Intellectual Property Crimes

• Author: Kassie Miller/Cesar Azrak/Rianna Jha/Victoria Kingham
• Pages: 1055-1104

INTELLECTUAL PROPERTY CRIMES

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1056

II. TRADE SECRET THEFT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1057

A. Economic Espionage Act of 1996 . . . . . . . . . . . . . . . . . . . . . 1058

1. Definition of Trade Secret . . . . . . . . . . . . . . . . . . . . . . . 1058

2. Elements of the Criminal Offenses . . . . . . . . . . . . . . . . . 1060

a. Economic Espionage . . . . . . . . . . . . . . . . . . . . . . . 1060

b. Theft of Trade Secrets . . . . . . . . . . . . . . . . . . . . . . 1061

3. Applicability to Conduct Abroad . . . . . . . . . . . . . . . . . . 1062

4. Prosecutions Under the EEA . . . . . . . . . . . . . . . . . . . . . 1063

5. Defenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1064

a. Independent Development . . . . . . . . . . . . . . . . . . . 1065

b. Reverse Engineering . . . . . . . . . . . . . . . . . . . . . . . 1065

c. Lack of Secrecy . . . . . . . . . . . . . . . . . . . . . . . . . . . 1066

d. Statute of Limitations . . . . . . . . . . . . . . . . . . . . . . . 1066

B. National Stolen Property Act . . . . . . . . . . . . . . . . . . . . . . . . 1066

1. Transported in Interstate or Foreign Commerce . . . . . . . 1067

2. Goods, Wares, or Merchandise . . . . . . . . . . . . . . . . . . . 1068

3. Minimum Value of $5,000. . . . . . . . . . . . . . . . . . . . . . . 1069

4. Knowledge of the Same. . . . . . . . . . . . . . . . . . . . . . . . . 1070

5. Stolen, Converted, or Taken by Fraud . . . . . . . . . . . . . . 1070

C. Trade Secrets Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1070

D. Mail and Wire Fraud Statutes . . . . . . . . . . . . . . . . . . . . . . . 1071

E. Computer Fraud and Abuse Act . . . . . . . . . . . . . . . . . . . . . . 1072

F. State Law Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1073

III. TRADEMARK COUNTERFEITING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1074

A. Trademark Counterfeiting Act . . . . . . . . . . . . . . . . . . . . . . . 1075

1. Relation to the Lanham Act . . . . . . . . . . . . . . . . . . . . . . 1075

2. The 2006 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 1075

3. The PRO-IP Act of 2008 . . . . . . . . . . . . . . . . . . . . . . . . 1076

4. Elements of the Criminal Offense . . . . . . . . . . . . . . . . . 1077

5. Defenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1078

B. RICO and Money Laundering Acts . . . . . . . . . . . . . . . . . . . . 1079

C. Other Federal Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1080

IV. COPYRIGHT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1080

A. Copyright Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1081

1. Elements of the Offense . . . . . . . . . . . . . . . . . . . . . . . . 1084

a. Existence of a Valid Copyright . . . . . . . . . . . . . . . . 1085

b. Infringement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1085

c. Willfulness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1088

1055

d. Financial Gain or Threshold Violation . . . . . . . . . . . 1088

B. The Internet and the First Sale Doctrine . . . . . . . . . . . . . . . . 1089

C. Internet Service Provider Liability . . . . . . . . . . . . . . . . . . . . 1090

V. PATENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1093

A. False Marking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1094

B. Counterfeiting or Forging Letters Patent . . . . . . . . . . . . . . . 1095

VI. CABLE TELEVISION AND SATELLITE DESCRAMBLING . . . . . . . . . . . . . . . 1095

VII. SENTENCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1096

A. Economic Espionage Act of 1996 . . . . . . . . . . . . . . . . . . . . . 1097

B. National Stolen Property Act . . . . . . . . . . . . . . . . . . . . . . . . 1098

C. Trade Secrets Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1098

D. Mail and Wire Fraud Statutes . . . . . . . . . . . . . . . . . . . . . . . 1099

E. Racketeer Influenced and Corrupt Organizations Act. . . . . . . 1100

F. Trademark Counterfeiting Act and Copyright Felony Act . . . . 1100

G. False Marking and Counterfeiting or Forging Letters Patent . 1103

H. Cable Television and Satellite Descrambling. . . . . . . . . . . . . 1103

I. INTRODUCTION

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

economy.

1

IP rights are critical to both industry and government,

2

yet civil sanc-

tions rarely deter infringement of intellectual property.

3

Some intellectual property

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

4

Moreover, some

1. See ECON. & STATISTICS ADMIN. & THE U.S. PATENT & TRADEMARK OFFICE, INTELLECTUAL PROPERTY

AND THE U.S. ECONOMY: 2016 UPDATE (2016), https://www.uspto.gov/sites/default/files/documents/

IPandtheUSEconomySept2016.pdf (describing “IP-intensive industries” as “a major, integral and growing part

of the U.S. economy” and noting that as of 2014, IP-intensive industries constitute 38.2% of U.S. GDP); see also

Intangible Asset Market Value Survey, OCEAN TOMO (Sept. 22, 2020), https://www.oceantomo.com/intangible-

asset-market-value-study/ (finding that the implied intangible asset value of the S&P 500 grew to over 90% by

July 1, 2020).

2. See Jon 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.

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).

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/

1056 AMERICAN CRIMINAL LAW REVIEW [Vol. 59:1055

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

remains in possession of the property.

5

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

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,

automobile parts, and toys.

7

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

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; trade secret law is pri-

marily a matter of state law.

11

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

civil penalty as mere cost of doing business).

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

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

IP CRIMES MANUAL] (“Although many of these means of misappropriation leave the original property in the

hands of its owner, they reduce or destroy the trade secret’s value nonetheless.”).

6. See THE COMMISSION ON THE THEFT OF AMERICAN INTELLECTUAL PROPERTY, THE NATIONAL BUREAU OF

ASIAN RESEARCH 1 (2017), https://www.nbr.org/wp-content/uploads/pdfs/publications/IP_Commission_

Report_Update.pdf.

7. See Office of the United States Trade Representative, 2021 Special 301 Report 9 (2021), https://ustr.gov/

sites/default/files/files/reports/2021/2021%20Special%20301%20Report%20(final).pdf.

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

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

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

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

11. See YEH, supra note 9, at 6.

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