The Ultimate Guide to the Federal Intellectual Property Theft Statutes - Federal Lawyer
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The Ultimate Guide to the Federal Intellectual Property Theft Statutes

Judge's Gavel and Ledger

While intellectual property theft and misappropriation can lead to claims for injunctive relief and damages, they can also lead to federal criminal charges in some cases. Many people are surprised to learn that this is the case. But, multiple federal statutes impose criminal penalties for intellectual property theft, and prosecution under these statutes can lead to substantial fines and prison terms.

When facing federal charges for intellectual property theft, it is imperative to have a clear and comprehensive standing of the elements of the offense. You also need to have a clear understanding of the penalties that are at stake in your case. If you are under investigation or facing charges for misappropriating trade secrets, trademarks, or copyrights, or if you are facing prosecution for any other intellectual property-related crime, here is an overview of what you need to know about the federal intellectual property theft statutes:

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Lynette S. Byrd

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John W. Sellers

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Linda Julin McNamara

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Chris J. Quick

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Michael S. Koslow

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Ray Yuen

Former Supervisory Special Agent (FBI)

Federal Intellectual Property Theft Statutes: An Overview

There are three main intellectual property theft statutes: (i) the trade secret theft statute, (ii) the trademark theft (counterfeiting) statute, and (iii) the copyright theft statute. As you may have noticed, a patent theft statute was not included in this list. However, while there is not a federal statute that speaks specifically to patent theft, individuals and entities accused of making unlicensed use of patented inventions can face criminal culpability (in addition to civil liability) under various federal criminal laws, as we explain below.

In all cases, intellectual property theft is a serious federal offense. The federal intellectual property laws are intended to promote creativity and competition; and, as a result, they are intended to indirectly advance the economic interest of the United States while also protecting the nation’s consumers. The federal government takes protecting these interests seriously, and the U.S. Department of Justice (DOJ) regularly prosecutes individuals and entities for all types of federal intellectual property crimes.

1. Trade Secret Theft

Trade secret theft is criminalized under 18 U.S.C. Section 1832. Under subsection 1832(a), individuals and entities can face prosecution for multiple criminal acts that involve “intent to convert a trade secret, that is related to a product or service used in or intended for use in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof.” To “convert” is a form of theft that involves claiming (or representing to claim) rights to an intangible asset that belongs to a third party.

Subsection 1832(a) allows for criminal prosecution of any individual or entity that:

  • “(1) [S]teals, or without authorization appropriates, takes, carries away, or conceals, or by fraud, artifice, or deception obtains such information;
  • ” (2) without authorization copies, duplicates, sketches, draws, photographs, downloads, uploads, alters, destroys, photocopies, replicates, transmits, delivers, sends, mails, communicates, or conveys such information;
  • “(3) receives, buys, or possesses such information, knowing the same to have been stolen or appropriated, obtained, or converted without authorization;
  • “(4) attempts to commit any offense described in paragraphs (1) through (3); or
  • “(5) conspires with one or more other persons to commit any offense described in paragraphs (1) through (3), and one or more of such persons do any act to effect the object of the conspiracy.”

In all cases, prosecution under subsection 1832(a) also requires proof that the defendant acted “intending or knowing that the offense will, injure any owner of th[e] trade secret” at issue. As with many other federal criminal statutes, challenging the prosecution’s evidence of intent or knowledge can be a key defense strategy in many trade secret theft cases prosecuted under 18 U.S.C. Section 1832.

Individuals prosecuted under the federal trade secret theft statute can face statutory fines and up to 10 years of federal imprisonment. Business entities prosecuted under the statute can face fines of up to $5 million or three times the value of the trade secret, whichever is greater.

2. Trademark Theft (Counterfeiting)

Trademarks identify the source or origin of a product sold in commerce. Theft of trademarks creates market confusion, and can ultimately mislead consumers to purchase misbranded, ineffective, and potentially dangerous products from unknown sources. As a result, federal authorities take trademark theft, also known as counterfeiting, seriously as well—and the federal trademark theft statute serves as a powerful tool for criminal prosecutors at the DOJ.

