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.)


Luke Neder Joins Dale Buchanan And Associates

Dale Buchanan and Associates has hired attorney Luke H. Neder.  The firm, which specializes in social security disability matters, recruited Mr. Neder to develop a personal injury and workers’ compensation practice.  Mr. Neder has experience representing plaintiffs in personal injury actions in a variety of contexts.  He has represented insurance companies and ... (click for more)

New And Used Vehicle Sales Rise In March

New vehicle sales in Hamilton County rose to 993 in March, and used vehicle sales rose to 4,052, according to figures from the County Clerk's office.  That compares to 1,044 new vehicles sold and 3,952 used vehicles sold in March of last year. Used sales in March were the highest of the year.  Totals for March included 432 new cars and 561 new trucks sold. They included ... (click for more)

Officials Expect MLK Boulevard Mural To Be Big Draw; Artist Apprentices To Be Hired For Project

Officials said Tuesday they expect a massive mural planned on a tall MLK Boulevard building by a renowned muralist will be a big draw for the area. City Councilman Moses Freeman said, "This is going to be a destination point. People are going to come here to see it. I guarantee it." He added, "She's world-renowned. We're going to be famous by having her work here." The ... (click for more)

Haslam Adds K-12 Funds In Budget Amendment

Tennessee Governor Bill Haslam on Tuesday unveiled additions to the FY 2015-2016 budget that will be considered by the General Assembly in the coming weeks, including added funding for K-12. The governor last week met with school superintendents from the largest systems in the state over the issue of state funding for K-12. The next day, the Hamilton County Schools joined ... (click for more)

Physicians Thank Their Patients On Doctor’s Day

March 30 has been set aside as National Doctors’ Day since 1933 as a time to recognize the contributions made by our physicians. While the recognition is appreciated, our greatest satisfaction comes from caring for our patients.  For 132 years, the Chattanooga-Hamilton County Medical Society has been the physicians’ voice as we worked together to improve health of our community. ... (click for more)

Roy Exum: Look At My April Garden

On this April Fool’s Day, as I take my monthly stroll through my virtual garden, there are gorgeous flowers and there are weeds, which appear to be trying harder than the flowers. So let’s see what we find before searching for “The Prize Egg” on Sunday. A FLOWER to the New York cab driver who told a young writer, “Always remember that everyone you meet knows something that you ... (click for more)