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Research Project
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LEGAL ENVIRONMENT OF BUSINESS
LEGAL RESEARCH PAPER
The objective of this project is to familiarize the student with applicable legal restraints on business. It is important that each prospective business manager be able to locate applicable law regulating the business activity; be able to understand the goal sought by the legislation; be able to understand and apply current interpretation of such legislation to the appropriate situation under consideration.
Note: Students are allowed to do research only on Federal Codes and Federal Regulations.
The structure and organization of the legal research is the following:
I. INTRODUCTION. There should be a general statement about the legislation one is about to do research on. Why is this topic important to you? How are you going to approach this topic. One should consider, that the introductions is designed to captivate the interest of the reader while at the same time providing the reader a basic outline on how one is going to approach this topic.
II. LEGISLATION. The student is to write the law as it exactly appears in the Federal Codes or Federal Regulations. The code in the research project should mirror the code as it appears in the federal codes. Remember, the purpose of electing representative in the legislature is to empower them to make the law. We in society merely respond to the law. Do not interpret or give impressions about the law in the legislative section of this paper.
III. RATIONALE. Whenever a law is written, the law itself must satisfy the “due process” standard of the 5Th and 14Th amendment. This means that the law cannot be arbitrary, capricious or unreasonable. Furthermore, due process requires that there be some evidence that the law went through a deliberative and rational process. Therefore, the law must have a purpose, goal or rationale. Student must state the purpose, goal or rationale of the law.
IV. SUBSEQUENT CASE ANALYSIS. Students are to select two cases that are relevant to the code in questions (it is advisable that the student go to the “notes on decision’ to ascertain relevant cases under the code section). Students are to brief the cases by applying (FILAC). Also, the students are to properly title the case. If the statute or subject is new and there are no relevant cases, students are advised to go to law journals articles (easily accessible in lexis nexus) and select two articles relevant to the subject at hand. The student is to properly cite the journal article and do a one page summary of each article.
V. CONCLUSION. The conclusion will consist of two parts:
a. SOCIAL IMPACT. In this section of the conclusion the student will explore as to whether or not the legislation is accomplishing its goal? Is there significant controversy about the legislation? In other words, what is the social attitude about the legislation.
b. PERSONAL OPINION. This section of the conclusion, the student provides their respective personal opinion of the legislation. In this section the student might explore how the law affects that person individually? Are there any ethical or moral opposition to the law?
FINAL DRAFT DUE November 21, 2013
Schmidt4
18 USCS § 1832: CRIMES: PROTECTION OF TRADE SECRETS
INTRODUCTION
The fundamental purpose of this law is to prevent unfair competition by making theft of trade secrets criminal. Protecting trade secrets is a goal which protects business, consumers, employees, and an effective competition in the market economy of the United States. The legislation which contains 18 USCS § 1832 is often referred to as the Economic Espionage Act of 1996. In this act, “trade secrets” refer to information, whether in tangible or intangible form, that: 1) is subject to reasonable measures to preserve its secrecy; and 2) derives independent economic value from its not being generally known to or ascertainable by the public. The specific section aims at protecting commercial information which could impact interstate or international commerce if it were made public. This topic is important to me because my mother and step-father each own and operate their own businesses. Each business operates in a different industry and faces different challenges in maintaining its exclusive company information (or “secrets”) which allocate a competitive advantage over other companies in each company’s respective industry. Without protection of such information, product resources, and procedures their success and possibly their ability to remain in business could be diminished. I plan to examine cases in order to understand this law’s purpose and application in protecting commercial interests while encouraging healthy competition in the market economy of the United States.
LEGISLATION
“Economic Espionage Act of 1996”
18 USC § 1832 (where trade secret as defined in 18 USC §1839)
§ 1832. Theft of trade secrets
(a) Whoever, with intent to convert a trade secret, that is related to or included in a product that is produced for or placed in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will, injure any owner of that trade secret, knowingly–
(1) steals, or without authorization appropriates, takes, carries away, or conceals, or by
fraud, artifice, or deception obtains such information;
(2) without authorization copies, duplicates, sketches, draws, photographs, downloads,
uploads, alters, destroys, photocopies, replicates, transmits, delivers, sends, mails,
communicates, or conveys such information;
(3) receives, buys, or possesses such information, knowing the same to have been
stolen
or appropriated, obtained, or converted without authorization;
(4) attempts to commit any offense described in paragraphs (1) through (3); or
(5) conspires with one or more other persons to commit any offense described in
paragraphs (1) through (3), and one or more of such persons do any act to effect the
object of the conspiracy, shall, except as provided in subsection (b), be fined under this
title or imprisoned not more than 10 years, or both.
