Ag Trade Secrets at Risk

FBI Agent Points to Need for Protecting Intellectual Property From Theft

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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As FBI Agent Jennie Nichols, pictured, explained to more than 100 attorneys at a technology and law conference last week, intellectual theft is a growing problem in the U.S. and in the agricultural sector. Companies need to be more diligent about the steps they take to protect their trade secrets, and documenting those procedures, to support a case in court. (DTN graphic)

LITTLE ROCK, Ark. (DTN) -- In an era of tremendous change in agricultural technology, it's more important than ever that agribusinesses, research universities and farmers protect themselves against the risks of intellectual theft.

Protecting trade secrets was highlighted last week at an agricultural technology and law conference in Little Rock, Arkansas.

Jennie Nichols, an attorney and special agent with the Federal Bureau of Investigation, pointed to some high-profile situations both in and out of agriculture in which employees, students and others left the country with critical research or were caught trying to do so.

A key point Nichols and others made at the conference is that if you have a special piece of technology or product, you have got to detail just what you are doing to protect such proprietary trade secrets.

"If you are the general counsel for a company or a university, you have to document how you are protecting your proprietary trade secrets," Nichols said.

The theft of trade secrets is getting more traction among federal authorities and in court. But, if a legal battle over a trade secret goes to court, company and university officials are likely going to be asked why a product or research is proprietary. And, if so, then what practices were being done to protect that secret.

"Document how you are protecting your stuff, because this is where it is becoming important, because we have to define how it was a trade secret," Nichols said. "Make sure you document what you have done for your company or university to protect that claim."

FEDERAL VIOLATIONS

A person can get 10 years of federal time for stealing a company trade secret. There are multiple federal violations, including stealing and taking those products across state lines. And, in federal time, a person will serve the vast majority of the sentence before the possibility of parole.

Nichols pointed to the case of a Chinese billionaire, considered the "Elon Musk of China," who studied at Duke University and allegedly stole a cloaking technology that Duke was working on. The U.S. military had invested in the research. According to a New York Times article last April, the situation is prompting the Trump administration to consider restricting Chinese students from working on certain types of research projects. To read the full New York Times article, visit: https://www.nytimes.com/…

It's just such thefts of intellectual property that helped spark the current trade battle the Trump administration is now engaged in against China. The U.S. has long criticized China for encouraging such theft that then is used to grow industries in China, and the White House argues such theft must stop or China could dominate several new high-tech industries in the future.

"Our view is we have a very serious problem losing our intellectual property, which is the biggest single advantage of the U.S. economy. We are losing that to China in ways that aren't reflective of the underlying economics," U.S. Trade Representative Robert Lighthizer told the House Ways and Means Committee back in March.

HIGH-PROFILE AG THEFTS

Agriculture has seen its share of high-profile thefts, some coming out of labs, while others come right out of cornfields. Nichols pointed to the case of Mo Hailong, who was sentenced in 2016 to three years in federal prison for stealing biotech corn seeds from DuPont Pioneer and Monsanto in the Midwest.

As DTN has reported in the past, before Hailong was caught, FBI agents said he shipped over 340 pounds of corn seeds from Iowa to his home in Florida. Authorities aren't certain where the seeds went from there, but it was easy to conclude the seeds were sent to China. The FBI also recorded some of Hailong's phone calls back to China, in which he and a Chinese plant breeder talked about "using the foreigners' technology to beat them." Citing the need to boost biotechnology in China, one of Hailong's co-conspirators said, "There is a serious need for a national hero."

In another case, Ventria Bioscience, based in Kansas, has developed a biotech rice that expresses recombinant human proteins. The company had $75 million invested in its rice seeds that were locked in a room with only a handful of people who had access. In 2012, a rice breeder who worked for Ventria and another researcher stole the rice and sent it to China with the help of another pair of researchers.

In April 2017, a former Ventria rice breeder, Wieqiang Zhang, 51, a Chinese national who lived in Manhattan, Kansas, was sentenced to 11 years in federal prison for conspiring to steal the rice samples.

