In the name of protecting claimed trade secrets, Silicon Valley tech giants are about to gain the controversial forfeiture rights against ex-employees that police are using in drug cases.
The Justice Department announced last month they had resumed the wildly controversial “Equitable Sharing Program” that gives police the option of prosecuting asset forfeiture cases under federal, instead of state law. The contentious practice lets police seize and keep up to 80 percent of cash and property from people who are never convicted of wrongdoing — and in many cases, never charged.
Studies have found that use of the practice has exploded in recent years, prompting concern that in many cases the police are motivated more by profit and less by justice.
Corporations are often involved in patent litigation in attempts to enforce their rights and defend competitor’s claims. But tech companies argue that patent litigation often requires then to disclose valuable information that they prefer remain with company insiders.
To protect trade secrets, Silicon Valley tech companies are currently required to bring claims under California law. While victims can be compensated with cash for their loss of property, there is no way to immediately reclaim stolen secrets under California law.
Breitbart News reported in ‘Silicon Valley wants to fix Democracy to be More Responsive to Silicon Valley,’ that in an effort to get the best government money can buy, tech lobbying had caught up to Wall Street as the largest source of U.S. lobbying dollars.
Computer/Internet companies spent $139.5 million in lobbying in 2014, up +2,000 percent in the last 25 years. Tech’s presidential-cycle campaign donations are expected to be double the $64.1 million spent in 2012.
All that Silicon Valley lobbying and donating seems to have created bipartisan support for ‘The Defend Trade Secrets Act,’ which for the first time would give corporations the option to sue in federal court over claims of trade-secret theft by ex-employees. With the full support of President Barack Obama’s administration, the legislation was unopposed 87-0 in the Senate and passed the House with just two opposing votes.
The bill would allows federal judges to order law enforcement officials to seize intellectual property “suspected” of being stolen. Supporters say this would provide an easier and more effective way for victims to seek restitution, while keeping their algorithms and innovations confidential.
San Francisco intellectual property attorney Michael Ng told the siliconvalley.com blog, “Informational assets generally have become more important as our economy gets more tech-focused, things like manufacturing decline and innovation becomes more of the source of business value.”
Jule Sigall, Microsoft’s assistant general counsel of Intellectual Property Policy and Strategy, emphasized the praised the proposed trade secret legislation:
“Companies rely on networks of manufacturers and service providers accessing, storing and using their trade secrets in many locations,” he wrote, “and their ability to share secrets with such providers, with the knowledge they will remain protected, remains vital to the growth of cloud-powered economies.”
But Eric Goldman, a law professor at Santa Clara University, and 40 other law professors that specialize in intellectual property litigation sent a letter to both Houses of Congress warning that the “ex parte” provision of the bill that does not define what property can be seized, could easily be abused to cause significant damage to unrelated businesses.
It is easy to imagine how big corporate interest seeking to harass an ex-employee or slow down a competitor could claim one document was stolen and conceivably get a court order to perform forensic analysis on all of an ex-employees’ personal devices and the devices he/she works with at their new company.
Goldman told Dow Jones MarketWatch that because companies will soon have to defend against lawsuits in both state and federal courts. He believes that the new legislation will drive up the cost of trade-secret litigation, which he said already runs about $1 million for a case worth between $1 million and $10 million.
“If it’s a startup company,” he said, “the cost of litigation might be enough to make the company go under.”