Abstract
Abstract
Kansas-based Ventria Bioscience Inc. developed genetically engineered rice seeds that would be used in the therapeutic and medical fields. Unfortunately, one of Ventria's employees worked with a Chinese entity to steal the rice seeds, but he was caught and charged with conspiracy to steal trade secrets under the Economic Espionage Act (EEA). Later, the employee was convicted of such conspiracy crime, but the employee filed a motion to acquit. The U.S. District Court for the District of Kansas in United States v. Weiqiang Zhang denied the motion and finally sentenced the employee to about ten years. This article is intended to explore the Zhang decision. The Zhang decision demonstrates the success of the EEA in protecting R&D investment in the development of genetically modified substances. A genetically modified substance is a protectable trade secret under the EEA, as long as the owner implements physical security measures and contractual measures to protect its trade secrets.
I. Introduction
O
Ventria spent about $75 million to develop the stolen rice seeds that can produce “human serum albumin, contained in blood, or lactoferrin, an iron-binding protein found, for example, in human milk.” 3 Zhang began to work for Ventria as a rice breeder in 2008. 4 Before joining Ventria, Zhang came to the United States as a foreign student in 2000 and earned a PhD degree in 2005. 5 When Zhang was in China, he worked for the Tianjin Crop Research Institute (TCRI) which induced Zhang to steal the rice seeds. 6
The criminal act started in August 2012 when Zhang and another defendant, Wengui Yan, traveled to China to visit TCRI. 7 Yan was a geneticist at the U.S. Department of Agriculture. 8 After returning to the States, Yan kept in contact with TCRI's people and later went back to TCRI again. 9 Meanwhile, Zhang started to send Ventria's confidential or proprietary information to his private e-mail accounts. 10
In June 2013, Yan began to assist TCRI's people in visiting the States by, for example, sending TCRI an invitation letter in the name of the Department of Agriculture. 11 A group of TCRI's people came to the States in July 2013. 12 With arrangements made by Zhang and Yan, the group visited several agricultural sites other than Ventria's facilities. 13 Zhang and Yan also met the group during their visit. 14
The crime was caught when the TCRI group waited for a flight to China in early August 2013. 15 United States Customs and Border Protection staff searched the group's luggage and found the stolen rice seeds. 16
A criminal complaint against Zhang and Yan was brought to the United States District Court for the District of Kansas on December 12, 2013. 17 The defendants were charged with violating 18 U.S.C. § 1832(a)(5), 18 part of the Economic Espionage Act (EEA), 19 which criminalizes an act of conspiracy to steal trade secrets. 20 Yan pleaded guilty on October 24, 2016. 21 But Zhang did not. 22
On February 15, 2017, Zhang was convicted of three crimes: “one count of conspiracy to steal trade secrets, one count of conspiracy to commit interstate transportation of stolen property[,] and one count of interstate transportation of stolen property.” 23 The second and third counts were based on 18 U.S.C. § 2314. 24 Later, Zhang filed a motion for judgment of acquittal, but the district court denied the motion in United States v. Weiqiang Zhang. 25
This article is intended to explore the Zhang decision in regards to Zhang's conspiracy to steal Ventria's trade secrets. 26 Part II introduces the elements of conspiracy to steal trade secrets under 18 U.S.C. § 1832(a)(5). Part III analyzes the Zhang decision concerning § 1832(a)(5). Part IV discusses implications drawn from the Zhang decision.
