Convicted California economic espionage defendant sentenced

A secret loses its mystery once it’s told. For businesses, the value of a trade secret depends upon how well confidential information is protected. Trade secret leaks put companies and, ultimately, the nation’s economy, at great financial risk and gives competitors an unfair advantage.

California now has the distinction of having the first ever jury trial to convict defendants of economic espionage. In fact, fewer than two dozen people in the U.S. have ever been convicted of the crime since the 1996 passage of the Economic Espionage Act. The defendants, a former California businessman and an ex-DuPont engineer, were found guilty in March.

The one-time entrepreneur recently was sentenced in federal court to a 15-year prison term. The defendant also was fined $28 million — the same amount the East Bay man reportedly took from Chinese government-controlled companies to swipe a DuPont trade secret. The convicted man was found guilty of employing three former DuPont engineers to steal an intellectual recipe for a protected white pigment.

The pigment titanium dioxide enhances white and is a staple in common but plentiful products, like paper. The defendant paid the engineers to obtain confidential DuPont documents that described the pigment making process. A Chinese factory was built to manufacture the pigment using stolen DuPont instructions.

Two engineers were convicted in the conspiracy and the third committed suicide prior to making a plea deal. The engineer convicted by a jury is 78 years old. He is free on bail until sentencing.

The federal judge who sentenced the 56-year-old ex-businessman declared the defendant chose greed over “his adopted country.” The man’s wife, who operated the business with her husband, also faces charges including obstruction of justice. She entered a not guilty plea to the charges.

While most intellectual property claims are resolved through civil litigation, some cases are also tried in criminal courts. Economic espionage is not a rare crime, but it is rarely prosecuted.

Source: San Jose Mercury News, “East Bay man gets 15 years for selling trade secrets to China” Paul Elias, Associated Press, Jul. 11, 2014