Page 10 - White-Collar Crime

S10 | MONDAY, SEPTEMBER 29, 2014 | White-Collar Crime
| NYLJ.COM

Cyber Crime
Committee’s Subcommittee on Crime and Ter- These bills rely principally on government these legislative proposals, their prospects

rorism held a hearing on “Economic Espio- action to go after cyber thieves. Two other remain uncertain in a Congress that seems
nage and Trade Secret Theft: Are Our Laws bills would give affected companies the ability unable to move forward on nearly any legisla-
« Continued from page S3
Adequate for Today’s Threats?” The subcom- to go to federal court themselves. Sen. Jeff tive business of substance.
is authorized to prevent “unfair methods of mittee’s chairman, Sen. Sheldon Whitehouse Flake’s (R-Ariz.) Future of American Innova-
competition and unfair acts in the importation (D-R.I.), and Sen. Lindsey Graham (R-S.C.), tion and Research (FAIR) Act (S. 1770) would Developments in the European Union
of articles . into the United States” if “the used the occasion to loat a draft bill that create a federal civil cause of action for trade
threat or effect” of the importation or sale is would amend the EEA to make it easier to go secret misappropriation against defendants The United States is not alone in recogniz-
“to destroy or substantially injure an industry after foreign-government-sponsored hackers
located outside the territorial jurisdiction of
in the United States.” If these requirements ing cyber espionage and trade secret theft as
growing economic threats. Last November,
are met, the ITC can “complete[ly] exclu[de]” the European Commission put out a draft
the offending company’s product from the directive designed to strengthen EU laws
United States. The ITC’s jurisdiction extends against trade secret misappropriation. The The International Trade Commission is authorized to prevent
to products that incorporate misappropri- draft directive notes that “[i]nnovative busi-
ated trade secrets where the theft took place “unfair methods of competition and unfair acts in the importation
overseas.8
nesses are increasingly exposed to dishonest of articles . into the United States” if “the threat or efect” of the
But this remedy also has shortcomings. practices aiming at misappropriating trade
First, the ITC’s remedial power is limited to secrets, such as theft, unauthorised copying, importation or sale is “to destroy or substantially injure an industry in
economic espionage, breach of conidentiality
imported articles. Second, the ITC can only requirements, whether from within or from the United States.”
provide the equivalent of forward-looking outside of the Union.” The draft directive also
injunctive relief. It cannot order an award
of damages.
expressed concern about lack of adequate
legal protection for trade secrets and varia- by clarifying that it covers cyber intrusions the United States or acting on behalf of, or
U.S. Regulatory and Legislative Responses
tion in trade secret laws among member from abroad, specify that it encompasses theft for the beneit of, a person outside the ter-
states discouraging cross-border research of negotiating positions, make violation of the ritorial jurisdiction of the United States, that
Recognizing these limitations in the current and development.10
EEA a RICO predicate, and permit intervention is, a foreign government or corporation. The
regime of legal remedies for victims of trade If approved, the directive would work a by injured private parties.9
bill expressly provides that actions may arise

