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.)


Local Vapor Store Expands; Creates Premium Chattanooga-Inspired EJuices

After opening on June 12, the locally-owned Chattanooga Vapor Company has continued to thrive at its North Shore locations off of Frazier Avenue and in Soddy Daisy, at the corner of Dayton and Thrasher Pike. No matter where one falls within the company’s three-step process, they ensure each individual’s needs are met. Its focus on helping people quit smoking and using tobaccos is ... (click for more)

HTI Employment Solutions Job Fair Draws Over 500 Applicants And Counting

HTI Employment Solutions is holding its first job fair in Chattanooga on Thursday, from 10 a.m.-7 p.m.   at Embassy Suites Hotel at 2321 Lifestyle Way near Hamilton Place Mall. The company was awarded the bid to staff 300 positions created by Tier 1 Automotive Supplier and will staff ... (click for more)

Lookout Mountain, Ga., Raises Sewer Rates; Joins In Kudzu Fight

The Lookout Mountain, Ga., City Council on Thursday night approved an increase in sewer charges. The council approved ordinance 281 increasing sewer rates to $6 per 100 cubic feet of water from the previous rate of $4.77.  The new increase will be in effect in January 2015.    City Manager Brad Haven said the town will be replacing the flow meter for ... (click for more)

Severe Weather To Threaten South As Thanksgiving Travel Begins

AccuWeather reports a storm riding a surge of springlike warmth will bring a round of severe weather including the risk of a few tornadoes this weekend in the South as Thanksgiving travel begins. According to Severe Weather Expert Henry Margusity, "The storm system will draw warm, moist air northward from the Gulf of Mexico and allow thunderstorms to develop, while at ... (click for more)

Don't Allow Us To Be Overrun By People Who Do Not Belong Here - And Response (6)

Thank you, Senator Corker, for your clear, concise evaluation of the president's attempt to bypass Congress and personally and independently establish national policy that violates our current immigration laws.   Our long-standing failure to enforce our laws to control illegal immigration across our southern border has made this country less safe and ... (click for more)

Roy Exum: ‘Pretty’ Seeking ‘Rich’

The story has been around for a while, long enough for the fact-checking Snopes.com to classify it as a “legend,” which means “great story but lacks validity,” so as we hope Tennessee’s football team can somehow beat 19 th -ranked Missouri in a rough-and-tumble game at Neyland Stadium tonight, allow me to share this because it is delightful just the same. The following is what ... (click for more)