(b) Any organization that commits any offense described in subsection (a) shall be fined not more than $ 5,000,000.
RATIONALE
Congress, having the power to regulate interstate and international commerce, has a valid interest in preventing deceptive or fraudulent action taken to harm another in order to achieve economic advantage in a particular market. There is a clearly reasonable and non-arbitrary purpose in Congress’ aim to prevent such competitive practices which undermine the free-market economy of the United States. Information and technology are forms of a company’s property. Every company in any given market has the equal right to the opportunity to develop a unique product or service to compete in that market. Congress is protecting the right of each company to do just that, consistent with due process of the 5th and 14th Amendments of the Constitution as this law provides an avenue for those whose rights have been violated to seek remedy for that violation. Trade secrets are a vital component of the modern business and economic world. A business works hard to develop and perfect its products, services, and results which enable it to operate, function and grow to become successful. Such secrets are to be protected in order to maintain success and to remain a vital contributor in an ever-changing market environment. Several forms of an entity’s operations can be considered vital to their trade participation and these ought to be protected from competitors, outside or opposite interests, and those persons or entities which might affect the ability of a business to continue to exist, operate, or maintain integrity. A company’s final product or service is not the only thing that needs protection, but the processes and resources by which these are created are often more in need of protection as the means to an end. Reveling information (a secret) which is not the property or right of an individual or group who has gained access to it, whether it is by legitimate or illegitimate means, it is fraud, illegal, and criminal. Using stolen or deceptive means to gain access or share information (secrets) in order to achieve an economic advantage by intentionally aiming to disadvantage or hinder another is a criminal act under this code. The government has an interest in commerce and maintaining a functional economy, both of which are the aim of this law. The law aims to prevent unfair competition practices, fraudulent deception, or intentional harm to a particular position of one company in the economy versus another by making it a criminal offense to conspire or gain highly valuable, researched and developed information for unauthorized use.
SUBSEQUENT CASE ANALYSIS
US v. David T. Krumrei 258 F.3d 535; 2001
Facts
Krumrei met with a man he believed to be a competitor of Wilsonart, who was actually a private investigator, where he knowingly and without authorization told the investigator a Wilsonart trade secret related to coating of caul plates. Krumrei worked for a company sub-contracted to develop a machine for a company contracted by Wilsonart to test the coating development. Written agreements were made about confidentiality of the product and technology Wilsonart was developing in this process. Krumrei was being investigated at the time of the meeting because he had solicited a competitor offering to help them develop the same process and product which only Wilsonart had done. The investigator and the meeting were a result of that company informing Wilsonart of the proposal. The FBI took part in monitoring the meeting and prosecuted Krumrei after he disclosed the trade secret, clearly acknowledged it to be a trade secret, and had discussed the price of $350,000 for the disclosure in that monitored meeting. Krumrei motioned for a dismissal due to constitutional vagueness of the definition of trade secret and the requirement of the owner to take reasonable measures to safeguard and protect a secret.
Issue
Is the law 18 USC §1832(a)(2) constitutionally vague in respects to defining a trade secret? If so was Krumrei entitled to a dismissal of the charges for this violation at trial as requested?
Law
18 USCS § 1832 (a) (2)
(a) Whoever, with intent to convert a trade secret, that is related to or included in a product that is produced for or placed in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will, injure any owner of that trade secret, knowingly–
(2) without authorization copies, duplicates, sketches, draws, photographs, downloads,
uploads, alters, destroys, photocopies, replicates, transmits, delivers, sends, mails,
communicates, or conveys such information;
Analysis
The Sixth Circuit found that the district court did not err in denying to dismiss the charge because by Krumrei himself called the information a trade secret which means he related to the very law he is questioning for vagueness, making it not so vague that he could not understand it. In other words, the law is clear enough that Krumrei considered the information he attempted to sell to be a trade secret, and he knew it to be valuable (hence the price he placed on it himself) so it is clear and conceivable that he understood there existed a desire and need to protect it by its owner. That concept does not require additional evidence to establish the owner’s desire and specific steps to safeguard the secret under the law.
Conclusion
US District Court denial of dismissal affirmed and Krumrei’s conviction stands.
