Co-authored by Christie O. Tate.

In the latest example of a significant international trade secret theft resulting in a federal criminal prosecution, chemist David Yen Lee recently pleaded guilty in federal court in Chicago to “knowingly and without authorization” possessing one or more trade secrets of his former employer Valspar Corporation (“Valspar”) with intent to convert them “to the economic benefit of someone other than the owner.” Valspar is an international company with offices in Illinois and elsewhere that manufactures and sells paint and coating products in the United States and internationally. Lee worked for Valspar as a Technical Director from approximately 2006 until March 2009, when he departed for Nippon Paint (“Nippon”), a Valspar competitor.

According to his plea agreement, beginning in September 2008 and continuing through February 2009, Lee discussed possible employment with Nippon. On February 27, 2009, Lee accepted an employment offer from Nippon to serve as the Vice-President of Technology and administrator of research and development in Nippon’s Shanghai, PRC offices. Lee resigned from Valspar on March 16, 2009, and prepared to relocate to Shanghai.

As a Technical Director at Valspar, Lee had access to Valspar’s secured internal computer network, including access to trade secrets in the form of proprietary chemical formulas, paint properties calculations, and emerging research and development information. According to his plea agreement, during the period from November 2008 through March 2009, Lee downloaded trade secrets from Valspar’s secured computer system and transferred electronic files to external thumb drives with the intention of using the trade secrets for the benefit of another. In the plea agreement, the parties stipulated that the misappropriated trade secrets were worth between $7 million and $20 million.

Lee now faces up to 10 years in prison.

While an old rule of thumb in the trade secrets arena was that trade secret misappropriation was a civil matter in which prosecuting authorities did not want to become involved, this case is the latest of several high profile criminal prosecutions resulting from trade secrets misappropriation. Although each case is different, common factors which seem to draw prosecutorial attention are the value of the trade secrets at issue and whether there is an international aspect to the misappropriation.

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