Economic Espionage
Act of 1996

President Clinton's signature on the Economic Espionage Act of 1996 culminated a nearly two-year effort on the part of the FBI and U.S. industry professionals to provide new legal tools to prosecute those who commit economic espionage by stealing trade secrets. The Economic Espionage Act (EEA) specifically proscribes the various acts defined under economic espionage and addresses the U.S. national and economic security aspects of the crime. The law also addresses the theft of trade secrets where no foreign involvement is found.

As defined in the Economic Espionage Act of 1996, the term trade secret refers to all forms and types of financial, business, scientific, technical, economic or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if:

  • The owner thereof has taken reasonable measures to keep such information secret, and; 
  • The information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by the public.

The owner of a trade secret is the person or entity that has rightful legal or equitable title to, or license in, the trade secret.

Before the enactment of the EEA, there was virtually no federal statute that outlawed the theft of trade secrets. Federal prosecutors were limited to using laws such as the Interstate Transportation of Stolen Property Act, the Computer Fraud and Abuse Act, and Mail and Wire Fraud statutes, to prosecute individuals for the theft of trade secrets. Due to the limitations and inadequacies of these laws in prosecuting the theft of trade secrets, it became evident that a new federal statute was needed.

Provisions

The EEA contains two separate provisions that make the theft or misappropriation of trade secrets a federal criminal offense. The first provision, under Section 1831, is directed toward foreign economic espionage and requires that the theft of a trade secret be done to benefit a foreign government, any instrument of a foreign government, or foreign agent. In contrast, the second provision, under Section 1832, makes the commercial theft of trade secrets a criminal act regardless of who benefits.

Reflecting the more serious nature of economic espionage, a defendant convicted for violating Section 1831 can be imprisoned for up to 15 years and fined $500,000 or both. Corporations and other organizations can be fined up to $10 million. A defendant convicted for theft of trade secrets under Section 1832 can be imprisoned for up to 10 years and fined $500,000 or both. Corporations and other entities can be fined no more than $5 million.

A defendant cannot be convicted under the EEA if it is proven that the elements of a trade secret were discovered through parallel development or reverse engineering. In addition, the EEA does not apply to individuals who seek to capitalize on their lawfully developed knowledge, skills, or abilities. The EEA also does not prohibit legitimate economic collection or reporting by personnel of foreign governments by lawful means.

The EEA provides that the court, in imposing sentencing, "shall" order the forfeiture of any proceeds or property derived from violations of the EEA, and may order the forfeiture of any property used to commit or to facilitate the commission of the crime. While the EEA does not provide for civil forfeiture proceedings, it does authorize the government to file a civil action seeking injunctive relief.

The law may be applied to offenses outside the U.S. if any act in furtherance of the offense was committed in the U.S. or the offender is a U.S. person or organization.

Before the EEA was passed, victims of trade secret thefts were faced with the dilemma that by reporting the matter to law enforcement authorities the trade secret may be publicly revealed during criminal prosecution. The EEA provides that courts must issue orders necessary to protect the confidentiality of trade secrets, consistent with Federal Rules of Procedure and the Constitution.  The prosecution is permitted to immediately appeal any order authorizing or directing disclosure of a trade secret.

The EEA should serve as a powerful deterrent and is a very important law enforcement and security management tool for protecting intellectual property rights. The EEA is not intended to convert all thefts of trade secrets into criminal cases; however, the EEA substantially raises the stakes in the arena of economic espionage.

To report violations of the EEA or to obtain additional information, contact the local FBI Awareness of National Security Issues and Response (ANSIR) coordinator.  Telephone numbers for FBI field offices are listed in most telephone directories.

Reference
Largely copied from Annual Report to Congress on Foreign Economic Collection and Industrial Espionage, June 1997, and brochure The Economic Espionage Act of 1996: A Brief Guide, both prepared by the National Counterintelligence Center.

 

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