Member Article

Should employees be at liberty to remove trade secrets they created when they leave their employers? Think carefully, physical liberty might just be at stake.

In his junior year at UC Berkeley, he built a prize-winning robot out of Legos to sort Monopoly money. Later, he entered the first ever two-wheeler in the DARPA Grand Challenge, an American autonomous vehicle competition funded by the US Department of Defense. He also had pizza delivered in a driverless Toyota Prius across the San Francisco Bay Bridge.

Apart from Silicon Valley cognoscenti, most would not have heard of Anthony Levandowski. However, the brilliant 40-year-old engineer is, in fact, responsible for some of today’s most cutting-edge technologies, like Google’s Street View and its self-driving car project now known as Waymo.

Levandowski is, arguably, the father of today’s autonomous vehicles. And it was perhaps a desire to attain public recognition of this that drove his spectacular fall from grace.

Last month, he was sentenced to 18 months in prison in the United States under the Economic Espionage Act (EEA) for stealing autonomous car-related trade secrets from his erstwhile employer Google. The EEA is what hackers can also be charged under. The theft here was in the form of 14,000 sensitive files amounting to almost 10 gigabytes of data Levandowski downloaded into his laptop before leaving the company in 2016 to co-found self-driving truck business Otto, which was acquired by Uber later that year.

Levandowski assumed leadership of Uber’s driverless-car operations, before being fired less than a year later after failing to cooperate in an internal investigation amid mounting legal battles with Google. Uber later expressed regret for its actions in acquiring Otto, admitting that it “could and should have been handled differently”.

A rare prosecution

Judge William Alsup had taken the rare step of recommending a criminal investigation into Levandowski while presiding over the earlier civil trial between Uber and Waymo, which was settled when Uber agreed to pay Waymo US$245 million in Uber stock, together with a promise not to use Waymo’s technology.

Separately in March, the court confirmed an arbitration panel ruling that found Levandowski had breached his employment contract with Google by poaching employees for his startup, and ordered Levandowski to pay Google US$179 million, bankrupting him.

In documents arguing why Levandowski deserved prison time, US Attorney David Anderson called the theft a “brazen and shocking” act that seemed driven by ego as much as greed.

“Levandowski’s actions suggest he wanted to be seen as the singular inventor of the self-driving car, the way Alexander Graham Bell is credited with inventing the telephone,” Anderson wrote.

Let us be clear, this was not someone trying to memorise a secret formula. This was conduct so egregious that Judge Alsup called it the “biggest trade secret crime [he had] ever seen”. Highlighting the tension that exists in this area though, he also noted that Levandowski was a “brilliant, groundbreaking engineer that [the US] needs.” The judge ultimately declared that a non-custodial sentence, which Levandowski had hoped for, would amount to “a green light to every future brilliant engineer to steal trade secrets”.

So who owns trade secrets and confidential information: their creators, or the companies they work for, whose resources they use to create those trade secrets? And should people go to jail for taking them?

Commentators have come down on both sides of those questions. Some say that allowing the free movement of trade secrets, even if stolen, actually benefits rather than hinders technological innovation, and that governments should not be helping tech giants enforce their legal rights through such prosecutions.

Other observers say that simply no evidence exists that government prosecution has stifled innovation. Trade secrets, they add, are not the exclusive preserve of tech giants and can belong to companies of all sizes. In fact, smaller players and individuals often lack the resources to engage in gruelling civil litigation to protect their rights and recover their precious intellectual property. As American lawyer Peter J Toren notes, “since the EEA was enacted in 1996, Silicon Valley has created more wealth than previously created in human history”, and actually calls for more such prosecutions rather than less.

Whatever side of the debate you fall on, the answers under the law are quite clear: most of the time, the companies own the trade secrets; and whether or not you should, you can most certainly go to jail for stealing them.

And what about Singapore? 

In 2009, former Citibank manager Jonathan Seah was fined S$160,000 after being found guilty under Singapore’s Computer Misuse Act of extracting confidential bank database information and abetting his subordinates to do the same. He was the last of the so-called “Citibank Six” to be convicted of pilfering the data. Seah did not pay his fine and went to jail.

Bizarrely, upon his release a year later in 2010, Seah was then extradited to the US to face charges of mail fraud under a different name. That marked the strange end – at least in Singapore – of a case that had begun in 2006, when I acted for Citibank against the six for their breaches of confidentiality in leaving the bank for a rival. The civil lawsuits had in fact already been settled out of court by the time the criminal proceedings commenced.

While most of the charges against the group were under the Computer Misuse Act – which is more similar to the US Computer Fraud and Abuse Act than the EEA – there were also charges under the Banking Act – possibly the first prosecution under the latter act for the disclosure of customer information, and one that reflected Singapore’s clear stance on upholding its tough banking secrecy laws.

Across all industries, clauses protecting trade secrets and confidential information are just one type of post-employment restrictive covenant, with the courts here (and internationally) ruling that clients, customers and staff are employers’ protectable proprietary interests. While no one in Singapore has been jailed for stealing clients or poaching staff, employers here can and have obtained civil injunctions barring such ex-employee actions for periods of up to a year or more – on pain of contempt of court.

It is also possible for companies to get blanket non-compete injunctions – in other words, preventing ex-employees from joining competitors altogether for a period after leaving. But an unusual feature of Singapore law (with the UK Courts taking a different view, for example) essentially prevents ex-employers from obtaining non-compete injunctions if their contract already contains clauses protecting confidentiality, clients and staff. This is an odd quirk that even High Court judges have questioned over the years, but it remains the law to date.

Hard on employees? 

Coming back to the two questions posed earlier, the answers in Singapore’s context would seem clear. To be a banking hub, the Republic must both establish, and be able to enforce, strict banking secrecy laws. These should include powers to jail and not just fine offenders, lest financial penalties merely become a cost of business in a cut-throat environment. And outside of banking, Singapore’s positioning as both an intellectual property and Asia-Pacific business hub also demands that it has tough laws such as the Computer Misuse Act to prevent the theft of trade secrets and confidential information, which are often incredibly valuable and many companies’ lifeblood, especially for the start-ups we are seeking to cultivate.

To put matters into context, the US Commission on the Theft of American Intellectual Property estimated in 2017 that the cost of trade secret theft to US firms ranges from US$180 billion to US$540 billion. The European Centre for International Political Economy estimated in 2018 that cybercrime including trade secret theft could cost a million jobs in Europe by 2025. In an era when trade secrets can be pilfered with a single click, it is imperative that we have robust laws in place to decisively deter and punish such theft. No one questions if a bank robber should go to jail – so why not a trade secret thief, when the value of what he steals can be worth many times more than all the cash in a bank branch?

But what about the employees who created the trade secrets? Well, do not feel too sorry for Anthony Levandowski at least. Of the US$179 million he was ordered to pay Google, a cool US$120 million represented sums he had received from Google while employed there. He was far from being a poor exploited inventor, and he may yet still go down as the Alexander Graham Bell of the self-driving car. Meanwhile though, his drive for that recognition has hit at least a year-and-a-half long speed bump.