United States: Industrial Espionage And The Defend Trade Secrets Act

Last Updated: August 25 2016
Article by Bret Cohen and Nicholas W. Armington

American corporations are facing an ever increasing threat of misappropriation of their valuable trade secrets through industrial espionage, defined as the theft of a company's trade secrets by an actor intending to convert the trade secret to the economic benefit of a competitor. Indeed, former Attorney General Eric Holder has said that "[t]here are only two categories of companies affected by trade-secret theft: those that know they've been compromised and those that don't know yet." (See Protection of Trade Secrets: Overview of Current Law and Legislation). With this "significant and growing threat" of industrial espionage by competitors, current and former employees, and even foreign intelligence services, American companies must be vigilant and employ all available measures to protect against misappropriation of valuable trade secrets. (See Office of the National Counterintelligence Executive, Foreign Spies Stealing U.S. Economic Secrets in Cyberspace). In the recently enacted Defend Trade Secrets Act ("DTSA"), which creates a federal civil cause of action for trade secret misappropriation, American companies have been given a number of robust tools to prevent, or remedy ongoing misappropriation of valuable trade secrets. The DTSA was recently put to use by Monsanto Company ("Monsanto") and The Climate Corporation ("Climate") in Monsanto Co. v. Chen, Case No. 4:16-cv-876 (E.D. Mo.), after a former employee, with an offer to join a competing Chinese seed company, allegedly used sophisticated software capable of performing digital reconnaissance and exfiltrating data to download trade secret information from secure servers. The district court granted orders for a temporary restraining order and preliminary injunction directing the return of trade secrets and identification of cloud data storage where the trade secrets were stored. While not specifically put to use in this case, the new civil seizure mechanism of the DTSA, discussed in more detail below, is another tool that may be useful in cases like the present case where a former employee has stored misappropriated trade secret information in cloud data storage and may not fully comply with a TRO or preliminary injunction.

Monsanto's Complaint for Trade Secret Misappropriation

On June 16, 2016, Monsanto filed a complaint in the United States District Court for the Eastern District of Missouri alleging violation of the DTSA by a former employee's misappropriation and unauthorized use and removal of confidential and trade secret information from Monsanto's secure data environment. Jiunn-Ren Chen was employed as a data science analyst at Monsanto. In June, Mr. Chen announced his resignation and admitted that he was considering an offer to serve as Director of Resource Management and Bioinformatics for a Chinese seed company. Following this announcement, Monsanto performed a standard review of Mr. Chen's company issued computers and allegedly discovered that the computers were loaded with highly sophisticated and unauthorized software that could be used to perform reconnaissance, seek vulnerabilities in the system, exfiltrate data, and conceal activity on the device through cloaking functionality. Mr. Chen denied knowledge of the software, but refused to provide for forensic examination additional data devices he admitted that he had connected to his work computer. Additionally, after Mr. Chen returned his work computer, Monsanto detected that Mr. Chen's company issued unique login credentials were used to remove fifty-two files from Monsanto's secure environment containing proprietary material important to Monsanto and Climate's current and future business. When confronted with the removal of these files during an exit interview, Mr. Chen allegedly made the inculpatory statement "did you find files moving," and further admitted to contact with another Chinese national who recently plead guilty to conspiracy to commit theft of Monsanto trade secrets.

Granting of Temporary Restraining Order and Preliminary Injunction

In its motion for a temporary restraining order, Monsanto argued that there was a substantial likelihood that it would succeed on the merits because Mr. Chen used improper means, including unauthorized access to Monsanto's secure environment, in an effort to covertly acquire highly valuable trade secret information that Monsanto had taken reasonable steps, as part of its ongoing standard operating procedures, to keep confidential. Monsanto also argued that it would suffer irreparable harm if Mr. Chen was not prevented from disclosing trade secrets to the agricultural company in China for which Mr. Chen is considering accepting employment because the misappropriated material relates to strategy and sensitive products of Climate and further explains confidential research methods and results. Monsanto also argued that the balance of the harms weighed in its favor because Mr. Chen would be in no worse position if the order issued as he has no right to use or disclose the trade secrets, and also argued that issuance of a restraining order would further the public interest because "the American people, who comprise the public, have an interest in protecting trade secrets developed by American companies from foreigners who seek to steal them." The Court granted a temporary restraining order directing Mr. Chen to return the misappropriated trade secrets, identify the location where such information is stored, and enjoining Mr. Chen from disclosing the trade secret information.

