American corporations are facing an ever increasing
threat of misappropriation of their valuable trade secrets through industrial
espionage, defined as the theft of a company’s trade secrets by an actor
intending to convert the trade secret to the economic benefit of a competitor.
Indeed, former Attorney General Eric Holder has said that “[t]here are only two
categories of companies affected by trade-secret theft: those that know they’ve
been compromised and those that don’t know yet.” (See Protection of Trade Secrets: Overview of Current Law
and Legislation).
With this “significant and growing threat” of industrial espionage by
competitors, current and former employees, and even foreign intelligence
services, American companies must be vigilant and employ all available measures
to protect against misappropriation of valuable trade secrets. (See Office of the National
Counterintelligence Executive, Foreign Spies Stealing U.S. Economic Secrets in
Cyberspace).
In
the recently enacted Defend Trade Secrets Act (“DTSA”), which creates a federal
civil cause of action for trade secret misappropriation, American companies
have been given a number of robust tools to prevent, or remedy ongoing
misappropriation of valuable trade secrets.
The DTSA was recently put to use by
Monsanto Company (“Monsanto”) and The Climate Corporation (“Climate”) in Monsanto Co. v. Chen, Case No. 4:16-cv-876 (E.D.
Mo.), after a former employee, with an offer to join a competing Chinese seed
company, allegedly used sophisticated software capable of performing digital
reconnaissance and exfiltrating data to download trade secret information from
secure servers.
The district court granted orders for a temporary restraining
order and preliminary injunction directing the return of trade secrets and
identification of cloud data storage where the trade secrets were stored. While
not specifically put to use in this case, the new civil seizure mechanism of
the DTSA, discussed in more detail below, is another tool that may be useful in
cases like the present case where a former employee has stored misappropriated
trade secret information in cloud data storage and may not fully comply with a
TRO or preliminary injunction.
Monsanto’s
Complaint for Trade Secret Misappropriation
On June 16, 2016,
Monsanto filed a complaint in the United States District Court for the Eastern
District of Missouri alleging violation of the DTSA by a former employee’s
misappropriation and unauthorized use and removal of confidential and trade
secret information from Monsanto’s secure data environment. Jiunn-Ren Chen was
employed as a data science analyst at Monsanto. In June, Mr. Chen announced his
resignation and admitted that he was considering an offer to serve as Director
of Resource Management and Bioinformatics for a Chinese seed company. Following
this announcement, Monsanto performed a standard review of Mr. Chen’s company
issued computers and allegedly discovered that the computers were loaded with
highly sophisticated and unauthorized software that could be used to perform
reconnaissance, seek vulnerabilities in the system, exfiltrate data, and
conceal activity on the device through cloaking functionality.
Mr. Chen denied
knowledge of the software, but refused to provide for forensic examination
additional data devices he admitted that he had connected to his work computer.
Additionally, after Mr. Chen returned his work computer, Monsanto detected that
Mr. Chen’s company issued unique login credentials were used to remove
fifty-two files from Monsanto’s secure environment containing proprietary
material important to Monsanto and Climate’s current and future business. When
confronted with the removal of these files during an exit interview, Mr. Chen
allegedly made the inculpatory statement “did you find files moving,” and
further admitted to contact with another Chinese national who recently plead
guilty to conspiracy to commit theft of Monsanto trade secrets.
Granting of Temporary Restraining Order
and Preliminary Injunction
In its motion for a temporary
restraining order, Monsanto argued that there was a substantial likelihood that
it would succeed on the merits because Mr. Chen used improper means, including
unauthorized access to Monsanto’s secure environment, in an effort to covertly
acquire highly valuable trade secret information that Monsanto had taken
reasonable steps, as part of its ongoing standard operating procedures, to keep
confidential. Monsanto also argued that it would suffer irreparable harm if Mr.
Chen was not prevented from disclosing trade secrets to the agricultural
company in China for which Mr. Chen is considering accepting employment because
the misappropriated material relates to strategy and sensitive products of
Climate and further explains confidential research methods and results.
