IP FAQ: When Does Trade Secret Theft Become a Federal Crime?


     By Sheldon Mak & Anderson PC

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Trade secret theft is generally addressed through civil lawsuits. However, in some cases, the misappropriation of trade secrets can rise to the level of a federal crime. The Economic Espionage Act of 1996 criminalizes trade secret theft committed for personal benefit within the country or for the benefit of a foreign government.

Section 1831 addresses foreign economic espionage and requires that the theft of a trade secret be done to benefit a foreign government, instrumentality, or agent. The elements of the crime include:

The defendant intended or knew his actions would benefit a foreign government, foreign instrumentality, or foreign agent;
The defendant knowingly received, bought, or possessed a trade secret, knowing the same to have been stolen or appropriated, obtained, or converted without authorization; and
The item/information was, in fact, a trade secret.

Meanwhile, Section 1832 involves the misappropriation of a trade secret with the intent to convert the trade secret to the economic benefit of anyone other than the owner and to injure the owner of the trade secret. The elements of the crime include:

The defendant intended to convert a trade secret to the economic benefit of anyone other than the owner;
The defendant knowingly received, bought, or possessed a trade secret, knowing the same to have been stolen or appropriated, obtained, or converted without authorization;
The item/information was, in fact, a trade secret;
The defendant intended, or knew, the offense would injure the owner of the trade secret; and
The trade secret was related to or included in a product that is produced for or placed in interstate or foreign commerce.

Of course, prosecutors will not pursue every case that meets the above criteria. As detailed by the Department of Justice, U.S. Attorneys will evaluate evidence of involvement by foreign agents, the type of trade secret involved, the degree of economic injury, the effectiveness of civil remedies, and the potential deterrent value before deciding whether to bring a criminal action.

ABOUT THE AUTHOR: Teddie C. Hsu
Teddie C. Hsu is a registered patent attorney and is admitted to practice law in California. He received his legal education from the UC Davis King Hall School of Law, and he earned his undergraduate degree from UCLA in Electrical Engineering with a Biomedical emphasis.

Mr. Hsu has experience prosecuting a wide variety of patents, both domestic and foreign, including those involving semiconductor technology, LED lighting systems, hydrotherapy jets, and computer circuits. He also has patent litigation experience from his summer internship at Hogan & Hartson, LLP and extensive general litigation experience from his time spent as a judicial extern with the Hon. Judge Samuel K. Feng in San Francisco.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.