Intellectual Property Crimes

• Author: Todd Kowalski/Caitlyn Coffey/Christina Danberg/Jessica Tsibidis-Goldberg
• Pages: 1003-1049

INTELLECTUAL PROPERTY CRIMES

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1004

II. TRADE SECRET THEFT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1005

A. Economic Espionage Act of 1996 . . . . . . . . . . . . . . . . . . . . . 1005

1. Definition of Trade Secret . . . . . . . . . . . . . . . . . . . . . . . 1006

2. Elements of the Criminal Offenses .. . . . . . . . . . . . . . . . 1007

a. Economic Espionage . . . . . . . . . . . . . . . . . . . . . . . 1007

b. Theft of Trade Secrets . . . . . . . . . . . . . . . . . . . . . . 1008

3. Applicability to Conduct Abroad . . . . . . . . . . . . . . . . . . 1010

4. Prosecutions Under the EEA . . . . . . . . . . . . . . . . . . . . . 1010

5. Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1011

a. Independent Development . . . . . . . . . . . . . . . . . . . 1012

b. Reverse Engineering . . . . . . . . . . . . . . . . . . . . . . . 1012

c. Lack of Secrecy . . . . . . . . . . . . . . . . . . . . . . . . . . 1013

d. Statute of Limitations . . . . . . . . . . . . . . . . . . . . . . 1013

B. National Stolen Property Act . . . . . . . . . . . . . . . . . . . . . . . . 1013

1. Transported in Interstate or Foreign Commerce . . . . . . . 1014

2. Goods, Wares, or Merchandise . . . . . . . . . . . . . . . . . . . 1015

3. Minimum Value of $5,000 . . . . . . . . . . . . . . . . . . . . . . 1015

4. Knowledge of the Same . . . . . . . . . . . . . . . . . . . . . . . . 1016

5. Stolen, Converted, or Taken by Fraud . . . . . . . . . . . . . . 1016

C. Trade Secrets Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1017

D. Mail and Wire Fraud Statutes . . . . . . . . . . . . . . . . . . . . . . . 1018

E. Computer Fraud and Abuse Act . . . . . . . . . . . . . . . . . . . . . . 1019

F. State Law Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1020

III. TRADEMARK COUNTERFEITING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1020

A. Trademark Counterfeiting Act . . . . . . . . . . . . . . . . . . . . . . . 1021

1. Relation to the Lanham Act .

.

. . . . . . . . . . . . . . . . . . . . . 1021

2. The 2006 Amendment . .. . . . . . . . . . . . . . . . . . . . . . . . 1022

3. The PRO-IP Act of 2008 . .. . . . . . . . . . . . . . . . . . . . . . 1023

4. Elements of the Criminal Offense . . . . . . . . . . . . . . . . . 1023

5. Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1025

B. RICO and Money Laundering Acts . . . . . . . . . . . . . . . . . . . . 1025

C. Other Federal Statutes . .. . . . . . . . . . . . . . . . . . . . . . . . . . . 1026

IV. COPYRIGHT . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1027

A. Copyright Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1027

1. Elements of the Offense . . . . . . . . . . . . . . . . . . . . . . . . 1031

a. Existence of a Valid Copyright . .. . . . . . . . . . . . . . 1031

b. Infringement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1032

c. Willfulness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1034

1003

d. Financial Gain or Threshold Violation . . . . . . . . . . 1035

B. The Internet and the First Sale Doctrine . . . . . . . . . . . . . . . . 1035

C. Internet Service Provider Liability . . . . . . . . . . . . . . . . . . . . 1037

V. PATENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1040

A. False Marking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1040

B. Counterfeiting or Forging Letters Patent . . . . . . . . . . . . . . . 1041

VI. CABLE TELEVISION AND SATELLITE DESCRAMBLING . . . . . . . . . . . . . . . 1042

VII. SENTENCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1042

A. Economic Espionage Act of 1996 . . . . . . . . . . . . . . . . . . . . . 1043

B. National Stolen Property Act . . . . . . . . . . . . . . . . . . . . . . . . 1044

C. Trade Secrets Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1044

D. Mail and Wire Fraud Statutes . . . . . . . . . . . . . . . . . . . . . . . 1045

E. Racketeer Influenced and Corrupt Organizations Act . . . . . . 1046

F. Trademark Counterfeiting Act and Copyright Felony Act . . . 1046

G. False Marking and Counterfeiting or Forging Letters Patent 1049

H. Cable Television and Satellite Descrambling . . . . . . . . . . . . 1049

I. INTRODUCTION

Intellectual property (“IP”) constitutes a substantial portion of today’s American

economy.

1

See THE U.S. PATENT & TRADEMARK OFFICE, INTELLECTUAL PROPERTY AND THE U.S. ECONOMY (3d ed.

2019), https://www.uspto.gov/sites/default/files/documents/uspto-ip-us-economy-third-edition.pdf (noting that

“IP-intensive industries” accounted for 41% of U.S. GDP and 33% of all U.S. employment).

IP rights are critical to both industry and government,

2

See J. Patrick Gelinne, J. Donald Fancher & Emily Mossburg, The Hidden Costs of an IP Breach: Cyber

Theft and the Loss of Intellectual Property, DELOITTE INSIGHTS (July 25, 2016), https://www2.deloitte.com/

insights/us/en/deloitte-review/issue-19/loss-of-intellectual-property-ip-breach.html#endnote-2.

yet civil sanc-

tions rarely deter infringement of intellectual property.

