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May 14

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New Federal Option to Fight Trade Secret Theft

A bipartisan bill by U.S. Senators Chris Coons and Orrin Hatch called the Defend Trade Secrets Act was recently introduced to build on the Economic Espionage Act of 1996 and create a federal private right-of-action for theft of corporate trade secrets, providing the same federal protections available for patents, trademarks, and copyrights.

The bill’s sponsors estimate the annual loss associated with U.S. corporate trade secret theft to be $160 – $480 billion and point to the increasing problem of theft at the direction of a foreign government or for the benefit of a foreign competitor. The bill would bring uniformity over the various state laws, with remedies that include:

  1.  injunctive relief,
  2. actual monetary loss or unjust enrichment,
  3. royalties for the unauthorized use or disclosure of trade secrets,
  4. exemplary damages (up to three times the amount of compensatory damages), and
  5. attorneys’ fees

Experts are usually needed to calculate monetary remedies, which often involve complicated customer and sales analysis.  Experts are also often useful to establish other areas of the case, including:

  1. Identifying that trade secrets have in fact originated from the plaintiff. The challenge plaintiffs sometimes face is that it is lawful for one to reverse engineer information from publicly available sources. Defendants sometimes claim that, although the data appears similar, the data was not actually taken from the plaintiff but assembled from memory, or from other sources. These assertions can be tested by:
    1. inspection of metadata to ascertain the source of the questioned information,
    2. statistical analysis to determine the likelihood of the alternate explanation being plausible, and
    3. comparison of relevant data sets to determine whether it is possible (or likely) that the alternate explanation is correct.
  1. Inspecting computers to identify the means that the stolen data was removed, recovered, and used. This can be done with computer forensics to discover devices and programs used, and data recovered, even if the devices, software, or data were subsequently removed or “deleted.”
  2. Providing information about what data is actually available from public sources in that industry, and how the stolen information would be useful to a competitor.N

About the author

Renee Howdeshell

Renee Howdeshell is a founding member of Fulcrum Inquiry, an accounting, finance and economic consulting firm that performs damage analyses for commercial litigation, forensic accountings, royalty & distribution audits, financial investigations, and business valuations. Ms. Howdeshell holds a degree in Finance and Marketing from the University of Virginia's McIntire School of Commerce and is a Certified Public Accountant (CPA) and a Certified Fraud Examiner (CFE). She has testified as an expert witness in federal court, CA state court and arbitration regarding the results of her work. She can be reached at (213) 787-4112 and her resume is available at www.fulcrum.com.

Permanent link to this article: http://betweenthenumbers.net/2014/05/new-federal-option-to-fight-trade-secret-theft/

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