The Revictimization of Companies by the Stock Market Who Report Trade Secret Theft Under the Economic Espionage Act
29 Pages Posted: 1 Apr 2002
In 1996 Congress passed the Economic Espionage Act (EEA). One of the concerns surrounding the passage of the EEA was that publicly traded companies would be hesitant to report trade secret theft to the government for fear that doing so would adversely impact their stock prices. This article investigates whether that concern has merit.
Using event study methodology, we found that the market does, in fact, negatively react to the reporting of trade secret theft under the EEA. Stated differently, these companies are "revictimized" by going public with their loss. Further, we found a strong statistical link between the value of the trade secret and subsequent decreases in stock value (i.e., the higher the value of the trade secret the greater the decrease in stock price). These findings have important implications regarding the efficacy of the EEA and future amendments. They also have important implications for corporate legal counsel, CEOs, managers, and shareholders.
Keywords: Trade secrets, trade secret theft, economic espionage, competitive intelligence, securities, stock prices, stock value, event study, intellectual property, trade secret misappropriation
JEL Classification: G30, G34, G38, K1, K14, K2, K22, K4, K42
Suggested Citation: Suggested Citation