This case involves the theft of trade secrets for the manufacture of tires for large earthmoving vehicles. Currently, Goodyear, Michelin and Bridgestone manufacture such tires in the U.S. Wyko Tire Technology, a Tennessee company, supplied Goodyear with parts for tire assembly machines to manufacture these huge tires. HaoHua South China Rubber Company, a competitor to the U.S. tire companies, contracted Wyko to supply four tire-building parts so that it could manufacture tires for large earthmoving vehicles. Wyko did not know how to make the parts it agreed to make, but knew that Goodyear used machines like Wyko needed to design and build.
Coincidentally, Goodyear asked Wyko to repair some of its tire-assembly machines and two Wyko employees, senior engineer Clark Alan Roberts and engineer Sean Edward Howley, went to Goodyear’s Topeka, Kansas plant. Roberts and Howley signed secrecy agreements and were told that cameras were not allowed in the plant. Despite that, when they were left alone for a few minutes, Howley used his cell phone to take pictures of the machines Wyko needed to design and build. Howley and Roberts circulated the photos among Wyko employees by email. Wyko’s IT manager spotted the photos and sent them to Goodyear. Goodyear notified the FBI, leading to the indictment of Roberts and Howley. A jury convicted Roberts and Howley of 7 counts of theft of trade secrets and 3 counts of wire fraud. Roberts and Howley appealed to the Sixth Circuit Court of Appeals, which affirmed the convictions.
Tires for large earthmoving vehicles, which measure up to 63 inches in diameter and weigh thousands of pounds, require reinforcement. The best method of reinforcement is to use rubber-coated steel cords. A complicated process, called “swabbing down,” involves wrapping the tire material around steel hoops to create the curvature in the tire. The swabbing-down process must prevent any folds or wrinkles that could trap air and cause a hole in the tire. It was a swabbing down device that Howley took pictures of.
Howley and Roberts were prosecuted under 18 USC §1832(a) for theft of trade secrets.
A defendant violates federal law when he ‘steals’ or ‘without authorization photographs’ a trade secret, intending or knowing that the offense will injure any owner of that trade secret.
(Opinion pdf page 5).
A trade secret is information that its owner has taken reasonable measures to keep secret and that derives independent economic value from not being generally known to, and not being readily ascertainable through proper means by, the public.
Howley and Roberts argued that the photographs Howley took at the Goodyear plant were not trade secrets. The Sixth Circuit ruled that they were trade secrets. Goodyear took reasonable measures to keep the design of the tire assembly machines secret by fencing the factory property and requiring visitors to pass through a security checkpoint, obtain permission to visit in advance, sign confidentiality agreements and to agree not to take photos. Goodyear also required all of its suppliers to keep Goodyear’s proprietary information secret.
The ‘reasonable measures’ requirement does not mean a company must keep its own employees and suppliers in the dark about machines they need to do their work.
(Opinion pdf page 5).
The Sixth Circuit also ruled that the information is economically valuable because it is not readily ascertainable through proper means by the public. “Companies generally do not guard worthless information, and Goodyear is no exception.” (Opinion pdf page 6). Witnesses at trial testified that only a few American companies have the know-how to manufacture large steel-reinforced tires, that developing that know-how is expensive and time consuming and that tire manufacturers do not share that information with each other. The behavior of Wyko’s employees was another indication that the information was not available through public means. Wyko hired a former Goodyear engineer to design the machines it intended to sell to HaoHua. The photos revealed differences between Wyko’s designs and the Goodyear machines and provided Wyko with missing pieces to the puzzle.
Howley and Roberts intended or knew that their actions would harm Goodyear. They knew that HaoHua was a Goodyear competitor and knew they were evading Goodyear’s no camera policy. Roberts asked Wyko’s IT manager for a credit card-sized camera before the trip, presumably intending to take covert photos with it. Wyko’s IT manager did not have a small camera.
It was no stretch for the jury to conclude that Roberts and Howley knew the machines they photographed constituted trade secrets and, by extension, that the photographs would help a Goodyear competitor.
(Opinion pdf page 7).
The Sixth Circuit rejected Howley’s and Roberts’s challenge to their wire fraud convictions (18 USC §1343). The court ruled that they took pictures even though they promised not to, a material misrepresentation, transmitted the pictures electronically and that they intended to deprive Goodyear of its exclusive intellectual property, its trade secrets.
The Sixth Circuit ruled in the government’s favor on its cross appeal regarding the length of the sentences. The district court sentenced Howley and Roberts each to four month of home confinement, 150 hours of community service and four years of probation. The government argued that the minimum range under the guidelines is 37 to 46 months in prison. The district court did not provide a reason for its sentencing decisions. The Sixth Circuit remanded, instructing the district court to articulate its reasoning.
This case is U.S. v. Howley, Nos. 11-6040/6071/6194, Sixth Circuit Court of Appeals.