Three Frightening Stories

Three frightening stories for all businesses can be found on the links below.  All stories, reported nationally by the Associated Press, concern an alleged case of economic espionage.  Two San Jose businessmen from China were arrested in 2002 ago at San Francisco International Airport with tickets to China and briefcases bulging with trade secrets belonging to Sun Microsystems, NEC Electronics Corp., Transmeta Corp. and Trident Microsystems Inc., according to claims of the U.S. Justice Department.  

This case was first reported in the www.economicespionage.com website last year. 

But what really makes this a scary tale is to read the progression of the case over just a few days in late 2003 to see what thin ice companies often find themselves on, and to see as well what companies often do wrong that aids thieves who steal trade secrets.  After working up the case for two years, federal prosecutors -- as well as the four well-known corporate victims -- nearly saw their case go out the window needlessly. 

Why? Read on. 

In Story No. 1, the judge was considering pre-trial motions, including standard motions by the defense to dismiss the charges against their clients.  This is when the prosecutors are supposed to slam the door shut on the possibility of dismissal by overwhelming the judge with a preponderance of evidence.  But that, apparently, did not happen.

Click here to read Story No. 1.

In Story No. 2, U.S. District Judge James Ware was openly considering dismissing the entire case.  He said:

"This is an unusual case because it seems to me that it's a matter of opinion what constitutes a trade secret," Ware said in his San Jose courtroom.  "It's not as if most things are stamped 'trade secret.'"

This is frightening because the Judge is so clearly wrong.  If a company has done all the things it is supposed to do to identify and protect its trade secrets, then it is not a matter of opinion what constitutes a trade secret, it is a matter of record.  Companies that have the sort of Trade Secret Compliance Program they're supposed to have do, in fact, have trades secrets that are, in essence, stamped: "Trade Secret" for just this reason: to be able to prove conclusively in a court of law (civil or criminal) that a legitimate trade secret has been stolen or compromised.  And companies that fail to establish and maintain a Trade Secret Compliance Program run the additional risk of meeting up with a judge that is not as well-versed in what constitutes a trade secret as the prosecution should have made him.

This story indicates:

  • the prosecution failed at properly educating the judge;

  • the prosecution may have similar difficulties before a jury;

  • the four companies that were victimized may have failed to properly identify their own trade secrets which, if true, would be the best news possible for the defense; 

  • justice (once again) may not be served; and

  • it's still open season for economic espionage criminals.

Click here to read Story No. 2.

In Story No. 3, the judge rules that the case will proceed to trial after all.  The prosecution must have been "sweating bullets" until that ruling.

(Of course, in ordering the trial the judge said that the prosecution had turned in an "extraordinary depth and breadth" of evidence...so why was the judge confused in Story No. 2?)

Click here to read Story No. 3.

Businesses watch cases like this closely to see how prosecutors and the FBI perform, and to judge whether the federal government can be trusted with a company's trade secrets.  Federal prosecutors came close to losing this case even before it began.  Many eyes will be watching to see how they do from here on.