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By Heather Somerville 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 4, 2019).

The federal indictment announced last week against a driverless-car engineer that accuses him of stealing trade secrets from Google's parent company before he jumped to a rival is being viewed as a warning to Silicon Valley that prosecutors may scrutinize defections to competitors that involve sensitive technology.

Legal experts who specialize in intellectual property say they can't think of another example in which federal agents pursued an expansive criminal case against a high-level U.S. tech employee accused of taking proprietary material to a new job. Traditionally, trade-secrets-theft cases have been brought by U.S. companies against a former employee, not by the Justice Department.

"It does highlight the willingness of federal prosecutors to now charge criminally what historically and traditionally might have been viewed only as a civil noncompete dispute," said Jacob Frenkel, a former senior counsel at the Securities and Exchange Commission who is now in private practice.

The charges come as Silicon Valley companies build more competitive and coveted technology, such as autonomous-driving systems, and as businesses take advantage of a 2016 law that allows companies to seek remedies in federal court for alleged misappropriation of trade secrets.

The indictment reflects the Trump administration's priorities, which include the enhanced protection of U.S. intellectual property and more resources to pursue and prosecute alleged theft, according to attorneys and federal prosecutors.

"These are the cases that really matter," said John Bennett, a special agent in charge of the San Francisco field office of the Federal Bureau of Investigation, at a press conference regarding the alleged theft from Alphabet Inc.'s self-driving unit Waymo. "And these are the cases that the FBI will continue to stand in the breach to make sure our economy and our companies have the ability to compete on the world platform." He said investigations of trade-secret theft would remain a priority for the bureau.

In the Waymo case, Anthony Levandowski is accused of taking more than 14,000 files a month before he resigned from Waymo and later went to work for Uber Technologies Inc. After Mr. Levandowski's departure, Waymo detected the downloads as part of a forensic investigation, according to the lawsuit the company filed.

Waymo and Uber settled the suit last year, with Uber promising not to use Waymo's technology. While Mr. Levandowski wasn't a defendant in that case, the judge overseeing the trial referred the allegations to the Justice Department.

Federal authorities announced last week that Mr. Levandowski, 39 years old, was charged with 33 counts of trade-secret theft during his employment at Waymo.

Mr. Levandowski denies the charges. "The evidence in this case is going to show conclusively Anthony did not steal anything, not from Google, not from anyone," said one of Mr. Levandowski's attorneys, Miles Ehrlich.

The Justice Department has encouraged companies to report more digital crimes, including intellectual-property theft, and has positioned itself as a partner of business rather than a foe.

Amy Hess, an executive assistant director at the FBI, urged at a conference of technology executives and investors in July more cooperation between the technology companies and government in battling cybercrimes, including those involving intellectual property.

"When companies see something -- activity that looks off -- we are highly encouraging them to contact us," Ms. Hess said during an onstage talk. "We need to bring in and encourage that type of collaboration and coordination. We need each other to share information."

While much of those efforts focus on defending against any attempts in China to steal U.S. technology, they are also contributing to stronger enforcement within U.S. industry, according to industry and government lawyers.

The ability to move digital information makes it easier for departing employees to take corporate secrets with them, said Josh Rich, who heads the trade-secrets practice at the law firm McDonnell Boehnen Hulbert & Berghoff. That has led to more employee surveillance by companies and more scrutiny from the FBI.

"It is a pattern that is becoming more and more familiar, and Silicon Valley companies, having caught on to it, have begun tracking and going back and seeing if they can halt the spread of the information after the employee leaves the company," Mr. Rich said.

Last year, U.S. authorities charged a former Apple employee with stealing trade secrets after the company said it had discovered he downloaded a blueprint related to self-driving cars onto a personal laptop to bring to a car startup in China. Another former Apple employee was arrested on similar charges earlier this year. Both defendants have pleaded not guilty. In June, the augmented-reality firm Magic Leap Inc. sued a former employee for allegedly stealing designs to start a rival company, also in China.

Part of what makes Mr. Levandowski's case exceptional is that he is a U.S. citizen who worked at an executive level for several U.S. companies.

Mr. Levandowski has been one of the most prominent engineers in his field. A robotic motorcycle he created for a 2004 national competition now sits in the Smithsonian. His move to Uber epitomized the talent battle involving Waymo, Uber, Lyft Inc., General Motors Co. and numerous startups to dominate in a new era of driverless cars.

The charges against Mr. Levandowski carry a maximum sentence of 330 years and more than $8 million in fines. He pleaded not guilty at his arraignment and was released on bail.

The indictment sends a message to aspiring technologists that any questionable behavior regarding intellectual property is extremely risky, according to technology investors and legal experts.

"When executives see they themselves might be held responsible for that too great a risk, it does have a chilling effect and may diminish the willingness to do things that are close to the edge," Mr. Rich said.

Write to Heather Somerville at Heather.Somerville@wsj.com

(END) Dow Jones Newswires

September 04, 2019 02:47 ET (06:47 GMT)

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