II. Conspiracy to Steal Trade Secrets Under 18 U.S.C. § 1832
The EEA makes conspiracy to steal trade secrets illegal. 27 18 U.S.C. § 1832(a)(5) provides that “[w]hoever, with intent to convert a trade secret, that is related to or included in a product that is produced for or placed in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will, injure any owner of that trade secret, knowingly … (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, shall, except as provided in subsection (b), be fined under this title or imprisoned not more than 10 years, or both.” 28 A person will be charged with conspiracy to steal trade secrets, in violation of 18 U.S.C. § 1832(a)(5), 29 if he conspires with one or more other persons to “steal[], or without authorization appropriate[], take[], carr[y] away, or conceal[], or by fraud, artifice, or deception obtain[] such information.” 30
An offense under 18 U.S.C. § 1832(a) has five elements. 31 The Fifth Circuit has stated:
[T]he Government must prove (1) that the defendant intended to convert proprietary information to the economic benefit of anyone other than the owner; (2) that the proprietary information was a trade secret; (3) that the defendant knowingly stole, copied, or received trade secret information; (4) that the defendant intended or knew the offense would injure the owner of the trade secret; and (5) that the trade secret was included in a product that is placed in interstate commerce. 32
But, to establish a conspiracy offense under 18 U.S.C. § 1832(a)(5), 33 the Third Circuit has held that “proof that the defendants sought to steal actual trade secrets is not an element.” 34 That is, “[a] defendant can be convicted of [conspiracy pursuant to 18 U.S.C. § 1832(a)(5)] even if his intended acts were legally impossible.” 35 Following the Third Circuit, the Sixth Circuit has held that “[t]he fact that the information they conspired to obtain was not what they believed it to be does not matter because the objective of the [defendants'] agreement was to steal trade secrets, and they took an overt step toward achieving that objective.” 36 Recently, the Ninth Circuit has affirmed a conspiracy jury instruction reciting that “the government must prove that Defendant firmly believed that certain information constituted trade secrets.” 37
III. Analysis of United States V. Weiqiang Zhang
A. Review standard for a motion for judgment of acquittal
The Zhang court followed the Tenth Circuit case law to review a motion for judgment of acquittal. 38 The evidence is examined “in the light most favorable to the government.” 39 While a motion for judgment of acquittal will be granted “when the evidence is insufficient to sustain a conviction,” 40 the motion must be denied if “any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.” 41
The Tenth Circuit does not require “[t]he evidence necessary to support a verdict [to] conclusively exclude every other reasonable hypothesis and need not negate all possibilities except guilt.” 42 Rather, courts must consider “both direct and circumstantial evidence, as well as reasonable inferences that can be drawn from that evidence.” 43 An inference will be found “‘reasonable’ only if ‘logical and probabilistic reasoning’ can lead to the conclusion.” 44 However, the evidence is not examined in “bits and pieces.” 45 Instead, the sufficiency of the evidence is evaluated by “consider[ing] the collective inferences to be drawn from the evidence as a whole.” 46
B. Issues concerning 18 U.S.C. § 1832(a)(5)
To support a motion to acquit him of conspiracy to steal trade secrets, Zhang offered three arguments, but the Zhang court rejected all of them. 47
First, Zhang argued that there was no evidence sufficient to support an inference that he believed the stolen rice seeds constituted Ventria's trade secrets. 48 This argument relates to the government's burden of proving Zhang's “intent to convert a trade secret.” 49
The court disagreed with Zhang's argument. 50 The court found that the jury heard enough evidence of Ventria's efforts to create its rice technology and keep its technical information secret. 51 The evidence showed that Ventria spent time and money developing and protecting its technology, that Ventria required its employees (such as Zhang) to sign nondisclosure agreements, and that Ventria's patents did not disclose much of its rice technology. 52 Besides, the jury heard evidence about Zhang's past employment with TCRI and his recent interaction with TCRI's people. 53 Specifically, the evidence showed that Zhang hid from Ventria the nature of his day off while Zhang actually accompanied TCRI's people. 54 Last, the evidence showed that without Ventria's authorization, Zhang obtained Ventria's rice seeds and stored them at his home. 55 Overall, the court held that this unauthorized act further supported that Zhang was intentionally hiding the nature of his activities and, therefore, the inference that he knew he was stealing Ventria's properties. 56
Further regarding Zhang's belief, the court concluded that “[t]he government was not required to prove that the stolen seeds actually contained trade secrets.” 57 Rather, the court clarified that the government “was only required to prove that [Zhang] and his co-conspirators believed that they would be stealing a trade secret.” 58 Eventually, the court held that the evidence was enough for creating “reasonable inferences that [Zhang] and his co-conspirators did, in fact, believe that they would be stealing a trade secret.” 59
Zhang's second argument was that there was insufficient evidence to show that he “acted for the economic benefit of anyone other than Ventria.” 60 This argument is concerned with the government's burden of proving that “the conversion of a trade secret was done ‘to the economic benefit of anyone other than the owner thereof.’” 61
Zhang specifically argued that the government failed to prove his “motivation to create economic benefit for China.” 62 But the court disagreed. 63 The court found that the jury had heard evidence showing Zhang's past employment with TCRI and his loyalty to TCRI. 64 The jury also heard that TCRI and Ventria were in the same field, such that Zhang's assistance would save TCRI the cost of rice technology development. 65 Therefore, the court held that “[t]he evidence was sufficient for the jury to find that [Zhang] and his co-conspirators acted for the economic benefit of TCRI (and, logically, that [Zhang] intended to benefit himself, as he stated his desire to return to TCRI).” 66
Finally, Zhang argued that there was insufficient evidence to show his intent to harm Ventria. 67 This argument relates to the government's burden of proving that “the act be done ‘intending or knowing that the offense will[ ] injure any owner of that trade secret.’” 68
The last argument focused on Zhang's continuous employment with Ventria. 69 Because Zhang still worked for Ventria after the alleged crime, he could not injure Ventria. 70 But the court disagreed. 71 The court found that the same evidence showed that Zhang acted for TCRI's economic benefit with an intent to injure Ventria or that Zhang knew that his actions would injure Ventria. 72 The evidence also showed Ventria's strong measures to protect its trade secrets and its employees' awareness of these protective measures. 73 Therefore, the court held that the evidence supported the jury's logical inference “that if [Zhang] and his co-conspirators were working to benefit one of Ventria's competitors, such actions would also work to the detriment of Ventria—who had spent significant time and resources in developing the rice seeds.” 74
IV. Implications
A. Genetic information as a trade secret
Whether the stolen rice seeds are trade secrets was not answered in the Zhang decision, but the EEA may be broad enough to protect genetic information included in rice seeds.
