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Court Must Estimate Loss for Sentencing in Tire Trade Secret Theft

By William Peacock, Esq. on February 05, 2013 | Last updated on March 21, 2019

Ever see a bulldozer's tires? They're big. You can't score those at Wal-Mart. In fact, only three companies in the United States make those behemoths: Goodyear, Michelin, and Bridgestone. Why the lack of competition? Making steel-reinforced tires is a major pain, apparently.

A Chinese state-owned company wanted to get in on the action. (Some of their fellow countrymen already beat them to it, apparently.) Wyko is an American company that provides parts for tire-manufacturing machines to Goodyear and others. Goodyear had their own secretive process for making the big tires.

See where this is going? The two appellants here, Sean Howley and Clark Roberts, worked for Wyko and while servicing Goodyear's other machines, snuck a camera in and took snapshots. Wyko also previously hired a former Goodyear employee to make sketches of the secret machine. The combination allowed them to begin work on making their own machine for the Chinese.

The appellants tried to argue, with a straight face, that they did not steal trade secrets. After all, a trade secret is only a secret when the owner has taken reasonable measures to secure the information and the information derives economic value from not being generally known to the public.

Friends, you snuck a camera into a secured facility after signing confidentiality agreements. It was secret and secured.The information is also obviously valuable (just ask your former clients, the Chinese) and not known to the public (hence, the sneakery).

Even the Sixth Circuit is mocking the appellants. "When all is said and done, Wyko could not have found designs for swabbing-down machines at the public library or on Wikipedia."

After the appellants made a couple of other ridiculous arguments that were briefly addressed and dismissed, the government cross-appealed the appellants' four month home confinement sentence. Yep. More bad news for the Wyko warriors.

Per the sentencing guidelines, the punishment should fit the value of the crime. The government offered three estimates: (1) $305,000 (the contract price between Wyko and the Chinese), (2) $520,000 (Goodyear's cost to make the machine) and (3) $20 million (Goodyear's annual sales of uber-big tires).

The District Court didn't like the estimates for various reasons, so it just sat on its hands and gave the defendants the minimum sentence, to be served in the comfort of their own homes. The court stated that the government failed to prove loss, and therefore set the amount at zero (which logically conflicts with the "independent economic value" element of the crime). Their explanation was also apparently very cursory.

The Sixth Circuit reversed. Though determining the value of a trade secret is no easy task, and courts do not need to come to an exact figure, they do have to try. A reasonable estimate, with some explanation, will suffice.

Even the smallest estimate proffered by the government would have yielded a guideline of 37 to 46 months in prison - not at home. Though the lower court is free to deviate from the guidelines on remand, they can't skip the valuation and explanation step.

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