secret theft, both the Executive Branch and major change in trade secret protection in At nearly the same time, Sens. Carl Levin from extraterritorial conduct “if the conduct,
Congress have offered some reform propos- Europe. By providing a uniform deinition (D-Mich.), John McCain (R-Ariz.), Jay Rock- either by itself or in combination with con-
als. Last year, the Administration issued a of trade secrets and trade secret misappro- efeller (D-W. Va.) and Tom Coburn (R-Okla.) duct within the territorial jurisdiction of the
“Strategy on Mitigating Theft of U.S. Trade priation, it would bring European law much re-introduced their Deter Cyber Theft Act (S. U.S., causes or is reasonably anticipated to
Secrets” and a “Joint Strategic Plan on IP more closely into alignment with U.S. law. It 2384). The bill would require the Director cause, an injury” either within U.S. territo-
Enforcement.” They call for improving pro- would authorize damages and prompt injunc- of National Intelligence to publish an annual rial jurisdiction or to a U.S. person. And the
tections against cyber espionage through new tive relief, thus making Europe’s trade secret report identifying countries engaging in com- bill provides a process for promptly seeking
trade agreements and through “naming and puter espionage targeting valuable informa- an order of seizure against goods used in or
shaming” countries that don’t take action laws much more effective tools for victims tion of U.S. companies; a priority watch list gained through the cyber theft.
of cyber espionage.
through the issuance of special reports under of the foreign countries that are the most Sens. Chris Coons (D-Del.) and Orin Hatch
§301 of the Trade Act. They urge enhanced Time for Action
egregious offenders; U.S. technologies and (R-Ut.) have introduced a similar bill (S. 2267).
criminal prosecutions and amendment of the information targeted or stolen by foreign Building on the criminal prohibitions in the
EEA to ix the loophole revealed in Aleynikov. As cyber thieves become more sophisticat- cyber espionage; goods and services pro- EEA, it would authorize federal civil suits on
That last recommendation was accomplished duced using stolen information; and govern- largely the same grounds. Like the FAIR Act,
in January of this year. But the others remain ed, the problem of cyber theft of trade secrets ment actions to combat computer espionage. the Coons/Hatch bill would also authorize
unachieved and of uncertain effectiveness.
and other IP is likely to grow. Policymakers on The bill would also authorize the Treasury seizure orders and would have extraterrito-
Congress has also stepped in, with biparti- both sides of the Atlantic have recognized the Department to freeze the assets of individuals rial reach, though somewhat more limited,
problem, but more needs to be done to turn
san proposals for strengthened criminal and proposals into effective tools in the hands of or companies that beneit from theft of U.S. circumstances.
civil remedies. In May, the Senate Judiciary
victims and supportive governments.
technology or other commercial information.
Despite the bipartisan backing for many of

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1. Ofice of the National Counterintelligence Execu- From the publisher of
tive, Foreign Spies Stealing US Economic Secrets in Cy-
berspace 1 (1991).
2. Defense Security Service, Targeting U.S. Technolo- gies, A Trend Analysis of Reporting From Defense Indus-
try (2012).
3. Mandiant, Exposing One of China’s Cyber Espio-
nage Units 3 (2013).
4. Press Release, DOJ, Ofice of Public Affairs, U.S. COMPLETE COVERAGE THAT YOU CAN ACCESS ANYWHERE
Charges Five Chinese Military Hackers for Cyber Espio-
nage Against U.S. Corporations and a Labor Organization for Commercial Advantage (May 19, 2014).
5. United States v. Aleynikov, 676 F.3d 71 (2d Cir. Apr.
11, 2012).
The only approach for providing 360̊
6. 18 U.S.C. §1030(a)(2)(C), (b), (g); see also id.
§1030(c)(4)(a)(i)(I).
coverage of the New York Commercial Division.
7. National Conference of Commissioners on Uni- New York Commercial Litigation Insider is your
form State Laws, Uniform Trade Secrets Act with 1985 Amendments §1(2)(ii)(B)(I) (1985), available at http://
www.uniformlaws.org/shared/docs/trade%20secrets/ ticket to the most comprehensive coverage –
utsa_inal_85.pdf; see also id. §§2-3 (injunctive relief and conveniently available online.
damages provisions).
8. See 19 U.S.C. §337(a)(1)(A); see Raymond T. Nim-
mer & Holly K. Towle, The Law of Electronic Commer-
cial Transactions ¶ 3.05[2][A] (rev. 2013) (noting several
courts have expressly held the term does not encom- pass “revenue loss due to a competitor’s use of . trade WWW.LITINSIDER.COM
secrets”).
9. The draft bill and explanatory materials are avail-
able at http://www.whitehouse.senate.gov/news/re- @NYComLitInsider
lease/whitehouse-and-graham-working-to-crack-down-
on-economic-espionage.
10. The draft directive is available at http://ec.europa. eu/internal_market/iprenforcement/docs/trade-se-
crets/131128_proposal_en.pdf.