About two weeks ago I was watching a U.S. House of Representatives Judiciary Committee hearing on YouTube titled, “Safeguarding Trade Secrets in the United States.” I almost fell off my desk chair when I heard a member of the committee (Congressman Darell ISSA) bring-up U.S. federal law, 28 USC 1782.
Here is a partial quote of Chairman ISSA’s opening statement, “…one particular area is closing the discovery loophole to safeguarding trade secrets…concern under 28 USC 1782…allows foreign entities with merely an interest in foreign litigation to compel discovery in the United States…U.S. companies argue that foreign companies have engaged in technology relevant litigation… have been using 1782 to obtain information that they could not have obtained in their home court…again under 1782 companies in foreign domiciles are in fact gaining discovery they could not have gained in their home country… and that statute provides no protection to safeguard trade secrets of U.S. companies…”
Reinforced by Industry-Recognized IP Attorneys
This opinion was overwhelmingly supported by the testimony of three industry-recognized IP attorneys: James POOLEY, David S. ALMELING, and Kenneth R. CORSELLO, respectively.
But Why Was I Surprised When 28 USC 1782 Was Mentioned?
A few years ago my group was contracted to investigate a global fraud scheme in which millions of a foreign client’s money was initially wired to various U.S. bank accounts and later dispersed to foreign (receiving) bank accounts all over the world.
The fraudsters had persuaded our client to send these wire transfers to U.S. banks, which our client was deceived into believing was the receiving bank. We came to learn that the U.S. banks were only intermediary banks.
In an effort to try and recover the client’s money, we needed the U.S. banks to tell us where the client’s millions ultimately landed—but they would not give us that information without a subpoena.
How 28 USC 1782 Was Used for a Judicious Purpose?
This is where the application of 28 USC 1782 came in:
Since our investigation initially disclosed a number of foreign (intermediary) bank institutions that also received the client’s money from the U.S. banks, we filed a complaint with law enforcement in one of the foreign countries. That foreign law enforcement/fraud investigation agency provided us with proof of their taking the complaint.
We were then able to bring proof of this complaint to a U.S. District Court who supplied us with a subpoena for records in which to serve on the U.S. banks.
What Was the Basis for the U.S. District Court Issuing a Subpoena?
The client’s attorneys made the case that the foreign fraud investigation agency did not have the authority to subpoena U.S. banks, so, in an effort to assist the foreign government’s fraud investigation, the subpoena was issued, which, of course, served to assist our private investigation as well.
What Did the Bank Records Show?
The subpoenaed bank records revealed a classic money-laundering tour of the client’s money to final destinations such as Cyprus, Lebanon, Romania, China, Hong Kong, etc.
The benefit of Utilizing 28 USC 1782
As a result of the application of 28 USC 1782, the client has been able to institute legal recovery actions in several of the foreign countries in which the final receiving banks are located.
Can 28 USC 1782 be Used by an IP Rights Holder to Follow a Counterfeiter’s Money?
It appears so. It goes without saying that one of the more recognized and effective ways to defeat organized crime-transnational counterfeiting is to “find their money.”
Judicious use of 28 USC 1782 may give an IP rights holder the option of discovery that they would otherwise not have.
Closing up the above described loophole in 28 USC 1782 alluded to by U.S. Congressman ISSA in order to mitigate trade secrets exposure is in this IP investigator’s opinion reasonable and necessary, but it is also important to keep in mind that there may well be circumstances in which the use of 28 USC 1782 can be useful to IP rights holders as well.
ADDITIONAL NOTE: Why Would a Client Choose Not to Bring Their Case to the Attention of U.S. Law Enforcement Right Away?
There are a variety of reasons, but a client’s general attitude may be:
- As dedicated as law enforcement is, every case cannot receive equal law enforcement attention
- IP rights holders have every right to use all legal (and creative) means available to vigorously pursue infringers of their IP
- Information developed privately by IP rights holders may generate more law enforcement interest
DISCLAIMER: I am not an attorney. The above case study is my understanding of how the client’s attorneys applied 28 USC 1782, and how it might be applied in other IP infringement situations for the benefit of the IP rights holder. It is recommended you confer with an IP attorney for further information.
 U.S House of Representatives, Judiciary Committee, April 17, 2018, “Safeguarding Trade Secrets in the United States,” video runtime: 1:06 https://judiciary.house.gov/hearing/safeguarding-trade-secrets-in-the-united-states/