Article

Striking the Balance in Trade Secret and Corporate Espionage Disputes

09 Dec 2019

In 2017, the Commission on the Theft of American Intellectual Property issued a report to Congress estimating that the theft of trade secrets could cost the United States economy as much as $600 billion annually. In the years following, news reports indicate that alleged instances of corporate espionage and the theft of trade secrets continue at a rapid pace. But sometimes trade secret assertions can be overbroad, vague, and anticompetitive. Many commentators have cautioned that trade secret assertions should not be used improperly to inhibit employee mobility.

In a recent example of corporate espionage and theft of trade secrets, on November 21, 2019, the United States Department of Justice (DOJ) announced that Haitao Xiang, a Chinese national who had previously worked for the Monsanto Company (now a part of Bayer AG), and its subsidiary The Climate Corporation, had been indicted by a federal grand jury on one count of conspiracy to commit economic espionage, three counts of economic espionage, one count of conspiracy to commit theft of a trade secret, and three counts of theft of a trade secret.

Monsanto focused on developing technological solutions to improve crop performance and food production. In pursuit of that goal, Monsanto acquired The Climate Corporation, a digital agriculture company focused on enabling farmers to improve field performance and crop yield with data driven solutions derived from the information collected in their fields, in 2013. Together, Monsanto and The Climate Corporation developed FieldView™, an online

precision-agriculture platform for farmers to collect and store data from their fields. In addition, FieldView™ provides farmers digital tools to monitor field performance and make customized agronomic decisions to maximize crop yield (e.g., tools to select hybrid plants, monitor soil quality and changes, monitor field regions, select fertilizer plans, select seeding rates, as well as tools for guiding numerous other agronomic decisions). A critical component of the online farming software platform is “Nutrient Optimizer,” a proprietary predictive agronomic algorithm, which Monsanto and The Climate Corporation decided to maintain as a trade secret rather than seeking patent protection.

According to allegations in the DOJ’s press release, Xiang was employed by Monsanto and The Climate Corporation as an imaging scientist from 2008 to 2017. The DOJ alleges that Xiang used his experience as a scientist at Monsanto to promote himself to the Chinese government as a potential recruit for its Thousand Talents Program (the “Talent Plan”). According to The United States Senate Permanent Subcommittee on Investigations, China designed the Talent Plan in 2008 to recruit 2,000 high-quality overseas professionals and academics, including scientists and engineers. The DOJ press release further alleges that, after being selected as a Talent Plant recruit, Xiang quit his job at Monsanto and purchased a one-way ticket to China. Before boarding his flight, however, Xiang was detained at the airport where officials seized a micro SD card with copies of the proprietary Nutrient Optimizer algorithm. If convicted, Xiang faces up to 15 years in prison and a $5 million fine for each espionage charge, and up to 10 years in prison and a $250,000 fine for each trade secret theft charge.

This is not an isolated incident, and allegations of corporate espionage and theft of trade secrets are expected to continue. Given the current geopolitical environment, moreover, it should come as no surprise that many such allegations will involve foreign nationals. But the pendulum may be swinging too far. Trade secret claims need to be substantiated with actual identifiable information that derives value from not being publicly known. They should not be a means by which to inhibit employee mobility or deter competition. Whether a given claim is the latter or the former can sometimes depend on point of view, and often requires focused analysis of the relevant facts. Getting sound legal advice early in the process is necessary to preserve evidence and ensure the best possible outcome. MoFo has handled a range of trade secret matters, from small to large, for both the prosecution and defense, and across many different industries.

For more information about legal and business insights related to Life Sciences and technology, visit MoFo Life Sciences and MoFo Tech.

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