Home > U.S. Trademark Law (LAW-609-001) - For Prof. Farley's Class > Indiana chemical firm has trade secrets stolen

Indiana chemical firm has trade secrets stolen

September 1, 2010 Leave a comment Go to comments

Dow AgroSciences, an Indianapolis-based subsidary of Dow Chemical Co. has reportedly lost $300 million USD worth of valuable data and information as the result of a scientist sending valuable trade secrets to Germany and China.

Indianapolis, IN

Under U.S. law, “A trade secret, as defined under 18 U.S.C. § 1839(3) (A), (B) (1996), has three parts: (1) information; (2) reasonable measures taken to protect the information; and (3) which derives independent economic value from not being publicly known.”  A trade secret could be a formula, process, design or even a compilation of informaton which is generally not known, and knowledge of which is protected, because a business can obtain an economic advantage over its competitors. A trademark on the other hand,  is protected from infringement on the basis that misappropriation might confuse consumers as to the origin product once the mark has been associated with a particular supplier and that supplier’s goodwill. A trademark enjoys no protection until it is used and identifiable by consumers. The fact that a company plans to use a trademark might itself be protectible as a trade secret, but the two terms are distinct.

A federal indictment served in Indianapolis alleges that 45-year old employee Kexue Huang, a Chinese born Canadian citizen disseminated sensitive information regarding the research and development of several different pesticides and organic compounds to a univesity in China. The alleged acts of economic espionage took place while the accused worked as a researcher for Dow AgroSciences from 2003-2008. Although the accused is a Canadian citizen, he had obtained permanent U.S. resident status. The information that was misappropriated took DowAgroSciences more than 20 years to develop. Dow’s global vice-president for research and development, testified that developing the organic pesticides called spinosyns had cost the company at least $300 million US. 

Dow Chemical Co.

The indictment alleges that the accused published a paper in China about the organic pesticides and also encouraged the students at the Chinese university to proceed with further research. The FBI testified that the accused was developing a scheme to market the pesiticides in China where could have potentially made millions of dollars. The FBI believes that the accused smuggled samples of a particular bacterial strain in the suitcase of his son on a recent trip to China.

Huang is charged under the Economic Espionage Act, a rare occurance in the Unites States. Unfortunately, the indictment has been classified since the date it was filed in mid-June 2010. The indictment charges the accused with 12 counts of theft and attempted theft of trade secrets to benefit a foreign government. In addition, the accused was charged with five counts of foreign transportation of stolen property. The charges under the Act are each punishable by up to 15 years in prison. The Economic Espionage Act was passed in 1996 after the U.S. realized China and other countries were targeting private businesses as part of their corporate espionage and spy strategies. 

The accused entered a plea of ‘not guilty’ before a Magistrate Judge in the United States District Court for the Southern District of Indiana. The accused has been held without bond since mid July in a Massachusetts jail. 

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