Legal Definitions - Economic Espionage Act

The Economic Espionage Act is a United States federal law enacted in 1996 that makes it a crime to steal or illegally obtain "trade secrets." A trade secret is any valuable confidential business information that provides a company with a competitive advantage, such as formulas, designs, processes, customer lists, or marketing strategies, provided the company takes reasonable steps to keep it secret.

The Act primarily targets two categories of offenses:

• Misappropriation of Trade Secrets: This involves the theft or unauthorized acquisition of trade secrets for the benefit of anyone other than the rightful owner. This could be for personal gain, to benefit a domestic competitor, or for other purposes.
• Economic Espionage for a Foreign Entity: This is a more severe offense, specifically targeting the theft or unauthorized acquisition of trade secrets with the intent to benefit a foreign government, foreign instrumentality, or foreign agent.

The law also applies to individuals who knowingly receive, purchase, or possess trade secret information that they know was stolen. It is sometimes referred to as the Industrial Espionage Act.

Examples:

• Scenario 1 (Misappropriation by an Insider): A lead software developer at a cutting-edge artificial intelligence firm, frustrated with their current employer, secretly copies the source code for the company's proprietary AI algorithm onto a personal drive before leaving to join a rival startup. The developer intends to use this stolen code to accelerate the new company's product development.

  How it illustrates: This situation demonstrates the misappropriation of trade secrets (the AI algorithm's source code) by an individual for the benefit of a competitor, which is a direct violation of the Economic Espionage Act.

• Scenario 2 (Economic Espionage for a Foreign Government): A foreign intelligence agency orchestrates a sophisticated cyberattack against a major American aerospace company, successfully exfiltrating highly confidential blueprints for a next-generation stealth aircraft. The agency's goal is to provide these designs to their country's military to develop a similar aircraft without incurring the immense research and development costs.

  How it illustrates: This example clearly falls under the economic espionage provision, as it involves the theft of trade secrets (stealth aircraft blueprints) specifically intended to benefit a foreign government or instrumentality, carrying more severe penalties under the Act.

• Scenario 3 (Knowingly Possessing Stolen Trade Secrets): A small manufacturing company owner is approached by a former employee of a larger, more established competitor. The former employee offers to sell the owner a USB drive containing detailed schematics and production processes for the competitor's highly efficient new manufacturing robot. Despite strong suspicions that the information is stolen, the owner purchases the drive, believing it will give their company an unfair advantage.

  How it illustrates: In this case, the manufacturing company owner knowingly receives and purchases trade secret information (robot schematics and production processes) that they have reason to believe was stolen, which is also a criminal offense under the Economic Espionage Act.