of the charges against him, including attempting to commit economic espionage.

To read the entire FBI news brief, click this link or copy and paste the URL below.

https://www.fbi.gov/news/stories/insider-sentenced-for-economic-espionage

 

Frequently Asked Questions

“How can the government show that I had the intent to provide the trade secrets to a foreign entity?”

The intent is, generally, one of the most challenging elements to prove any crime and economic espionage is no different. There are several ways the prosecution may be able to prove that you had the intent to provide the trade secrets in question to a foreign entity.

The prosecution may have access to communications with the person you were supposed to provide the information to, who could have come forward on their own or may have been an undercover federal agent.

The prosecution may be able to prove intent based on the nature of the trade secrets stolen – if it is the type of information that would be highly beneficial to a foreign entity and would garner a lot of interest and, thus, a lot of money.

 

“Does the government’s use of an undercover agent violate any of my constitutional rights?”

Simply put, no. Any law enforcement agency may use an undercover agent in order to gather evidence of a crime during an investigation.

What an undercover agent may not do is entice you to commit a crime that you are not already predisposed to do. This is considered entrapment.

Entrapment is, essentially, the planning of a criminal offense by a law enforcement officer and his or her “procurement of its commission by one who would not have perpetrated it except for the trickery, persuasion or fraud of the officer.”There is no constitutional prohibition against entrapment, though.

 

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