On March 5, 2014, the U.S. Attorney’s Office in San Francisco secured the first-ever federal jury conviction on charges brought under the Economic Espionage Act of 1996. The defendants -- two individuals (Walter Liew and Robert Maegerle) and Mr. Liew’s company USA Performance Technology Inc. -- were convicted of stealing DuPont Co.’s method for making titanium dioxide, a “white pigment” chemical used to whiten various products from cars to the middle of Oreo cookies, which garners $17 billion in sales worldwide.
Prosecutors said that Liew and his wife launched their small California company in the 1990s, aimed at exploiting China’s desire to build a DuPont-like factory to make the chemical. The couple then recruited former DuPont scientists with the goal of winning Chinese contracts. Mr. Maegerle worked for DuPont as an engineer from 1956 to 1991 before joining the Liews and, according to prosecutors, providing the Liews with detailed information about DuPont’s Taiwan factory. Tze Chao, another former DuPont scientist who worked with Liews, pleaded guilty in 2012 to conspiracy to commit economic espionage, and another former DuPont engineer linked to the case, Tim Spitler, committed suicide. Mr. Liew allegedly received over $20 million from the Pangang Group (companies purportedly controlled by the government of the People’s Republic of China) for efforts to deliver the chemical recipe to China.
With a clean sweep by the prosecution of guilty findings on the verdict sheet, the defendants’ arguments that the Chinese obtained the information from public sources, such as expired patents, and that nothing was stolen from DuPont were not convincing. Mr. Liew (facing a maximum of 20 years in prison) and Mr. Maegerle (facing a maximum of 15 years) are scheduled to be sentenced on June 10.
The verdict is but the latest high-profile example of the consequences possible when trade secrets are stolen. The U.S. Attorney’s Office and other government agencies have made it a priority to fight economic espionage and trade secret theft that threaten U.S. economic and national security interests. In its current form, the Economic Espionage Act allows only federal prosecutors to bring criminal trade secrets charges against persons who have stolen trade secrets. Perhaps due to the complexities of the subject matter in trade secret cases, prosecutors have primarily pursued such charges in bench trials. Achieving a jury verdict against Mr. Liew and his co-defendants perhaps will open the door to further jury trials on such charges.