Lee Davis: 6th Circuit Hears Criminal Trade Secrets Case Concerning Giant Tires

Friday, February 15, 2013 - by Lee Davis
Lee Davis
Lee Davis

You might not think a case about giant tires would have much to do with criminal law, but a recent case before the Sixth Circuit Court of Appeals concerning criminal trade secrets involved just that. The case, U.S. v. Howley, involves a trade secrets prosecution under 18 U.S.C. Section 1832(a). The two men at the center of the case, Sean Edward Howley and Clark Alan Roberts, were convicted of stealing trade secrets and engaging in wire fraud.

The case involved engineers who worked for Wyko, an American company that provides parts to tire manufacturers like Goodyear. Apparently the story began when a government owned Chinese company wanted to get in on the giant tire building business.

Tires for huge earthmovers and giant bulldozers are incredibly expensive, complicated items that are only produced by a handful of companies around the world.

While servicing some of the Goodyear machines, Howley and Roberts (who had already signed confidentiality agreements with Goodyear) snuck some pictures. This information was combined with sketches Wyko already obtained from a former Goodyear employee of the machines used to make the tires. This was enough to allow Wyko to start working on a machine of their own for the Chinese company.

In a curious twist, Howley and Roberts claimed that they never stole trade secrets, despite clear evidence of their photographs. The two argued that a trade secret was only a trade secret when the person who owns it has taken measures to secure the information and if the supposedly secret information has value because it is not widely known. The Sixth Circuit flatly rejected the defendants’ arguments, saying that the information was securely kept, pointing out that both had been required to sign a confidentiality agreement and to specifically agree not to take any pictures during their visit to the plant. Moreover, the secret was economically valuable given the lengths Wyko and the Chinese company went to obtain it.

More bad news for the defendants came when the government cross-appealed their sentence, originally a four-month period of home confinement. According to prosecutors, the issue was that the sentence did not match the value of the criminal act. There were three estimates of damage provided by the government: the contract price between the Chinese firm and Wyko - $305,000; the price of Goodyear to make the equipment - $520,000; and finally, Goodyear’s annual sales of the giant tires - $20 million.

The lower court never fully grappled with the estimates given by prosecutors, saying they had failed to prove any economic loss, and decided to simply give Howley and Roberts the minimum sentence allowed. The Sixth Circuit disagreed with the lower court, saying that while it may be difficult to fix the value of a trade secret, the lower court should have at least tried. Even the lowest estimate provided by the prosecution would have resulted in a 37 to 46 month prison sentence. The Court then decided to remand the case for resentencing.

To read the full opinion, click here.

---

(Lee Davis is a Chattanooga attorney who can be reached at lee@davis-hoss.com or at 266-0605.)


Hugh Brown Joins Pendleton Square Trust And Family Office

Pendleton Square Trust and Family Office has hired Hugh Brown as principal/trust officer, the company announced Tuesday.   Mr. Brown joins Pendleton Square following a 20-year career in corporate and commercial banking. He has worked with dozens of family-owned businesses, often during times of transition such as acquisitions, organic growth and divestiture. He spent ... (click for more)

TDEC Awards Grants To Divert Household Hazardous Waste From Landfills

The Tennessee Department of Environment and Conservation (TDEC) has awarded the City of Chattanooga, City of Knoxville, City of Memphis, and Metropolitan Government of Nashville and Davidson County $127,500 each for the operation and/or maintenance of permanent household hazardous waste facilities. “These grants will provide an environmentally friendly option for citizens to ... (click for more)

Teen Shot Multiple Times On 4th Avenue; 2nd Youth Shot Twice On Pinewood Avenue; Woman Shot Twice On 25th Street

A teen was shot multiple times on 4th Avenue on Monday night. The victim was 19-year-old JaMarcus Davis. A second teen, 18-year-old Jaylain Ballard, was shot twice early Tuesday morning on Pinewood Avenue. Marion Heard, 45, was shot twice early Tuesday morning on 25th Street. In the first incident, Chattanooga Police responded at 7:20 p.m. to the area of the 2600 block ... (click for more)

Volkswagen To Spend Up To $14.7 Billion To Settle Allegations Of Cheating Emissions Tests And Deceiving Customers On 2.0 Liter Diesel Vehicles

In two related settlements, one with the United States and the State of California, and one with the U.S. Federal Trade Commission, German automaker Volkswagen AG and related entities have agreed to spend up to $14.7 billion to settle allegations of cheating emissions tests and deceiving customers. Volkswagen will offer consumers a buyback and lease termination for nearly 500,000 ... (click for more)

General Bell: Chattanooga Needs The Coolidge Medal Of Honor Heritage Center - And Response (7)

I'm pleased and indeed compelled to let you know a bit more about the exciting and most honorable "Charles H. Coolidge Medal of Honor Heritage Center" planned for Coolidge Park.     Here's what the Heritage Center will be:  It will be a fitting capstone for Chattanooga's Coolidge Park on Northshore in downtown Chattanooga.  While this exceptional Chattanooga ... (click for more)

Roy Exum: Pat Summitt’s Dash

In 1996 a woman named Linda Ellis wrote one of life’s most beautiful poems. Called “The Dash,” its first two verses read like this: “I read of a man who stood to speak at the funeral of a friend. He referred to the dates on the tombstone from the beginning…to the end. “He noted that first came the date of birth and spoke the following date with tears, but he said what ... (click for more)