Theft of Trade Secrets Laws & Legal Defense (18 U.S.C. § 1832)
Under 18 U.S.C. § 1832, part of the Economic Espionage Act of 1996, the theft of trade secrets is a high-stakes federal white-collar crime.
Federal prosecutors and the Department of Justice (DOJ) aggressively target trade secret theft to prevent individuals and commercial competitors from illegally converting proprietary business data, technology, or intellectual property for economic advantage.
To qualify as a federal offense under 18 U.S.C. § 1832, the trade secret must be related to or included in a product or service placed into interstate or foreign commerce.
What Is a Trade Secret Under Federal Law?
Federal prosecution under 18 U.S.C. § 1832 relies on the statutory definition established in 18 U.S.C. § 1839.
A trade secret includes all forms and types of financial, business, scientific, technical, economic, or engineering information—including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes—whether tangible or intangible.
To qualify legally as a trade secret, two strict criteria must be met:
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Reasonable Security Measures: The owner must have taken reasonable steps under the circumstances to keep the information confidential (e.g., encryption, non-disclosure agreements, restricted access protocols).
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Independent Economic Value: The information must derive independent economic value, actual or potential, from not being generally known to or readily ascertainable through proper means by another person.
Statutory Elements Required for Federal Conviction
To convict a defendant under 18 U.S.C. § 1832, federal prosecutors must prove each of the following six elements beyond a reasonable doubt:
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Unauthorized Acquisition: The defendant stole, took without authorization, appropriated, carried away, concealed, or obtained the information by fraud.
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Knowledge of Proprietary Status: The defendant knew that the stolen information was proprietary and belonged to the trade secret owner.
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Qualifying Trade Secret: The information met the legal definition of a trade secret under 18 U.S.C. § 1839.
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Intent to Convert: The defendant intended to convert the trade secret for the economic benefit of someone other than the rightful owner.
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Intent to Cause Economic Harm: The defendant knew or intended that the unauthorized disclosure or theft would cause economic injury to the trade secret owner.
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Interstate or Foreign Commerce Nexus: The trade secret related to a product or service used in or intended for use in interstate or international commerce.
Penalties for 18 U.S.C. § 1832 Violations
|
Offender Category |
Statutory Prison Sentence |
Maximum Criminal Fine |
| Individual Defendant | Up to 10 years in federal prison | Up to $250,000 (or twice the gross financial gain/loss) |
| Corporation / Organization | N/A (Corporate entity) | Up to $5,000,000 or 3 times the value of the trade secret |
Note: Individual and corporate defendants convicted under 18 U.S.C. § 1832 are also subject to mandatory asset forfeiture, court-ordered restitution to victim companies, and parallel civil lawsuits under the Defend Trade Secrets Act (DTSA).
Key Legal Defenses Against 18 U.S.C. § 1832 Charges
Defending against federal trade secret theft indictments requires challenging complex technical, digital, and financial evidence. Primary legal defense strategies include:
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Reverse Engineering: Under federal law, acquiring a trade secret through honest means—such as buying a commercially available product and analyzing or reverse-engineering its construction—is completely lawful.
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Independent Discovery / Parallel Development: Demonstrating that the defendant or company independently created or developed the process, formula, or software without utilizing or accessing the trade secret owner's proprietary data.
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Failure to Protect Confidentiality: Proving that the alleged owner failed to take reasonable security precautions to keep the information secret, which invalidates its status as a protected trade secret.
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Information Is Publicly Known or Readily Ascertainable: Showing that the underlying information was already in the public domain, published in industry literature, or easily observable through normal business operations.
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Lack of Criminal Intent (Mens Rea): Demonstrating that the defendant genuinely believed they had authorization to use the information or was unaware that the data was proprietary.
Frequently Asked Questions
What is the difference between Theft of Trade Secrets (18 U.S.C. § 1832) and Economic Espionage (18 U.S.C. § 1831)?
Theft of trade secrets (18 U.S.C. § 1832) targets commercial theft intended to benefit any private individual or company. Economic espionage (18 U.S.C. § 1831) specifically involves stealing trade secrets to benefit a foreign government, foreign instrumentality, or foreign agent, and carries harsher penalties of up to 15 years in prison.
Can an employee be charged under 18 U.S.C. § 1832 for taking work files to a new job?
Yes. If an employee downloads, emails, or copies proprietary customer lists, source code, formulas, or internal strategy documents to use at a competing employer without authorization, federal prosecutors can bring criminal charges under 18 U.S.C. § 1832.
Is reverse engineering illegal under federal trade secret laws?
No. Reverse engineering is an absolute defense to federal trade secret theft charges. If an individual or company independently deconstructs a publicly available product to discover how it functions, no federal criminal violation has occurred.
Does a trade secret have to be registered with the government to be protected under 18 U.S.C. § 1832?
No. Unlike patents, trademarks, or copyrights, trade secrets are not registered with any federal government agency. Protection relies entirely on keeping the information secret through reasonable physical, digital, and contractual security measures.
What should a company or executive do if targeted by an FBI trade secret investigation?
If served with a federal grand jury subpoena, target letter, or search warrant regarding 18 U.S.C. § 1832, do not destroy files, alter electronic records, or speak to FBI agents without counsel present. Retain a qualified federal criminal defense attorney immediately to safeguard your rights and manage all government communications.
Eisner Gorin LLP can help you. Schedule your consultation by calling (818) 781-1570 or by using the contact form. Our law firm is based in Los Angeles.