The definition of “trade secret” under the EEA covers
all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing[.] 75
Zhang stole Ventria's genetically modified rice seeds rather than traditional genetic information, such as a gene sequence. But the stolen rice seeds may be considered as a form in which genetic information is stored. Therefore, the stolen rice seeds may fall within the EEA's definition of “trade secret.”
B. Reasonable measures to protect trade secrets
The denial of Zhang's motion to acquit rested primarily on Ventria's measures to protect its trade secrets. 76 Ventria took two major protective measures. 77
First, Ventria's employees had to sign three agreements: Acceptance of Employment Offer, Acknowledgement of Receipt and Review of Employee Assignment Agreement (“Assignment Agreement”), and Acknowledgement of Receipt and Review of Employee Nondisclosure Agreement (“Nondisclosure Agreement”). 78
The Acceptance of Employment Offer established terms and conditions of employment, including obligations under the Assignment Agreement and Nondisclosure Agreement, as well as guidance written in the Employment Handbook. 79 The Employment Handbook stated that electronic resources used by employees belong to Ventria, and that the company can disclose or search information stored in these electronic resources. 80 The Assignment Agreement specifically required an employee to transfer her title, right, or interest in or to tangible or intangible properties created by her during employment. 81 Finally, the Nondisclosure Agreement required an employee not to disclose to third parties any information concerning Ventria's tangible or intangible properties. 82
Second, Ventria stored its master or developmental seeds in a secured place with limited accessibility. 83 About six employees, including Zhang, had magnetic card-reader access to the secured place and knew where each different seed was stored. 84
These protective measures not only led to an inference that Zhang believed that he would be stealing Ventria's trade secrets, 85 but also met the definition of “trade secret” under the EEA. A trade secret is protected under the EEA, “if the owner [of a trade secret] has taken reasonable measures to keep such information secret.” 86 The Ninth Circuit has held that such reasonable measures “include advising employees of the existence of a trade secret, limiting access to a trade secret on [a] need[-]to[-]know basis, and controlling plant access,” 87 and that “[s]ecurity measures, such as locked rooms, security guards, and document destruction methods, in addition to confidentiality procedures, such as confidentiality agreements and document labeling, are often considered reasonable measures.” 88
In United States v. Chung, 89 the Ninth Circuit held that the victim had taken reasonable measures to protect the trade secrets in dispute. 90 There, the victim “implemented general physical security measures for its entire plant.” 91 The victim's “[s]ecurity guards required employees to show identification before entering the building, and [the victim] reserved the right to search all employees' belongings and cars.” 92 The victim also “held training sessions instructing employees not to share documents with outside parties, and it required employees, including Defendant, to sign confidentiality agreements.” 93 Last, the stolen documents “were marked as proprietary.” 94
Similarly, Ventria's seed-storing places were accessible to few employees who must use a personal card to enter into the places. 95 Ventria also used different agreements to claim proprietary rights to Ventria's tangible or intangible properties and to prevent employees from disclosing internal information to others. 96 Finally, Ventria preserved the right to monitor employees' use of the company's electronic resources. 97 Therefore, Ventria's measures to protect its trade secrets were reasonable under the EEA.
V. Conclusion
The Zhang decision demonstrates the success of the EEA in protecting R&D investment on technology development of genetically modified substances. A genetically modified substance is a protectable trade secret under the EEA, as long as the owner implements physical security and contractual measures to protect its trade secrets. Under 18 U.S.C. § 1832(a)(5), one who conspires to steal genetically modified substances will be punished. Any foreign spies will pay for what they have done to harm the business interests of American companies.