Trade Secret Theft: The China Syndrome

As we all know, trade secret litigation has been steadily on the rise for the past decade.  (See The Who, What, Where, When, How, and Why of Trade Secret Audits and, in the related area of noncompetes, Noncompete cases not slowed by economy, legislation.) As we also know, the government has increased its enforcement efforts relative to intellectual property, including the formation of a Joint Strategic Plan on Intellectual Property Enforcement. Indeed, this week, at a speech at the International Spy Museum (how perfect is that?!), a representative of the FBI’s Economic Espionage Unit warned of increasing threats and cautioned companies to stay alert to potential indicators. See FBI Agent Warns Business Sector of Theft of Trade Secrets.

This week, there were two convictions for the theft of trade secrets. Interestingly, both involve people in their 70s selling secrets in China. One was Yeong C. Lin of California, who was convicted of conspiracy to steal trade secrets from Corning relating to thin film transistor LCD manufacturing process. See Man Sentenced for Theft of Corning Inc. Trade Secrets. The other was Wen Chyu Liu of Texas, a former research scientist, who was convicted of conspiring to steal trade secrets about certain Dow synthetic materials. See US scientist guilty of selling trade secrets to China.

These convictions should come as no surprise, given that, according to a report this month from the Department of Justice, 6 of the 9 “significant” recent trade secret cases involved a connection to China. 2010 U.S. Intellectual Property Enforcement Coordinator Annual Report on Intellectual Property Enforcement.

The takeaway? Trade secret theft – civil and criminal – is on the rise and China, right now at least, is providing a huge market opportunity for would-be thieves. Accordingly, take steps now to protect yourself and then make sure to monitor for suspicious conduct.

  1. […] This post was mentioned on Twitter by Scott F. Gibson, Russell Beck. Russell Beck said: Trade Secret Theft: The China Syndrome […]

  2. Russell, I think this post has a good emphasis on prevention (“protect yourself and then make sure to monitor for suspicious conduct”). I wanted to add one point re China: suppose prevention doesn’t work and you end up having to litigate an IP case against a Chinese firm with which you’ve done business? There may be a real advantage to having an arbitration clause in your contract,as China has a pretty good track record of enforcement of international arbitral awards, even though the prospects for litigating in China, or even attempting to serve process on Chinese firms in connection with U.S. litigation, are more dicey. I blogged about a recent case that illustrates this point a few days ago.


    1. Hi Ted. Thanks, I agree. In fact, arbitration clauses are also one of the handful of things that I now recommend considering when dealing with cross-border noncompetes if one of the parties is in California, North Dakota, or Oklahoma (where employee noncompetes are generally not enforced). RB

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