The Court also granted an agreed to preliminary injunction ordering Mr. Chen to return all trade secret information, disclose the persons to which the trade secret information was disclosed, identify all cloud storage locations where trade secret information was kept, and enjoining Mr. Chen from further disclosure of Monsanto and Climate trade secrets. This order followed a motion for a preliminary injunction in which Monsanto explained that it had uncovered additional evidence of Mr. Chen's misappropriation of trade secrets. Specifically, Monsanto alleged that Mr. Chen sent a number of emails to an outside account using his work email that contained confidential trade secret files related to Monsanto's proprietary Growth Stage Tracker and FieldScripts programs which relate to assisting farmers to maximize the return on their land. Monsanto explained that these systems derive value from their confidentiality and thus divulging this information to a competitor would be particularly damaging. Mr. Chen also accessed Climate's secure network during travels to China and visited competitors of Monsanto and Climate shortly before resigning.

Potential for Use of Civil Seizure Mechanism

In the present case, Monsanto pursued a replevin action to obtain the return of the trade secrets in Mr. Chen's possession, and did not seek the seizure of the misappropriated trade secrets through the new civil seizure mechanism of the DTSA. The civil seizure mechanism is a potent but, as of yet, unused protection provided by the DTSA. Civil seizure is a preventative tool employed prior to a finding of misappropriation by which a court may "issue an order providing for the seizure of property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action." Using this tool, a company aware of a potential misappropriation of its trade secrets may quickly prevent further dissemination of that information during the pendency of a formal DTSA case. Orders providing for the seizure of property under the DTSA are only granted in "extraordinary circumstances." To qualify for a civil seizure order, the requesting party must provide factual information satisfying a number of predicate factors, including specifying with reasonable particularity the matter to be seized and showing that a TRO or preliminary injunction would be inadequate. (See Explaining the Provisions of the Defend Trade Secrets Act ).

While yet to be employed, cases like the present, where an employee has potentially used external digital storage devices and/or cloud storage services to allegedly store misappropriated trade secrets may be a candidate for use of the civil seizure mechanism, especially if it is clear that the employee may not fully comply with a TRO or preliminary injunction. There is no shortage of cases where employees have allegedly stored misappropriated trade secrets using cloud storage services and other external storage media. See, e.g., Earthbound Corp. v. Mitek USA, Inc., Case No. C16-1150 RSM (W.D. Wash. Aug. 19, 2016) (granting TRO where former employee allegedly misappropriated trade secrets using Dropbox and Google Drive); Frisco Medical Ctr., L.L.P. v. Bledsoe, Case No. 4:12-cv-37 (E.D. Tex. Nov. 30, 2015) (forensic examination of former employee's computer equipment revealed that numerous files containing trade secret information were uploaded to employee's Dropbox account and that USB storage devices were attached to computer before Dropbox was uninstalled). Given the increasing threat of industrial espionage using advanced software and computing techniques, cases involving misappropriation and storage of trade secrets using digital means may be the first in which we see usage of the DTSA's civil seizure mechanism.

The Climate Corporation is a wholly-owned subsidiary of Monsanto and helps the world's formers sustainably increase their productivity using proprietary algorithms and predictive analytics to enhance technical tools sold to farmers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Nicholas W. Armington
Similar Articles
Relevancy Powered by MondaqAI
Seyfarth Shaw LLP
McLane Middleton, Professional Association
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Seyfarth Shaw LLP
McLane Middleton, Professional Association
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions