Cases from Susan P. Graber

United States Court of Appeals for the Ninth Circuit
9th Circuit: No Competitors Needed for Trade Secrets to Exist Under the EEA

United States v. Chung, 659 F.3d 815, 826 (9th Cir. 2011)
Docket No. 10-50074
Federal Court of Appeals for the 9th Circuit
Decided: September 26, 2011, Judge Susan P. Graber

In a 2011 opinion, the Court of Appeals for the Ninth Circuit affirmed the first trial court conviction under the Economic Espionage Act. Notably, the appellate court in United States v. Dongfan Chung addressed the independent economic value requirement under 18 U.S.C §1839(3)(B) as either actual or potential. In line with the statutory language, the Court asserted that the owner of secret information need not have actual competitors in order to rightfully protect its economic value.

In US v. Chung, the defendant Dongfan “Greg” Chung, a former engineer for the US-contractor Boeing, was found in possession of over 300,000 Boeing documents, including six documents containing Boeing trade secrets. On appeal of his conviction, Chun argued insufficient evidence as to the existence of any Boeing trade secrets within the documents he possessed. The court looked specifically at four Boeing documents relating to a NASA space-shuttle antenna. Judge Graber found that Boeing maintained the secrecy of the particular Boeing information and enacted reasonable protective measures to maintain secrecy. Most notably, the Court endeavored in an extensive analysis of he economic value required for such information to be trade secrets. While the EEA’s definition of trade secret is grounded upon the standard outlined in the Uniform Trade Secrets Act (UTSA), the text of §1839(3)(B) further defines the economic value of trade secret information as either actual or potential, and does not mention the existence of competitors.

The court reasons that such information “could assist a competitor in understanding how Boeing approaches problem-solving and in figuring out how best to bid on a similar project in the future, for example, by underbidding Boeing on tasks at which Boeing appears least efficient.” Thus the Court held Boeing’s secret information independently valuable not for Boeing’s potential use, but for use of such information by any potential Boeing competitor. Thus the Ninth Circuit held that under the EEA, companies need not have actual competitors in order to derive economic value from maintaining the secrecy of certain information.