The Problematic Role of Criminal Law in Regulating Use of Information: The Case of the Economic Espionage Act

Abstract:     
The Economic Espionage Act (EEA) is a federal law that makes it a crime to misappropriate a trade secret. This statute, which rests on a property conception of trade secrets, differs from common law and state statutes, which premise civil and criminal liability on wrongful conduct. Treating misappropriation of proprietary information as a property crime is likely to produce negative unintended consequences for both firms and their employees. Making firms liable for conduct of employees may cause them to avoid hiring experienced workers, thus reducing employee mobility and entry of information into the public domain. Strengthening trade secret protection through criminal penalties also creates a perverse incentive to rely less on patent law, which, in contrast to trade secret protection, benefits the community by requiring holders to reveal knowledge. Thus, the EEA may chill second-generation innovation. To mitigate those consequences, courts should strictly interpret the ambiguous terms in the EEA. The broader lesson is that it is wiser to proceed with a presumption against criminal penalties for misappropriation of information. Civil enforcement is more likely to produce a nuanced solution that takes into account the rights of others and already established public policy.

Number of Pages in PDF File: 70

Keywords: economic espionage, Economic Espionage Act, employee mobility, misappropriation, property, proprietary information, trade secret[s], white collar crime

Accepted Paper Series