With a Focus on Intellectual Property, NDCA Launches Its Own Whistleblower Pilot Program | Jones Day
In Short
The Situation: On March 14, 2024, the United States Attorney’s Office for the Northern District of California (“NDCA”) revealed details of its new whistleblower pilot program (“NDCA Program”).
The Result: Individuals who report information related to certain categories of criminal conduct to NDCA will receive a non-prosecution agreement (“NPA”) in exchange for their cooperation in investigating the conduct, provided they meet certain conditions. The NDCA Program is unique because it specifically focuses on reporting conduct related to intellectual property theft.
Looking Ahead: Companies should be aware of the criminal conduct subject to the NDCA Program and, in particular, its focus on intellectual property theft.
First teased by the Department of Justice (“DOJ”) in early March, details regarding the NDCA Program have now been issued. The NDCA Program encourages individuals to disclose criminal conduct and cooperate in its investigation in exchange for an NPA. However, unlike the similar SDNY whistleblower pilot program, the NDCA Program covers matters involving “intellectual property theft and related violations” and does not specifically exclude matters involving violations of the Foreign Corrupt Practices Act, state or federal campaign finance laws, and other criminal violations involving bribery, taxes, or the environment.
Specifically, the NDCA Program would apply to individuals who provide information about criminal conduct related to: (i) “intellectual property theft and related violations,” (ii) “fraud or corporate control failures,” (iii) “affecting market integrity,” or (iv) “state or local bribery or fraud relating to federal, state, or local funds.” “Intellectual property theft and related violations” is not further defined but likely would largely apply to conduct involving theft of trade secrets, as noted in the press release announcing the NDCA Program.
To be offered an NPA under the NDCA Program, individuals have to meet certain conditions:
- The NDCA or “any component of the DOJ” does not already know about the criminal conduct, and it is not public;
- The individual voluntarily discloses the criminal conduct and not in response to a government inquiry or reporting obligation;
- The individual can provide “substantial assistance” in the investigation and prosecution of one or more culpable persons, and is prepared to cooperate fully with the NDCA, including by testifying under oath when necessary or appropriate;
- The individual “truthfully and completely” discloses all criminal conduct in which the individual participated and of which the individual is aware;
- The individual is not an elected or appointed government official, an agent or official of a federal law enforcement or investigative agency, or a CEO or CFO (or equivalent) of a company; and
- The individual does not have a previous felony conviction or any conviction involving fraud or dishonesty and has not engaged in certain forms of criminal conduct involving use of force or violence, certain types of sexual offenses, or offenses involving terrorism or implicating national security or foreign affairs.
If an individual does not meet all of the above conditions, the NDCA may still agree to an NPA with the individual in an exercise of prosecutorial discretion, consistent with existing DOJ policies.
The contours of the NDCA Program will become clear over time—especially as it relates to the disclosure of “intellectual property theft and related violations.” For example, the Defend Trade Secrets Act’s whistleblower provisions under 18 U.S.C. § 1833(b) already provide criminal or civil action immunity to individuals who disclose trade secrets to government officials for the purpose of reporting or investigating a potential violation of the law. Because of this provision, the NDCA Program appears to be complementary with respect to disclosures of trade secrets to DOJ. And for disclosures related to other forms of intellectual property and “related violations,” the NDCA Program provides new incentives to potential whistleblowers.
The NDCA Program is another “carrots and sticks” effort by the DOJ to incentivize individuals and companies to self-disclose misconduct in exchange for different forms of leniency. Prior to the whistleblower pilot program that the United States Attorney’s Office for the Southern District of New York announced earlier this year, the DOJ had overhauled its voluntary self-disclosure program, announced a safe-harbor policy for companies that self-disclose misconduct after a merger or an acquisition, and revised its Corporate Enforcement Policy to provide more opportunities for companies to self-disclose corporate misconduct. And, most recently, the DOJ announced a new program that seeks to financially reward whistleblowers who report major corporate misconduct.
Moving forward, companies should be aware of the full range of applicable whistleblower programs, including the NDCA Program, and the protections and incentives those programs provide to individuals who have engaged in and/or become aware of corporate misconduct. Companies should ensure that they have in place effective controls and reporting mechanisms to timely identify, evaluate, and respond to allegations of misconduct. Encouraging individuals to promptly report issues internally in the first instance should afford the companies involved the opportunity to appropriately address and, if necessary, remediate compliance concerns, but companies should not deter individuals from reporting misconduct and seeking whistleblower protections.
Two Key Takeaways
- Companies should be aware of the scope and operation of the NDCA Program, especially as it is relates to intellectual property theft.
- Companies should ensure that their compliance programs and related activities (e.g., employee training) appropriately account for applicable whistleblower programs and also encourage the timely internal reporting of suspected misconduct.
