24 November 2008—What if the FBI came knocking on your door saying that your employer had accused you of stealing US $1 billion from the company? That’s exactly what happened to Biswamohan Pani, a former Intel engineer who was indicted earlier this month for stealing trade secrets from the chip maker. Instead of raiding the supply closet for some notepads, pens, and paper clips, Pani allegedly downloaded more than 100 pages of data containing details about future Intel chip designs and 19 drawings detailing the chips’ layouts.
It didn’t take much sleuthing to figure out that by the time Pani resigned his position at Intel near the end of May, he had already been hired by Intel rival Advanced Micro Devices (AMD) to work at one of its R&D labs. For nine days after he reported for duty at AMD on 2 June, he was technically still a full-fledged Intel employee, with all the rights and privileges thereof. One of those privileges was access to an encrypted server containing a cache of Intel’s trade secrets. Intel says it has proof that he raided the server. His supposed intent: to advance his career by strategically using the information to make himself indispensable to his new employer.
Pani has since been indicted for trade-secrets theft and wire fraud—charges that could land him in prison for up to 90 years.
How did Intel arrive at that $1 billion figure? ”It’s a very large, very round number designed to convey the value Intel is placing on the material taken,” says Richard H. Frank, an attorney who chairs the International Employment practice group at the San Francisco offices of Cooley Godward Kronish. Frank notes that in criminal cases, one of the criteria by which the courts calculate sentences is the value that is put on the stolen material. ”In a trade-secrets case, one of those criteria would be the value that is put on material that’s stolen,” he says.
Although there are no pending criminal or civil actions against AMD, which insists that it knew nothing about Pani’s actions and hasn’t been privy to the information, there are some steps Intel needs to take to ensure that its rival is not sandbagging—in other words, biding its time before coming out with chip designs based on the information. Among them is aggressively demanding that AMD cooperate in an internal investigation in which witnesses would be interviewed and computers would be reviewed forensically to see if any of the information allegedly taken was transferred to or copied on any of AMD’s systems.
Frank notes that there are some very good reasons why AMD would avoid using the pilfered data. One is criminal prosecution of individuals, which could lead to prison time and restitution for any profits Intel could prove had been lost, plus disgorgement of any of AMD’s ill-gotten gains. AMD could also face a civil action under which Intel could obtain an injunction preventing use of every product that contained Intel trade secrets. Intel could obtain civil damages in the form of lost sales and, again, ill-gotten gains. Intel could even win back its attorneys’ fees if it could prove its case. ”There are also intangibles [that would negatively affect AMD], such as distraction of management time, bad publicity, and other nonquantifiable market risks, such as lost sales, resulting from a taint on the company and its products, which could scare clients away,” says Frank.
A big open question is why Intel didn’t cut off Pani’s systems access the moment he tendered his resignation. Pani lied about where he was going after leaving Intel, concocting a suspicion-diverting story about going to work for a hedge fund. ”One of two things was going on,” says Frank. ”There either wasn’t a procedure in place, or the procedure wasn’t followed to deal with that resignation in terms of data security.” In other words, did somebody have a checklist? Did HR get notified? Did IT get notified? Did someone say, ”This person has given notice. What do we do now?” Frank says that even in the case of a transfer from Department A to Department B, there should be a checklist including termination of access to data from Department A that’s not necessary to the new job.