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.)


Atlanta Tech CEO Joins FourBridges Team

FourBridges Capital Advisors Thursday announced that Doug Johns, the current chairman and former CEO of HDJ Wireless Enterprise LLC, an Internet of Things company that operates the Atlanta-based global technology firm NIVIS, has joined the FourBridges team as senior advisor.  Mr. Johns will expand the investment banking firm’s industry focus to include technology and telecommunication ... (click for more)

FirstBank Gains Regulatory Approval For Acquisition Of Northwest Georgia Bank

FirstBank, the wholly owned subsidiary of First South Bancorp, Inc., and third largest Tennessee-headquartered bank, announced Thursday it has received all necessary regulatory approvals to complete its acquisition of Northwest Georgia Bank in Ringgold. These approvals came from the Federal Deposit Insurance Corporation, the Tennessee Department of Financial Institutions and the ... (click for more)

Local Religious Group Condemns Hammond Comments, Asks Apology

A local religious group, Mercy Junction and Peace Center, has condemned comments by Sheriff Jim Hammond on Muslims and asked for an apology. The group said, " People of all faiths, or of no faith, are invited to join Mercy Junction in front of the Islamic Society of Chattanooga for prayers on Friday afternoon. "Prayers In Solidarity" will take place outside the Islamic ... (click for more)

Sheriff's Office Releases Names Of 4 Deputies Involved In Shooting After Pursuit

The Hamilton County Sheriff’s Office has released the names of the four law enforcement personnel involved in the shooting incident of Brent Pickard on Aug. 26. They are Sgt. Gregg Carson, Sgt. Spencer Daniels, Deputy Adam Ty Williams and Deputy Eric Baxter. As per the sheriff's office policy, all four personnel were placed on mandatory administrative leave and have returned ... (click for more)

Who's Responsible For East Ridge's Stadium? - And Response (2)

There just can be no excuse for East Ridge High School's stadium being in such dangerous condition that it has been condemned.   Where is responsible for this? I know there are a few other stadiums like this as well. And there is no excuse for this.  Building new and beautiful schools, state of the art technology. Top athletic facilities as well. Yet, East Ridge ... (click for more)

Roy Exum: Five Straight Days Of Football

If I covered my first high school football game as a fledging sports when I was 16 years old, and I am now 66, I figure that’s darn near about a half-century of passes and punts. The mystifying part is that I still get as big of a kick hovering around the game as I did on my very first time so as we usher in the start of the college season with five straight days of games, here ... (click for more)