US v. Stephen R. Martin 228 F.3d 1; 2000
Facts
While employed at a competitor’s company, Martin began correspondence with an IDEXX employee as a potential employer for a startup company he planned to create himself to compete with both the other two companies. He used such correspondence to gain access to IDEXX information, internal e-mails, customer information, product data and research information, software samples, and testing technology information. He was charged with conspiracy to steal trade secrets among other offenses such as mail and wire fraud. Martin appeals claiming that insufficient evidence was presented to prove that an agreement existed and that he intended to injure IDEXX by gaining such information, and that the information he obtained did not meet the definition of a trade secret as defined by 18 USC §1839.
Issue
Does information obtained which is questionably related to a trade secret satisfy the evidence requirement that a conspiracy to steal trade secrets existed?
Law
18 USC § 1832(a)(5):
(a) Whoever, with intent to convert a trade secret, that is related to or included in a product that is produced for or placed in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will, injure any owner of that trade secret, knowingly–
(1) steals, or without authorization appropriates, takes, carries away, or conceals, or by
fraud, artifice, or deception obtains such information;
(2) without authorization copies, duplicates, sketches, draws, photographs, downloads,
uploads, alters, destroys, photocopies, replicates, transmits, delivers, sends, mails,
communicates, or conveys such information;
(3) receives, buys, or possesses such information, knowing the same to have been
stolen
or appropriated, obtained, or converted without authorization;
(4) attempts to commit any offense described in paragraphs (1) through (3); or
(5) conspires with one or more other persons to commit any offense described in
paragraphs (1) through (3), and one or more of such persons do any act to effect the
object of the conspiracy, shall, except as provided in subsection (b), be fined under this
title or imprisoned not more than 10 years, or both.
Analysis
Precedent establishes in US v. Echeverri, to prove conspiracy the government must show that an agreement existed, that it had an unlawful purpose, and that the defendant was a voluntary participant. Also, in US v. Andjar and US v. Garcia, the government must show that at least one conspirator committed an overt act, taking an intended step toward achieving said conspiracy. The Court found through the language and statements made during several examples of ongoing correspondence that these requirements were satisfied in order to show that Martin intended to steal trade secrets and conspired with another individual to accomplish that goal. The law clearly uses express examples which Martin used to obtain or receive such desired information, establishing his violation of the law in more than one way. Martin’s claim that the definition of a trade secret does not fit the information he obtained or received is not founded. A conviction for conspiracy to steal trade secrets need not show that the attempt was successful. Because a reasonable jury could have concluded an agreement existed and that the information sought or obtained was related to a trade secret there is sufficient evidence to convict on the charge of conspiracy to steal trade secrets.
Conclusion
Affirm conviction finding in favor of the United States.
SOCIAL IMPACT
If every company had their competitor’s secrets, there would be no market, no economy, no demand for product improvement, advantage or development, and essentially the need for alternatives in product markets would cease to exist. As a result, every market would stalemate into a static state. Our capitalistic sense of individualism is centered on those genuine, unique, and forward reaching opportunities one seeks in developing something that will result in achievement, market advantage, and rising above competition in a given market or industry. Protecting this interest protects the survival of a market economy in our country, and protects the ambition of individuals to continue to strive to evolve industries that impact daily life and the quality of life for future generations. For example if cancer research was to cease now, there would be no cure to ever be developed; if insect pesticide producers did not find the ingredient that killed West Nile virus in infected mosquitoes we could be facing a large scale pandemic; or if laundry detergent producers did not attempt to find all natural ways to make detergent, thousands of people could not wash their clothes efficiently due to allergies to common chemicals. Certain information revealed could remove a company from its position within its market or affect other companies in more than one market. A business is entitled to confidentiality when it employs or contracts with others under this law just as individuals, customers, clients and patients are entitled to protections of privacy in respective situations of vulnerability.
PERSONAL OPINION
I think that information is an asset which is so sought after and ideally protected in our society today. Information can be regarding an event, an individual, a group or entity, or anything which people are interested in knowing, but do not, and those who do have or know the information have an interest to prevent the public from gaining access to it. Aside from the understandable interest of controlling information, there is another reason I believe that this law assists society in its right to have secrets. I am thankful that a company is protected to continue to better its products and how they are made. This not only gives me alternatives and new and better products to choose from, but has provided me with other things such as alternative and better medical treatments for conditions I had found that older medicines afforded me no relief or results in combating. If companies did not compete, develop, and innovate new ideas nothing would change, get better or furthered in order to advance daily life, business, and evolve the economy and these interests need to be protected.
