Friday, February 15, 2013
Sixth Circuit Hears Criminal Trade Secrets Case Concerning Giant Tires
You might not think a case about giant tires would have much to do with criminal law, but a recent case before the Sixth Circuit Court of Appeals concerning criminal trade secrets involved just that. The case, U.S. v. Howley, involves a trade secrets prosecution under 18 U.S.C. Section 1832(a). The two men at the center of the case, Sean Edward Howley and Clark Alan Roberts, were convicted of stealing trade secrets and engaging in wire fraud.
The case involved engineers who worked for Wyko, an American company that provides parts to tire manufacturers like Goodyear. Apparently the story began when a government owned Chinese company wanted to get in on the giant tire building business. Tires for huge earthmovers and giant bulldozers are incredibly expensive, complicated items that are only produced by a handful of companies around the world.
While servicing some of the Goodyear machines, Howley and Roberts (who had already signed confidentiality agreements with Goodyear) snuck some pictures. This information was combined with sketches Wyko already obtained from a former Goodyear employee of the machines used to make the tires. This was enough to allow Wyko to start working on a machine of their own for the Chinese company.
In a curious twist, Howley and Roberts claimed that they never stole trade secrets, despite clear evidence of their photographs. The two argued that a trade secret was only a trade secret when the person who owns it has taken measures to secure the information and if the supposedly secret information has value because it is not widely known. The Sixth Circuit flatly rejected the defendants’ arguments, saying that the information was securely kept, pointing out that both had been required to sign a confidentiality agreement and to specifically agree not to take any pictures during their visit to the plant. Moreover, the secret was economically valuable given the lengths Wyko and the Chinese company went to obtain it.
More bad news for the defendants came when the government cross-appealed their sentence, originally a four-month period of home confinement. According to prosecutors, the issue was that the sentence did not match the value of the criminal act. There were three estimates of damage provided by the government: the contract price between the Chinese firm and Wyko - $305,000; the price of Goodyear to make the equipment - $520,000; and finally, Goodyear’s annual sales of the giant tires - $20 million.
The lower court never fully grappled with the estimates given by prosecutors, saying they had failed to prove any economic loss, and decided to simply give Howley and Roberts the minimum sentence allowed. The Sixth Circuit disagreed with the lower court, saying that while it may be difficult to fix the value of a trade secret, the lower court should have at least tried. Even the lowest estimate provided by the prosecution would have resulted in a 37 to 46 month prison sentence. The Court then decided to remand the case for resentencing.
To read the full opinion, click here.
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