§ 5.02 Background: Need for Legislative Reform

• Jurisdiction: United States
• Publication year: 2020

§ 5.02 Background: Need for Legislative Reform

Prior to the passage of the EEA, there was only a single, very limited federal statute that directly prohibited the misappropriation of trade secrets.³⁹ Thus, when confronted with an allegation that an individual had misappropriated a valuable trade secret, federal prosecutors were compelled to shoehorn theft of trade secret cases into statutes directed at other offenses. In particular, prosecutors attempted, with varying degrees of success, to use the Depression-era Interstate Transportation of Stolen Property Act (ITSP)⁴⁰ and the Wire Fraud⁴¹ and Mail Fraud statutes.⁴² However, a court decision severely limited that ability of the government to charge a defendant with the interstate transportation of stolen trade secrets under the ITSP concluding that the statute only covered the interstate transportation of a stolen tangible item.⁴³ Moreover, the use of the Mail Fraud and Wire Fraud statutes had always been limited because many thefts do not involve the use of mail or wire, as required. In addition, the applicability of these statutes is further limited, since most trade secrets thieves merely copy information and do not necessarily "defraud" the victims permanently of the data. As noted in the legislative history of the Economic Espionage Act, probiems with prosecuting the theft of trade secrets under federal criminal law led United States Attorney's Offices to decline matters that involved employees of U.S. corporations attempting to sell proprietary information to foreign governments.⁴⁴

Further, state laws do not entirely fill the holes left by federal law.⁴⁵ Only a limited number of states have criminal trade secret statutes and the applicability of these state criminal laws is limited by jurisdiction and lack of state resources, particularly in cases with international ramifications. Finally, civil remedies are often inadequate to compensate a company for the loss of secrets that may have been crucial in establishing that company's "market edge."⁴⁶

Legislators realized that the only practical way to protect critical U.S. corporate information from thefts by foreign governments and unscrupulous competitors was to enact a single comprehensive scheme that could bring federal resources to bear against defendants who steal proprietary information.⁴⁷ In response to these concerns, Congress introduced the Industrial Espionage Act of 1996 on June 26, 1996.⁴⁸ This bill eventually became the Economic Espionage Act of 1996 (EEA),⁴⁹ which President Clinton signed into law on October 11, 1996.

As originally written, the EEA only applied to thefts of trade secrets committed to benefit a "foreign government, foreign instrumentality or foreign agent."⁵⁰ Concerns that such a law might violate a number of international trade treaties to which the United States is a...