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Smartphone camera may put James Bond-wannabees in jail

February 6, 2013

Article courtesy of SBAM Approved Partner ASE

By Anthony Kaylin  

In today’s world everyone seems to have a smartphone with camera capabilities.  And most companies have a policy that states “use of a camera or cell phone with a camera is strictly prohibited on premises.”  So what happens when an employee violates the policy?

In the case of Clark Roberts and Sean Howley, over-zealousness and poor judgment turned them into convicted criminals.  Roberts and Howley worked as engineers at Wyko Tire Technology, a Tennessee company that supplied Goodyear with various parts for its tire-assembly machines.

HaoHua, a company owned by the Chinese government, was interested in building eight tire-assembly machines. Wyko began negotiating with HaoHua to supply four tire-building parts, all related to the swabbing-down process, for $1.154 million. Under the agreement, Wyko needed to ship the finished parts by July 2007. If Wyko was late, it would pay HaoHua a penalty of $2,590 per week.

Wyko faced one serious impediment to completing the deal: It had never built parts like these before.  Only a few companies had the knowledge to build the machines needed to produce the parts. One such company was Goodyear, which used machines like the ones Wyko needed to produce.  Wyko’s first strategy was to hire a retired Goodyear engineer to help to design the product, but due to Wyko’s overall inexperience it still got the specs wrong. HaoHua rejected them when Wyko sent them along.

In order to get the specs right, Wyko engineers needed to see the machine. But Wyko was also a Goodyear vendor; on an unrelated project, Goodyear asked for a Wyko technician to help fix machinery at its Topeka (Kansas) plant.  Instead of sending a technician, Wyko sent two senior engineers, Roberts and Howley, to the plant.  

Before their visit, both signed agreements that they might have access to trade secrets or other confidential information and that they would not disclose that information. A security guard reminded them that no cameras were allowed inside the factory.

Unescorted for a few minutes while there, one engineer used his cell-phone camera to take seven photos, which he forwarded to the design team.  

Then it got even more interesting.  Wyko’s IT manager, while apparently in the process of archiving e-mails on the Wyko server, spotted the e-mail the engineer had sent with the pictures attached. Concerned that the photos were taken illicitly, the IT manager used a pseudonym to create a Yahoo! e-mail account and forwarded the e-mail to a Goodyear employee.

Goodyear then notified the FBI, and federal investigators searched Wyko’s headquarters in September 2007. Indictments followed.  Wyko never delivered any tire-assembly machines to HaoHua.

Convicted of theft of trade secrets and wire fraud, the engineers were sentenced to four months of home confinement, community service, and probation. On appeal, the federal Sixth Circuit court affirmed the convictions, rejecting the engineers’ argument that Goodyear did not take “reasonable measures” to protect secrecy of the machinery. The court also remanded the sentencing back to the trial court, because the value of what was stolen was sufficient to impose 36 to 42 months of jail time. The defendants are now awaiting re-sentencing.

As for Wyko’s IT manager, he may have violated Wyko policies by not bringing the issue forward to the management first. But if Wyko acts on those violations and disciplines the manager, it risks violating the manager’s whistle-blower protections. Either way, the company finds itself in a very difficult situation.

The caveat of this case is that employers need to identify what truly is trade secrets and not, e.g. like a listing of employees, and be strict on the cellphone, confidentiality and picture policies.

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