Monsanto also argued that the balance of the harms weighed in its favor because
Mr. Chen would be in no worse position if the order issued as he has no right
to use or disclose the trade secrets, and also argued that issuance of a
restraining order would further the public interest because “the American
people, who comprise the public, have an interest in protecting trade secrets
developed by American companies from foreigners who seek to steal them.” The
Court granted a temporary restraining order directing Mr. Chen to return the
misappropriated trade secrets, identify the location where such information is
stored, and enjoining Mr. Chen from disclosing the trade secret information.
The Court also granted
an agreed to preliminary injunction ordering Mr. Chen to return all trade
secret information, disclose the persons to which the trade secret information
was disclosed, identify all cloud storage locations where trade secret
information was kept, and enjoining Mr. Chen from further disclosure of Monsanto
and Climate trade secrets. This order followed a motion for a preliminary
injunction in which Monsanto explained that it had uncovered additional
evidence of Mr. Chen’s misappropriation of trade secrets.
Specifically,
Monsanto alleged that Mr. Chen sent a number of emails to an outside account
using his work email that contained confidential trade secret files related to
Monsanto’s proprietary Growth Stage Tracker and FieldScripts programs which
relate to assisting farmers to maximize the return on their land. Monsanto
explained that these systems derive value from their confidentiality and thus
divulging this information to a competitor would be particularly damaging. Mr.
Chen also accessed Climate’s secure network during travels to China and visited
competitors of Monsanto and Climate shortly before resigning.
Potential for Use of Civil Seizure
Mechanism
In the present case,
Monsanto pursued a replevin action to obtain the return of the trade secrets in
Mr. Chen’s possession, and did not seek the seizure of the misappropriated
trade secrets through the new civil seizure mechanism of the DTSA. The civil
seizure mechanism is a potent but, as of yet, unused protection provided by the
DTSA. Civil seizure is a preventative tool employed prior to a finding of
misappropriation by which a court may “issue an order providing for the seizure
of property necessary to prevent the propagation or dissemination of the trade
secret that is the subject of the action.”
Using this tool, a company aware of
a potential misappropriation of its trade secrets may quickly prevent further
dissemination of that information during the pendency of a formal DTSA case.
Orders providing for the seizure of property under the DTSA are only granted in
“extraordinary circumstances.” To qualify for a civil seizure order, the
requesting party must provide factual information satisfying a number of
predicate factors, including specifying with reasonable particularity the
matter to be seized and showing that a TRO or preliminary injunction would be
inadequate. (See Explaining the Provisions of the
Defend Trade Secrets Act ).
While yet to be
employed, cases like the present, where an employee has potentially used
external digital storage devices and/or cloud storage services to allegedly
store misappropriated trade secrets may be a candidate for use of the civil
seizure mechanism, especially if it is clear that the employee may not fully
comply with a TRO or preliminary injunction. There is no shortage of cases
where employees have allegedly stored misappropriated trade secrets using cloud
storage services and other external storage media. See, e.g., Earthbound Corp. v. Mitek USA, Inc., Case
No. C16-1150 RSM (W.D. Wash. Aug. 19, 2016) (granting TRO where former employee
allegedly misappropriated trade secrets using Dropbox and Google Drive); Frisco Medical Ctr., L.L.P. v. Bledsoe, Case No.
4:12-cv-37 (E.D. Tex. Nov. 30, 2015) (forensic examination of former employee’s
computer equipment revealed that numerous files containing trade secret
information were uploaded to employee’s Dropbox account and that USB storage
devices were attached to computer before Dropbox was uninstalled).
Given the
increasing threat of industrial espionage using advanced software and computing
techniques, cases involving misappropriation and storage of trade secrets using
digital means may be the first in which we see usage of the DTSA’s civil seizure
mechanism.
The Climate Corporation is a
wholly-owned subsidiary of Monsanto and helps the world’s formers sustainably
increase their productivity using proprietary algorithms and predictive
analytics to enhance technical tools sold to farmers.
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