Zhang took hundreds of seeds, then in 2013 invited a research team from China to the Midwest. U.S. Customs and Border Protection officers caught that delegation as they tried to leave the U.S. with the seeds in their luggage.

The federal cases on the rice theft continue.

Just earlier this month, a federal grand jury in Arkansas charged Liu Xuejun, 49, and Sun Yue, 36, both from China, for conspiracy to steal trade secrets and conspiracy to commit interstate transportation of stolen property. To read more about that case, visit: https://www.kark.com/…

Wengui Yan, an Arkansas scientist who worked with the rice, also pleaded guilty to making false statements to the FBI and admitted he knew about the plans to steal the seeds.

The thefts happened, Nichols said, even though "Ventria's security actually did a decent job trying to protect their rice seeds." The company limited who had access to its research, but unfortunately, one of its rice breeders was selling the technology.

As Nichols noted, "This can happen just down the street from you guys. If you have something of value, especially in the ag department, there's a good chance someone will try to steal it."

STEAL YOUR STUFF

Employees or students may not realize what they are doing is theft, but they could be approached by company or government officials in another country offering large amounts of money to come there and replicate the research. "You hire people that are extremely qualified, very well-spoken, well-educated, they are brilliant," Nichols said. "That doesn't mean they don't want to steal your stuff."

Yet, corporate leaders can sometimes decline to take action. They are more worried about their reputations and avoiding negative news coverage, so they may decline to bring in authorities. Nichols said a better message is pushing for civil or criminal prosecution to send a message that such theft won't be tolerated.

"Even if they stole your stuff, the next person is going to show up as well," Nichols said. "No, if you try to steal from us, we're going to try to send you to prison for 10 years, sue you for $250,000 and sue whatever company took it from you."

SAFEGUARD TIPS

Some tips offered by Nichols include clearly identifying and safeguarding critical information and mark it as so. Document the fact the information is proprietary and vital to the company. Ensure it cannot easily be downloaded and taken. Also, ensure company or university information technology staff can see or know who downloads what materials.

Then there are risks of cyber theft. It might seem like a good idea to keep trade secrets on a server that several people in the company can tap into, but hacking is a growing industry globally. Hackers look to root out information to make them rich or turn over to their own government.

"Your most sensitive or proprietary stuff and trade secrets, don't stick it on a computer that is connected to the internet," Nichols said. "Stick it on a computer that is standalone. It saves you a whole lot of headaches."

Protection of trade secrets also means carefully considering investors, joint ventures and research partnerships. These collaborations can become even more complicated if the research partner is overseas. If you enter into an agreement with a foreign university, are you OK with them giving it to their government or letting someone else take it because they don't have the same kinds of safeguards in place? There are dangers when your most important business information is no longer under your control.

"You don't know how they are going to protect your stuff. You need to try to put it into your contract as much as possible that this is your research, your proprietary information, whatever it is, and they are obligated as part of these contracts to protect it," Nichols said. "You need to be aware you are giving up control, and you can't always be sure they are going to treat the information the same way as you."

BE CAREFUL WITH TOURS

Due diligence may mean ensuring employees are careful about inviting outside groups for tours at the last minute. It's important to know more information about who is going to tour a facility or lab and under what conditions. Also, don't let these visitors bring in a cellphone or camera into sensitive areas.

Also ensure proper training of employees has occurred and is documented. Provide presentations and education for employees, but also document that such classes occurred and keep the information in a folder. This is needed to show an employee was not ignorant of the importance of the proprietary information.

"You want that documentation to eliminate the argument from an employee that he didn't know it was a trade secret," she said.

Have protocols for visitors, outside delegations and visiting scientists. Also, include protocols for your travel and workers with laptops with sensitive research. If those people with sensitive information are traveling, give them a clean laptop and phone to take.

"There is no reason to bring all of your information on project X on a laptop because you are going to China to a trade show and you leave your laptop in a hotel room," she said.

If you are part of a startup or business working on new, proprietary materials, the FBI does have private-sector liaisons to work with companies and educate them about the risks and protocols to put in place.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(ES/AG)

Chris Clayton