Now They Can Jail You For Stealing A Trade Secret - Whatever That Might Be

Thursday 1st May 2008

A new section in the Crimes Act 1961 means that stealing trade secrets is now a criminal offence punishable by up to five years in prison.

This section makes it an offence for someone to dishonestly take, copy or obtain any document describing a trade secret knowing that it contains a trade secret, with the intention of obtaining a pecuniary advantage or to cause loss to someone else.

What is a trade secret?

A “trade secret” is now defined in the Crimes Act 1961 as meaning any information that:

  • is, or has the potential to be, used industrially or commercially; and
  • is not generally available in industrial or commercial use; and
  • has economic value or potential economic value to the possessor of the information; and
  • is the subject of all reasonable efforts to preserve its secrecy.

The new section came into force on 1 October 2003 and is yet to be tested in court. One of the challenging issues will be determining what qualifies as a trade secret. For a prosecution to succeed, it will need to be shown that what was taken, copied or obtained was intended to be kept secret, and that reasonable efforts were taken by the true owner to prevent the information from becoming more widely known.

The definition of a trade secret is taken directly from common law, where determining what amounts to a trade secret has not been easy. Trade secrets have included for instance processes for the cultivation of pearls, quotations and plans prepared for contract bidding, and knowledge acquired by employees as part of their employment.

The new offence appears to require knowingly taking a document or description describing a trade secret. Acquiring knowledge of a trade secret and commercialising it, without physically taking, copying or obtaining a document disclosing the trade secret, may not be sufficient for a prosecution under the offence.

Theft of intellectual property

Other changes to the Crimes Act mean that theft of intellectual property may now also be a criminal offence, punishable by up to seven years in prison.

For theft, the Crimes Act requires the dishonest taking of property with intent to deprive an owner permanently of the property or any interest in the property. The definition of “property” has now been widened to include any tangible or intangible thing.

Intangible property may include intellectual property or confidential information. A dishonest person could offend under this section by depriving the true owner of the ability to obtain intellectual property protection and commercialise his/her intellectual property.

If a dishonest person takes confidential information from someone else, such as his/her employer, and applies for patent protection in his/her own name without the consent of the true inventor, and with the intention of depriving the inventor of the right to commercialise the invention or the right to obtain patent protection, that person could now be charged with theft.

A dishonest person may not even need to apply for patent protection in order to satisfy “taking” property by theft. An invention must be new and inventive on the date of filing in order to obtain a valid patent.

Disclosing confidential information without the permission of the true inventor intentionally directed at depriving him/her permanently of the right to obtain patent protection or commercialise the invention might be sufficient for theft.

A court would need to accept that the disclosure of confidential information equates to the “taking of property”.

Establishing ownership

However, a charge of theft could not be brought where someone applies for patent or trade mark protection with a genuinely held belief that he or she is entitled to do so. Only deliberately intending to deprive the owner permanently of the property or any interest will qualify as theft. Employees who are found to have a genuine belief that they own the intellectual property are unlikely to offend.

The new definition of theft to include tangible and intangible property acknowledges that property may come in a variety of forms and that the particular nature of the property should not dictate whether there has been theft.

In the past a true owner has had to apply under the Patents or Trade Marks Acts to establish ownership where someone has filed for patent or trade mark protection in contravention of the owner’s rights. The true owner will still need to take such action against the dishonest party in order to assert his/her rights to the patent or trade mark registration, regardless of whether the thief is actually charged under the Crimes Act.

Recognition of the crucial importance of trade secrets and the economic damage caused by industrial espionage is welcome. Enforcement of the new provisions in all but the worst cases by an already overstretched police force will be another issue.

This article was also published in The Independent, 17 December 2003.

Need more information?

Contact a member of our team:

Contact us

Baldwins' eNewsletter

Sign up to our monthly newsletter