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Trading Secrets A Law Blog on Trade Secrets, Non-Competes, and Computer Fraud

U.S. Counsels Cross-Border Consistency In Criminal Consequences For Trade Secret Theft

Posted in International, Legislation, Trade Secrets

What do the laws of the United States, Peru and Australia have in common when it comes to imposing similar riminal penalties for trade secret misappropriation?  Virtually nothing!

In the U.S., criminal penalties for misappropriating trade secrets range from 10 to 15 years.  In Peru, the maximum criminal sentence for stealing trade secrets is 2 years.  And in Australia, there is no law expressly criminalizing trade secret theft.

These cross-border inconsistencies are significantly undercutting global efforts to deal with the ever-expanding problem of trade secret misappropriation.  The U.S. Chamber of Commerce has recently come out with a proposal intended to address this problem.

A.        The Problem

As a result of the growing interdependence among the world’s economies, the fight against trade secret misappropriation has gone global, stretching far beyond national borders.  This is especially true in the Asia-Pacific region, where there has been a marked increase in the theft of trade secrets in recent years.

Complicating efforts to fight this problem is the fact that the laws of countries directed to this cross-border issue are anything but consistent.  In many countries — both developing and developed — there are no criminal penalties for trade secret theft, only civil remedies.  However, empirical data strongly suggests that even very large civil awards provide little deterrent for would-be trade secret thieves.

Even in those nations where trade secret misappropriation is a criminal offense, the actual penalties contained in such statutes, and indeed the enforcement of such laws, vary dramatically from country to country.

This lack of consistency makes the prosecution of cross-border trade secret theft very expensive, and greatly reduces the deterrent effect of such laws.

B.        The Proposed Solution

Currently, the United States and eleven other countries (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam) are negotiating a huge multilateral free-trade agreement known as the Trans-Pacific Partnership (“TPP”).  The TPP is intended to join and integrate the economies of Pacific Rim countries.

The twelve countries presently participating in the TPP negotiations make up 40% of the world’s gross domestic product, and account for approximately one third of all world trade.  In addition, each of these nations, to different degrees, has seen a tremendous uptick in trade secret theft.  Such thefts obviously impact trade development and expansion at which the TPP is aimed.

In response, the U.S., through the U.S. Chamber of Commerce, has proposed that the twelve negotiating countries each commit to include in the TPP criminal and civil penalties that would provide “uniform, statutory and cost efficient protection of trade secrets.”  The Chamber envisions commitments that would establish robust trade secret protection, with criminal penalties designed to sufficiently deter a growing problem.”

Among other things, the proposal takes aim at those countries that have no statutes expressly criminalizing trade secret misappropriation, including Canada, Australia, Malaysia and Singapore.

In addition, the Chamber proposes that the TPP require member nations to provide justification for conditioning a company’s access to its markets on disclosure by the company of its trade secret and confidential information.

C.        The Prospects for Success

Although the Chamber’s proposal is strongly supported by U.S. businesses, the likelihood that the other negotiating countries will agree to include it in the TPP is not great.  In some countries, trade secret misappropriation has only recently become a significant problem, and the need for criminal penalties is not recognized.  In others, there is a reluctance to commit to changing existing laws because of the difficulty of doing so, or because imposing or increasing criminal penalties through trade agreements is domestically unpopular.  The fact that the Chamber has made this proposal late in the negotiations of the TPP also undercuts the chances of it being adopted.

D.        What to Do

Given these circumstances, you should not look for any significant changes in the trade secret misappropriation laws of TPP countries that would make such laws more consistent with comparable U.S. laws any time soon.  A more uniform body of law in this area may ultimately be achieved, but that will not happen for many years, at best.  For now, you should continue to step up your efforts to protect your trade secrets and confidential information, and address possible misappropriation before the perpetrator has the opportunity to evade American justice.