A. General Skill or Knowledge

• Library: The Economic Espionage Act: A Practitioner's Handbook (ABA) (2017 Ed.)

A. General Skill or Knowledge

In the EEA, Congress sought "to ensure that the theft of intangible information is prohibited in the same way that the theft of physical items is punished."² However, policing the movement of intangible information from person to person is made far more difficult by the fact that, unlike physical items, our society—and our economy—starts from the presumption that information should be free, and its movement between persons unrestricted. For example, the patent system allows an individual, in certain circumstances, to exercise ownership over a limited set of information, carved out from the broader universe of information, which is presumed to be freely available. To obtain such ownership, an individual must make application, and be awarded an ownership of specific, and limited, information.

Trade secrets—particularly under the EEA's broad definition³—are far less certain than patents, which are carefully circumscribed, and which are publicly described in a central registry, providing advance notice of the scope of information subject to protection. The EEA requires no advance circumscription or notice; instead, the question whether information is a protected "trade secret" is usually answered after the fact, by a court.

This critical difference raises the concern that, in attempting to prevent the improper movement of information, the EEA may prevent, or at least chill, movement of information that is not only considered appropriate, but beneficial and even necessary, creating obstacles to employee mobility and, some argue, innovation.⁴ One commentator has written that:

Learning from work is the way that workers traditionally acquire the general skills and knowledge necessary to move to better jobs or start independent businesses. . . . Common law distinguishes between protected information, or firm-specific knowledge, that employees may not disclose to others and unprotected information, general knowledge and skill, that they are free to use in other employment. The inherent ambiguity between these categories is heightened because the existence of a trade secret is not established until trial, making it even more likely that employers will err on the side of caution.⁵

For this reason, courts have long drawn a distinction, in enforcing trade secret protection, between information that is "stolen," and information to which an individual was merely exposed in a former job, and which she merely remembers, and uses, in a new position.⁶

In civil trade secret cases, courts have held that employees who change jobs may make use of their "acquired experience," including information "casually retained in [the employee's] memory as the result of his work for" the prior employer.⁷ But they have also held that "to afford [trade secret] protection to the employer, the information need not be in writing but may be in the employees' memory."⁸ In The Hyman Cos., Inc. v. Brozost,⁹ an attorney who negotiated leases for one chain of jewelry stores left the company to work for a competitor. The court held that the initial employer's "methods of operations," such as "how to negotiate a lease [and] how to identify a good location," were not protected trade secrets, but specific information that could be used in negotiating leases, such as individual store profitability, was.¹⁰ Similarly, in InFlight Newspapers, Inc. v. Magazines In-Flight, LLC,¹¹ the court held that, while a former employer's customer list was not a trade secret, information contained in the former employer's bid proposals—including pricing, the contract cycle, and proposal format—were.¹²

Even finer distinctions have been necessary. For example, in Tactica Int'l, Inc. v. Atlantic Horizon Int'l, Inc., the Southern District of New York wrote that "[r]emembered information as to specific needs and business habits of particular customers is not confidential."¹³ However, in North Atlantic Instruments, Inc. v. Haber,¹⁴ the court found that in certain circumstances, this kind of "casually retained" information may be a trade secret. Haber was head of sales for a manufacturer of "specialized, technical, industrial electronics equipment" targeted toward a "niche market" in the "aerospace and high-tech industries." The court took note of the highly specific nature of the company's market: "there may be only two engineers—within a company comprised of 20,000 engineers and 100,000 employees—who might need the technology," and held that although the list of companies to which the initial employer sold products was not a trade secret, the "needle-in-the-haystack character of the search for the handful of engineers" within those companies who might use the technology made their identities trade secrets, which Haber was precluded from using for his new employer, even though he retained them in his memory.¹⁵

In a civil case, the stakes at issue are measured by damages, which bear at least a rough correlation to the economic benefit a second employer receives when it hires a competitor's employee and obtains and uses "protected information" of the prior employer. But in an EEA case, where criminal penalties are at issue, those stakes are different, and higher, and the distinctions drawn in civil cases may not be appropriate when criminal penalties are at play.¹⁶ For example, although the court found them to be trade secrets, it is hard to imagine that Mr. Haber could face imprisonment for conducting business for his second employer with engineers whom he had met while working for his initial employer. But while that result may seem inappropriate, or even unlikely, it is not foreclosed by the language of the EEA, and may cause employers and employees to err on the side of caution, dampening employee mobility and, possibly, innovation. And employees in this situation may find themselves depending on the exercise of prosecutorial discretion.¹⁷

In enacting the EEA, Congress was clearly aware of the need to draw this distinction. The statute's legislative history indicates that the EEA was not intended to apply "to individuals who seek to capitalize on the personal knowledge, skill, or abilities they may have developed" in one job when moving to another," or "to prosecute employees who change employers or start their own companies using general knowledge and skills developed while employed."¹⁸ According to the Manager's Statement for the House Bill:

It is not enough to say that a person has accumulated experience and knowledge during the course of his or her employ. Nor can a person be prosecuted on the basis of an assertion that he or she was merely exposed to a trade secret while employed. A prosecution that attempts to tie skill and experience to a particular trade secret should not succeed unless it can show that the particular material was stolen or misappropriated. Thus, the government cannot prosecute an individual for taking advantage of the general knowledge and skills or experience that he or she obtains or comes by during his tenure with a company. Allowing such prosecutions to go forward and allowing the risk of such charges to be brought would unduly endanger legitimate and desirable economic behavior.¹⁹

Nevertheless, in reconciling the House and Senate bills, Congress deliberately "eliminated the portion of the definition of trade secret that indicated that general knowledge, skills and experience were not included in the meaning of that term," finding the language "unnecessary and redundant" because "the definition of trade secrets in itself cannot include general knowledge."²⁰

Courts applying the EEA have also recognized the need to address this tension.²¹ In United States v. Martin, the First Circuit wrote that the EEA:

[W]as not designed to punish competition, even when such competition relies on the know-how of former employees of a direct competitor. It was, however, designed to prevent those employees (and their future employers) from taking advantage of confidential information gained, discovered, copied, or taken while employed elsewhere.²²

The Martin court had little difficulty finding that an employee crossed the line between "general skill and knowledge" and "confidential information" belonging to her employer, particularly in light of emails forwarding information to a prospective new employer and referring to her acts...