Overview of Economic Espionage Act of 1996
(Public Law 104-294)

By
Joseph Valof, Esq.
OnSite Counsel

1 Wessonville Village Way
Westboro, MA 01581
Phone/Fax: 508-366-8825
e-fax: 603-761-9140
E-Mail: igc@nanosft.com


The subject Act [Chapter 90 'Protection of Trade Secrets'] went into effect on Oct 11, 1996 and provides for both monetary penalties as well as imprisonment, for both individuals and organizations [corporations and business entities] who knowingly steals or misappropriates or converts a company's trade secret(s), that is related to or included in a product that is produced for or placed in interstate or foreign commerce, to the economic benefit of anyone other than the owner. The Act covers downloading and uploading from a computer over the Internet. The Act also applies to anyone who conspires with one or more other persons to commit such acts, or who receives, buys, or possesses a trade secret, knowing the same to have been stolen or misappropriated without authorization of the owner.

The term 'trade secret' means all forms and types of financial, business, scientific, technical, economic, or engineering information, including software and computer codes, whether tangible or intangible, irrespective of how it is physically displayed i.e. electronically, graphically, photographically, or in writing, or stored.

The Act also applies to conduct occurring outside the United States if (1) the offender is a natural person who is a citizen or permanent resident alien of the United States, or an organization organized under the laws of the United states, or (2) an act in furtherance of the offense was committed in the United States.

The Attorney General may, in a civil action, obtain appropriate injunctive relief against any violations. The Act, however, does not preempt or displace any other remedies, whether civil or criminal, provided by United States federal, State/Commonwealth, possession or territory law(s).

The penalties include:

1. Individuals: up to $500,000 or 10 years imprisonment, or both.
2. Organizations: up to $5,000,000.

If the above acts were committed on behalf of a foreign government, the fines and imprisonment terms are increased to: $10,000,000 for an organization and for individuals $500,000 and up to 15 years imprisonment, or both.

In sum, the Act makes it even more important for companies to have written internal trade secret protection programs/policies in place, as well as an appropriate agreement with each employee. The Act will only apply to such confidential/trade secret information that companies can reasonable show was properly marked and treated as a trade secret. Also, the use of an NDA [Nondisclosure Agreement] in every instance that such information is to be disclosed to a third party becomes even more critical.