While the majority of intellectual property disputes are civil, some forms of intellectual property misappropriation can also constitute criminal violations. The most common type of criminal intellectual property theft involves counterfeit goods or creative works (think of fake handbags or the "FBI Warning" on DVDs and video cassettes). However, as a recent case demonstrates, another form of intellectual property theft is trade secret misappropriation.
In July, Atul Malhotra, a former IBM executive, plead guilty to stealing trade secrets and trying to pass them off to his new employer Hewlett-Packard, where he briefly became a vice president. Shortly after arriving at HP, Malhotra emailed IBM documents marked "Confidential" concerning IBM product costs and materials to some of his superiors. He knowingly passed along this sensitive material because his thought it would be to HP's (and his) advantage to do so. HP, being a responsible corporation, conducted an investigation and notified authorities. While he has yet to be sentenced, Malhotra faces up to 10 years in prison and a $250,000 fine.
While the case is interesting on its own terms, it is also instructive. Employees in today's economy are increasingly mobile and may be tempted to take confidential information from a former employer to obtain a competitive advantage at a new job or start-up. This is not a good idea. Such misappropriation could lead to serious civil and criminal penalties. If the stakes are high enough and an employee believes he or she is entitled to retain certain information, they should try to reach an agreement with the company or consult an attorney as to what may be taken legally.
Mr. Malhotra's case also illustrates the duties of employers when dealing with prospective or new employees. Caution should be exercised trade secrets during interviews or the conditioning of employment. In some cases, companies have been found liable for trade secret misappropriation based on overly probing inquiries into a competitor's operations during the hiring process.
Moreover, if an employee comes on board and discloses trade secrets from a former employer, then the company itself can be held liable for misappropriation. As part of the employment process, it is often advisable to have new employees sign a statement that they are not bringing trade secrets with them. Additionally, if there is a clear case of misappropriation, as with Mr. Malhotra, then the employer should isolate the information from view and contact the relevant authorities and isolate the information to avoid any civil liability for its misappropriation.
Whether employee or employer, it is important to bear in mind that violation of confidentiality obligations can have serious consequences. Whether in personal life or the business world, it's important to know how to keep a secret.