By IT-Lex Intern Shannon Allen (LinkedIn)

In the recent opinion U.S. v. Howley, the two defendants took cellphone pictures of a competitor’s giant truck tires and were federally convicted of sharing trade secrets.  Is this reasonable?

The Seattle Copyright Watch blog explains what happened:

“Wyko Tire Technology (“Wyko”), a Tennessee company, supplied Goodyear with parts for tire assembly machines to manufacture these huge tires. HaoHua South China Rubber Company, a competitor to the U.S. tire companies, contracted Wyko to supply four tire-building parts so that it could manufacture tires for large earthmoving vehicles.”

So far so good, except, “Wyko did not know how to make the parts it agreed to make. . . .”   Oops.  Well kind of.  See, Wyko hired previous Goodyear engineers to design and build the assembly machines required to manufacture these types of giant tires.  Unfortunately for Wyko, there were still missing pieces to the process that were, you guessed it, kept secret by Goodyear.

Not to worry, Wyko “knew that Goodyear used machines like Wyko needed to design and build.” So, here’s where the rubber hits the road (sorry, couldn’t resist): a couple of Wyko engineers simply went down to a Goodyear plant in Kansas to take photos of the tires in order to obtain information about the missing pieces of the manufacturing puzzle.  Brilliant, right?  Wrong.

Goodyear found out and called the FBI, and they both “were prosecuted under 18 USC §1832(a) for theft of trade secrets.”

What is a trade secret?

“[I]nformation that its owner has taken reasonable measures to keep secret and that derives independent economic value from not being generally known to, and not being readily ascertainable through proper means by, the public.”

A defendant breaks the law

“when he ‘steals’ or ‘without authorization photographs’ a trade secret, intending or knowing that the offense will injure any owner of that trade secret.”

Here the court found that

“Goodyear took reasonable measures to keep the design of the tire assembly machines secret by fencing the factory property [evidence that Goodyear valued the contents inside the fence] and requiring visitors to pass through a security checkpoint, [both Wyco engineers passed through a security checkpoint, so they should have known that Goodyear wanted to protect what was inside] obtain permission to visit in advance, sign confidentiality agreements [both Wyco engineers signed confidentiality agreements, so they should have known that Goodyear wanted secrets kept] and to agree not to take photos [both Wyco engineers took cellphone pictures while on property]. Goodyear also required all of its suppliers to keep Goodyear’s proprietary information secret.”

The men were convicted by a jury of multiple counts of theft of trade secrets (for taking the photos) and wire fraud, for sending them via cell phone. On appeal, the Sixth Circuit affirmed the convictions.” Both men were initially sentenced to “four month of home confinement, 150 hours of community service and four years of probation.”

But the government wanted more, arguing that “the minimum range under the guidelines is 37 to 46 months in prison. . . .[and] [t]he district court did not provide a reason for its sentencing decisions.”  So, [t]he Sixth Circuit . . . instruct[ed] the district court to articulate its reasoning.” We’ll see whether they’ll get the jail time the government seeks.

It’d be interesting to hear your thoughts on this case.

§ One Response to Cellphone Pics Of Giant Tires Lead To Federal Convictions

• Eric Everson says:

  March 11, 2013 at 9:37 am

  Thanks for calling this case to our attention Ms. Allen! In a global business environment, trade secret protections are a valuable legal resource. Fighting to enforce trade secret intellectual property rights can be a valuable risk offset that can protect substantial investment by the company. The question I wrestle with in criminal prosecution of the engineers is whether it is the engineers or the company they work for that should be pursued in such cases. Additionally the Achilles heel of trade secret protections has always been reverse engineering where we examine the ease of difficulty in a concept’s duplication or whether it is a concept readily discoverable by others; I see cause for injunction in a case like this, but prison time for doing something they were presumably requested to do by their employer remains highly debatable… -Eric E Ref: http://allenlawllc.org/

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