3

Technological advancement facilitates theft while making it harder to detect. See NAT’L RSCH. COUNCIL,

THE DIGITAL DILEMMA: INTELLECTUAL PROPERTY IN THE INFORMATION AGE 3 (2000). Even if theft is detected,

state civil remedies are historically difficult to pursue. See THE NAT’L BUREAU OF ASIAN RSCH., THE IP

COMMISSION REPORT: THE REPORT OF THE COMMISSION ON THE THEFT OF AMERICAN INTELLECTUAL PROPERTY

73 (May 2013), https://www.nbr.org/wp-content/uploads/pdfs/publications/IP_Commission_Report.pdf (discussing

challenges for litigants in state courts “including limited access to evidence and difficulty in enforcing judgments”).

Criminal prosecution also remains a limited deterrent. See Eldar Haber, The Criminal Copyright Gap, 18 STAN.

TECH. L. REV. 247, 276 (2015) (observing that criminal prosecutions of copyright violation are still rare).

Some intellectual property

thieves view civil damages simply as a cost of doing business.

4

See J. Derek Mason, Gerald J. Mossinghoff & David A. Oblon, The Economic Espionage Act: Federal

Protection for Corporate Trade Secrets, 16 COMPUT. L. 14, 15 (1999) (noting that “even if a company does bring

suit, the civil penalties often are absorbed by the offender” and the stolen property simply retained for future

prot); see also COMPUT. CRIME & INTELL. PROP. SECTION, CRIM. DIV., U.S. DEP ’T OF JUST., REPORTING

INTELLECTUAL PROPERTY CRIME: A GUIDE FOR VICTIMS OF COPYRIGHT INFRINGEMENT, TRADEMARK

COUNTERFEITING, AND TRADE SECRET THEFT 4 (3d ed. 2018), https://www.justice.gov/criminal-ccips/le/

891011/download (explaining government efforts to expand criminal sanctions so that IP violators do not see

civil penalty as mere cost of doing business).

Moreover, some

forms of IP infringement, like piracy of intangible goods and information, may

reduce or destroy the intellectual property’s value even if the original owner

1.

2.

3.

4.

1004 AMERICAN CRIMINAL LAW REVIEW [Vol. 60:1003

remains in possession of the property.

5

COMPUT. CRIME & INTELL. PROP. SECTION, CRIM. DIV., U.S. DEP’T OF JUST., PROSECUTING INTELL. PROP.

CRIMES 174 (4th ed. 2013) [hereinafter IP CRIMES MANUAL], https://www.justice.gov/file/442151/download.

The estimated total annual losses to the

United States and its companies from various forms of IP infringement could be

anywhere between $225 to $600 billion.

6

See THE COMM’N ON THE THEFT OF AM. INTELL. PROP., THE NAT’L BUREAU OF ASIAN RSCH. 1 (2017),

https://www.nbr.org/wp-content/uploads/pdfs/publications/IP_Commission_Report_Update.pdf.

In addition to causing economic damage

and undermining entrepreneurialism in the U.S., IP infringement may also com-

promise public safety when counterfeit materials are used in pharmaceuticals, elec-

trical appliances, and toys.

7

See Jill Bainbridge, Intellectual Property Rights Infringement Threatens Public Safety, BLAKE MORGAN

(Sept. 2021), https://www.blakemorgan.co.uk/intellectual-property-rights-infringement-threatens-public-safety/.

The marked increase in IP infringement—combined

with the ineffective deterrence of civil remedies—has led federal and state govern-

ments to criminalize IP infringement.

8

This article examines the key areas of intellectual property law that provide the

bases for criminal prosecutions. Section II examines the theft of trade secrets.

Section III discusses trademark counterfeiting. Section IV examines copyright

infringement. Section V considers patent violations. Section VI looks at cable tele-

vision and satellite descrambling. Section VII describes sentencing for intellectual

property crimes.

II. TRADE SECRET THEFT

Trade secret theft, one of the challenges facing U.S. corporations engaged in

global business,

9

See BRIAN T. YEH, CONG. RSCH. SERV., R43714, PROTECTION OF TRADE SECRETS: OVERVIEW OF CURRENT

L. AND LEGIS. 1 (2016), https://sgp.fas.org/crs/secrecy/R43714.pdf.

is addressed by the Economic Espionage Act (“EEA”).

10

Part A

of this Section discusses the EEA. Parts B through E discuss other federal statutes

that prosecutors have used to penalize the misappropriation of trade secrets, albeit

without overwhelming success. These statutes include the National Stolen

Property Act, the Trade Secrets Act, the Mail and Wire Fraud statutes, and the

Racketeer Influenced and Corrupt Organizations Act (“RICO”). Part F describes

various state attempts to combat the theft of trade secrets.

11

A. Economic Espionage Act of 1996

Congress enacted the EEA in 1996 in response to increasing efforts by foreign

governments, instrumentalities, and agents to misappropriate the trade secrets of

U.S. companies.

12

See Economic Espionage Act of 1996, Pub. L. No. 104-294, 110 Stat. 3488 (1996) (codified at 18 U.S.C.

§§ 1831–39); see also U.S. DEP’T OF JUST., JUST. MANUAL, CRIM. RES. MANUAL § 1122 (2018) [hereinafter

JUSTICE MANUAL CRM], https://www.justice.gov/jm/criminal-resource-manual-1122-introduction-economic-

espionage-act.

The EEA provides criminal and civil penalties for the theft of

5.

6.

7.

8. See IP CRIMES MANUAL, supra note 5, at 3–6.

9.

10. See Economic Espionage Act of 1996 (EEA), 18 U.S.C. §§ 1831–39.

11. See YEH, supra note 9, at 6 (noting that trade secret law is primarily a matter of state law).

12.

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