In United States v. Clark Alan Roberts and Sean Edward Howley, the United States Court of Appeals for the Sixth Circuit vacated the Eastern District of Tennessee’s sentencing of Roberts and Howley for seven counts related to the theft of trade secrets under the Economic Espionage Act and three counts related to wire fraud.
Roberts and Howley were both employed as engineers for Wkyo Tire Techonology (“Wyko”). Wyo made a deal to supply Chinese tiremaker HaoHua with certain tire-building parts; however, Wyko did not actually know how to create parts. Roberts and Howley leveraged Wyko’s business relationship with Goodyear Tire and Rubber co. (“Goodyear”) to surreptitiously photograph Goodyear’s designs for Wyko. Roberts and Howley’s conduct was was in violation of confidentiality agreements both engineers signed with Goodyear, and a federal jury found them guilty on all counts in December, 2012.
The Sixth Circuit upheld Roberts and Howley’s convictions. However, it threw out the District Court’s lenient sentencing. The District Court erred by assigning zero value to the misappropriated trade secrets. Although it was within the District Court’s discretion to disregard the government’s expert’s testimony regarding the value of the information under Daubert, it was still required to assign some value to the trade secrets.
The EEA provides guidelines for sentences, which are tied to the value of the misappropriated trade secret. Here, the District Court held the trade secrets had no value, and imposed sentences of four months of home confinement, 150 hours of community service and four years of probation for each defendant. The Sixth Circuit basically instructed the District Court that it could not artificially lower the defendants’ sentences through the “legal fiction” that the trade secrets in question were worthless (which is clearly not the case). As the Circuit Court instructed:
“Yes, all else being equal, an estimate of a substantial loss necessarily will increase the guidelines range, but it will not override the district court’s duty to exercise discretion in deciding what sentences to impose on the defendants, whether within the guidelines range or outside of it.”