Hearing of the Senate Judiciary Committee - On the Protection of Trade Secrets

Hearing

Today, U.S. Senator Herb Kohl questioned Attorney General Eric Holder at a Senate Judiciary Committee Oversight hearing about the protection of trade secrets and the impact a recent court decision (United States v. Aleynikov) has on the existing criminal prosecution of those committing trade secret theft. Kohl serves as a senior member of the Senate Judiciary Committee.

In 1996 Congress enacted the Economic Espionage Act, making it a federal crime to steal a trade secret. Economic espionage and trade secret theft continue to pose a substantial threat and the Federal Bureau of Investigation (FBI) estimates that U.S. companies lose billions of dollars each year to criminals who steal their ideas, formulas, designs and other proprietary information.

The recent court ruling (United States v. Aleynikov) overturned the conviction of a former Goldman Sachs employee who stole valuable computer code from the company, worth many millions of dollars. The court ruled that he did not violate the Economic Espionage Act because the stolen computer code was not a product intended for sale, as required by the statute.

Kohl asked Attorney General Holder how the court's decision would affect the current and future prosecution of these types of crimes. He also asked if additional legislation is needed to ensure this specific type of trade secret theft can be prosecuted under the current law.

Attorney General Holder replied that while they must respect the court's decision, the result was a setback in the ability to prosecute these crimes. He stated that they are looking into the impact of the decision and the negative outcomes that could occur as a result. He additionally expressed interest in working with Congress and the Judiciary Committee if the Department of Justice's investigation concludes the need for a legislative fix.

Today, as much as 80% of companies' assets are intangible trade secrets. Advances in technology make the protection of trade secrets more difficult and more critical than ever. Trade secrets can simply be downloaded from a company's computer, uploaded to the Internet, and transferred anywhere in the world in a matter of minutes.

Last December, the Senate Judiciary Committee approved U.S. Senator Herb Kohl's bipartisan "Economic Espionage Penalty Enhancement Act of 2011." This legislation would increase maximum penalties for stealing a trade secret to benefit a foreign company from 15 years to 20 years and direct the Sentencing Commission to consider increasing the penalty range for theft of trade secrets and economic espionage. This legislation was also introduced by Senators Chris Coons (D-DE) and Sheldon Whitehouse (D-RI) and is co-sponsored by Senators Richard Blumenthal (D-CT), Tom Coburn (R-OK), Dianne Feinstein (D-CA), Lindsey Graham (R-SC), Amy Klobuchar (D-MN) and Jon Kyl (R-AZ).

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