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People v. Hsieh

California Court of Appeal
86 Cal. App. 4th 287, 103 Cal. Rptr. 2d 51 (2001)
ELI5:

Rule of Law:

A criminal conviction for misappropriation of a trade secret under Penal Code § 499c requires the prosecution to prove beyond a reasonable doubt, with specific and non-conclusory evidence, that the information derives economic value from its secrecy and that the defendant acted with the specific intent to appropriate something they knew or reasonably should have known was a trade secret.


Facts:

  • Chung-Ta Hsieh was hired as an engineer by Anritsu Microwave Measurement Division in 1996 to work on a product called the 69000b Synthesizer, specifically its IQ modulator component.
  • In the spring of 1997, Hsieh expressed dissatisfaction with his compensation and role to his supervisor, Eric Liu.
  • After unsuccessful negotiations regarding his employment terms, Liu gave Hsieh verbal and written warnings about his work performance.
  • Anritsu terminated Hsieh's employment on April 29, 1997.
  • Sometime after his termination, Hsieh created a handwritten, simplified block diagram of the IQ modulator.
  • Hsieh intended to use the diagram as an example of his work during a job interview with Thermatrax, a company that was not a competitor of Anritsu.

Procedural Posture:

  • In May 1997, law enforcement executed a search warrant on Chung-Ta Hsieh's home and seized a crumpled engineering diagram from a wastebasket.
  • The Santa Clara County District Attorney's Office filed a three-count felony complaint against Hsieh.
  • Hsieh was charged by information in the state trial court with grand theft of trade secrets, illegal use of a computer system, and grand theft of a microwave switch.
  • After Hsieh waived his right to a jury, a bench trial was held.
  • The trial court acquitted Hsieh on two counts but convicted him of misappropriating a trade secret.
  • The trial court then reduced the felony conviction to a misdemeanor and sentenced Hsieh to probation and community service.
  • Hsieh, as the appellant, appealed his conviction to the California Court of Appeal, Sixth District, arguing the evidence was insufficient to support the verdict. The People were the respondent.

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Issue:

Does the evidence presented by the prosecution—consisting of conclusory testimony about the proprietary nature of a simplified engineering diagram and the defendant's admission of creating it for a job interview with a non-competitor—sufficiently prove beyond a reasonable doubt all elements of criminal trade secret theft under Penal Code § 499c?


Opinions:

Majority - Wunderlich, J.

No. A criminal conviction for trade secret theft cannot be sustained by insufficient evidence. The prosecution failed to meet its burden of proving beyond a reasonable doubt that the engineering diagram was a trade secret and that the defendant possessed the requisite criminal intent to misappropriate it. First, the prosecution failed to establish the diagram qualified as a trade secret because the testimony that it derived economic value from its secrecy was merely conclusory and lacked any supporting facts explaining how or why. Second, the prosecution failed to prove specific intent, as there was no evidence that the defendant knew or should have known the simple diagram constituted a trade secret; his own statements suggested he believed it was common knowledge. Finally, the defendant's 'use' of the diagram—in a job interview with a non-competitor—fell short of the industrial espionage the statute is designed to prevent, as criminal liability requires conduct that goes beyond what is required for civil liability.



Analysis:

This decision sets a high evidentiary standard for prosecutors in criminal trade secret cases, emphasizing that conclusory allegations from a company representative are insufficient to prove an element of the crime. The court's analysis on intent requires proof that the defendant appreciated the nature of the information as a trade secret, protecting employees who may be unaware of the proprietary status of general knowledge they possess. By questioning whether the defendant's 'use' of the diagram for a job interview constitutes criminal misappropriation, the ruling also narrows the scope of the statute to conduct more aligned with industrial espionage, thereby protecting employee mobility and the use of one's own skills and experience.

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