§ 5.07 Avoiding or Reducing Corporate Criminal Exposure

• Jurisdiction: United States
• Publication year: 2020

§ 5.07 Avoiding or Reducing Corporate Criminal Exposure

[1] Implementation of a Compliance Plan

Avoiding exposure to liability under the EEA requires that businesses take a close look at all their procedures involving confidential information. Standards of contracting authority and rules for entering into nondisclosure agreements should be reviewed to control the process of assuming, tracking, and enforcing confidentiality obligations to third parties. Hiring practices should be reviewed to avoid hiring tainted employees and consultants and to emphasize respect for intellectual property rights as part of a company's training program. Perhaps most importantly, a company must examine its business relationships to determine the procedures and behaviors of those who may create vicarious liability under the EEA.

The most important feature of any strategy for avoiding or mitigating corporate exposure under the EEA is a "compliance plan." Indeed, the Federal Sentencing Guidelines, which must be followed by all federal courts in sentencing, provide that an "organization" can reduce its culpability by establishing and maintaining an effective program to prevent and detect violations of the law. Moreover, a good compliance plan can also aid in convincing a United States Attorney's Office that prosecution of the corporation is not warranted because the corporation itself was victimized by a "rogue" employee.

The primary goal of compliance is to actually prevent unauthorized secrets from becoming part of the company's knowledge base. Because a good compliance plan will by definition raise the level of awareness within the organization about the importance of intellectual property, it will also lead to the increased protection of a company's own intellectual property. Since the loss or disclosure of most corporate trade secrets is most often caused by accident or negligence, a compliance plan can be an extremely effective and cost-efficient way to safeguard a company's own confidential information.

Other general goals of a compliance plan include increasing the likelihood of early discovery and avoiding liability in civil litigation. Civil lawsuits for trade secret misappropriation are on the increase, especially in technology-related industries. Just as in the criminal context, the implementation of a compliance plan is not a shield against all civil lawsuits, however it does reduce their likelihood and potential liability.

[2] Elements of a Compliance Plan

The following is a description of the eight most important elements of a compliance plan as proscribed by the Federal Sentencing Guidelines.⁸⁸⁶

[a] Standards and Procedure

The plan must include "standards and procedures to be followed" by all the employees of the organization.⁸⁸⁷ The standards should be specific enough to guide the employees in the exercise of their daily jobs. This part of the plan must also include such specific details as to the steps an employee must follow if a problem is identified, and the consequences for failing to comply.

[b] Oversight

The...