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.)


Association Of Fundraising Professionals' Southeastern Chapter To Hold Membership Meeting May 27

The Southeastern Chapter of the Association of Fundraising Professionals (AFP) will hold its monthly membership meeting on  Wednesday, May 27  at the Mountain City Club, located at 729 Chestnut Street, from 11:30 a.m.-1:30 p.m .   This month’s guest speaker is Lynne Wester, Founder and Principal of Donor Relations Guru. Ms. Wester is a frequent conference ... (click for more)

GDOL To Help Automation Personnel Recruit Workers In Dalton Next Week

The Georgia Department of Labor (GDOL) will help staffing company Automation Personnel fill 60 jobs for companies with textile plants in Murray and Whitfield counties. The recruitment will be held on  Wednesday, May 27 , from  9 a.m. to 12 noon  at the GDOL’s Dalton Career Center, 1406 Chattanooga Ave. The company is recruiting extrusion, ... (click for more)

Winning Bid For Huge River Tract Near Dayton Is $4,370,000, But Sellers Not Willing To Accept

A huge tract on the Tennessee River/Chickamauga Lake near Dayton, Tn., brought $4,370,000 at auction at the site on Saturday. However, the auction firm later said the high bid was not accepted by the sellers, John and Edyth Buxton. Henry Glascock of the John Dixon firm auction firm said, "It was a gorgeous piece of property, but we just didn't quite get there. "We had a willing ... (click for more)

Olympian Kristin Armstrong Sets Course Record; Talansky Is Men's Winner

Two-time Olympic goal medal winner Kristin Armstrong won the USA Cycling Professional Time Trial Championship in a record time at the Volkswagen course on Saturday morning. She finished the 19.2-mile course in 42 minutes, 8 seconds. The time trial victory assures the 41-year-old Armstrong of a spot as one of three American women to compete in the world championship time trial ... (click for more)

Shame On The Housing Authority - And Response

With Chattanooga and other cities around the nation struggling to find solutions to chronic homelessness it's cruel to evict families likely with children over a fight.   When you evict the adults you're also evicting any and all children in the household.  Intelligence would dictate looking for a root cause. Compassion would dictate looking for alternatives. Both ... (click for more)

Roy Exum: A Great Orthopedic Success

Mark Freeman, the chief of orthopedic surgery at Erlanger Hospital, shared a dazzling look at our area’s Level One Trauma Center Friday morning. Yet, as he described the dramatic changes that have occurred in just the past 12 months, the promise of what will happen within the next year was even more appealing. Believe this, our flagship hospital is getting well in a hurry. “If ... (click for more)