The federal trademark theft statute, 18 U.S.C. Section 2320, establishes several different crimes. It also imposes a variety of different penalties, which are imposed based on either the product involved, the consequences of the theft, or both. The acts that are criminalized under Section 2320 include:

  • Intentionally trafficking in goods or services and knowingly using a counterfeit trademark;
  • Intentionally trafficking in labels, packaging, or other similar items knowing that they include a counterfeit trademark “the use of which is likely to cause confusion, to cause mistake, or to deceive;”
  • Intentionally trafficking in counterfeited military goods or services “knowing that . . . the use, malfunction, or failure of which is likely to cause serious bodily injury or death, the disclosure of classified information, impairment of combat operations, or other significant harm to a combat operation, a member of the Armed Forces, or to national security;
  • Intentionally and knowingly trafficking drugs labeled with counterfeit trademarks; and,
  • Attempting or conspiring to commit any of the crimes listed above.

The penalties for trademark theft under Section 2320 include:

  • General Penalties: Up to a $2 million fine ($5 million for businesses) and 10 years of federal imprisonment.
  • Penalties in Cases Involving Serious Bodily Injury or Death: Up to a $5 million fine ($15 million for businesses) and 20 years of federal imprisonment (or life imprisonment in the case of death).
  • Penalties for Trademark Theft Involving Military Goods or Counterfeit Drugs: Up to a $5 million fine ($15 million for businesses) and 20 years of federal imprisonment.

3. Copyright Theft

The federal crime of copyright theft, or criminal copyright infringement, is defined in 17 U.S.C. Section 506. Subsection 506(a) provides that:

“Any person who willfully infringes a copyright shall be punished as provided under section 2319 of title 18, if the infringement was committed—(A) for purposes of commercial advantage or private financial gain; (B) by the reproduction or distribution, including by electronic means . . . of 1 or more copies or phonorecords of 1 or more copyrighted works, which have a total retail value of more than $1,000; or (C) by the distribution of a work being prepared for commercial distribution, by making it available on a computer network accessible to members of the public, if such person knew or should have known that the work was intended for commercial distribution.”

As you can see, the language in subsection 506(a) is somewhat outdated. However, this does not prevent the DOJ from using Section 506 to prosecute individuals and entities for all types of modern day copyright theft. Under 18 U.S.C. Section 2319, the penalties for criminal copyright theft are:

  • Statutory fines and up to five years of federal imprisonment in most cases;
  • Statutory fines and up to 10 years of federal imprisonment for second and subsequent offenses; and,
  • Statutory fines and up to one year of federal imprisonment in cases involving copyrighted works with a total retail value of less than $2,500.

Other Federal Statutes Used to Prosecute Intellectual Property Theft

Along with 18 U.S.C. Section 1832, 18 U.S.C. Section 2320, and 17 U.S.C. Section 506, the DOJ also uses a variety of other statutes to prosecute intellectual property theft—including theft of exclusive patent rights. Some examples of these statutes include:

  • Computer and Internet Fraud – Using computers and the Internet to misappropriate trade secrets, trademarks, copyrights, or patents can lead to prosecution under several federal statutes that target computer and internet fraud. Depending on the specific statute under which these crimes are prosecuted, potential penalties can include statutory fines and up to 30 years behind bars.
  • Economic Espionage – Committing trade secret theft “intending or knowing that the offense will benefit any foreign government, foreign instrumentality, or foreign agent” can be prosecuted as economic espionage under 18 U.S.C. Section 1831. This crime carries up to a $5 million fine and 15 years of imprisonment for individuals, while businesses can face a fine of $10 million or three times the value of the trade secret to the organization, whichever is greater.
  • Mail Fraud and Wire Fraud – Engaging in any “scheme or artifice to defraud” can lead to prosecution under the federal mail and wire fraud statutes, 18 U.S.C. Sections 1341 and 1343. This includes engaging in any scheme or artifice to obtain access to a trade secret, patent, or other intellectual property asset through unauthorized means. Mail fraud and wire fraud both carry up to a $1 million fine and 30 years of federal imprisonment.

Speak with a Federal Intellectual Property Theft Defense Lawyer at Oberheiden P.C.

Are you under investigation or facing charges for intellectual property theft in the United States? If so, we encourage you to contact us promptly for more information. To discuss your case with a federal intellectual property theft defense lawyer at Oberheiden P.C. in confidence, call us at 888-680-1745 or request a call online now.

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