Trade secrets, confidential information, and the criminal law.

AuthorCross, John T.

The author examines the extent to which property offences in the criminal law can be used to police the misappropriation of trade secrets and confidential information. After assessing the long-standing debate on whether information can be classified as property, he argues that answering the question one way or the other involves circular reasoning. When judges label information "property," it is to enable them to grant the desired remedies. Courts should instead ask more directly whether certain information should be protected under the circumstances. It follows that precedents holding that certain information is property in one area of the law should not be authoritative in others. The article then explores efforts made in Great Britain, Canada and the United States to apply criminal property offences to industrial espionage. Since these provisions presume the misappropriation or damage to tangible property, they are unsuitable to cases involving information. The author then suggests an alternative approach based upon the different types of values inherent in confidential information: "use value" and "monopoly value." Unfortunately, theft and vandalism provisions in existing criminal statutes protect only "use value," although it is the monopoly on information that is its primary source of value to the owner. The author concludes that legislation is required to define the mens rea and actus reus requirement in terms designed to protect the unique value of confidential information.

L'auteur evalue le potentiel qu'a le droit criminel de prevenir l'appropriation malhonnete de l'information confidentielle et des secrets commerciaux en la qualifiant d'atteinte au droit de propriete. L'auteur expose le long debat sur la question a savoir si l'information peut etre l'objet d'un droit de propriete; il conclut que dans un cas comme dans l'autre la reponse implique un raisonnement circulaire. L'attribution du terme > par les juges depend du resultat qu'ils veulent obtenir. Les tribunaux devraient plutot centrer leur raisonnement sur l'importance de proteger ou non l'information en question dans les circonstances, sans se sentir lies par la jurisprudence anterieure qui aurait caracterise autrement ce meme type d'information dans un autre con texte juridique. L'auteur examine les decisions portant sur l'espionnage industriel rendues en Grande-Bretagne, au Canada et aux EtatsUnis, pour conclure que le droit criminel actuel est difficilement applicable parce que l'atteinte criminelle au droit de propriete presuppose qu'il porte sur une chose tangible dont on veut proteger la libre utilisation par son proprietaire. Dans le cas de l'information, il s'agit de proteger non pas seulement l'utilisation que peut en faire son proprietaire, mais egalement le monopole qu'il a sur l'information. C'est en effet le monopole qui confere a l'information sa valeur et c'est en fonction du monopole qu'il faudrait, selon l'auteur, repenset le droit criminel pour accorder une meilleure protection a l'information confidentielle.

Synopsis Introduction I. Applying Property-Based Criminal Laws to the Misappropriation of Information A. Information as "Property" B. Specific Applications of Criminal Offences II. A Value-Based Analysis A. The Values Inherent in Information B. The Values Protected by the Criminal Law of Property 1. Theft 2. Other Property Crimes III. The Future of the Criminal Law and Information Conclusion Introduction

If nature has made any one thing less susceptible than others of exclusive property, it is the action of the thinking power called an idea, ... . Its peculiar character, too, is that no one possesses the less because every other possesses the whole of it. He who receives an idea from me receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.

--Thomas Jefferson (1)

Notwithstanding Jefferson's view of the nature of ideas, the law has historically recognized the need to keep certain types of information secret. In early societies, secrecy was important primarily for reasons of state. Indeed, the Hammurabic Code of 2100 B.C.--generally considered the world's oldest written code of laws--contained a provision punishing those who were caught prying into "forbidden" secrets. (2) As manufacturing and trade increased in importance, secrecy also proved to be a valuable asset in the world of commerce. Manufacturers and merchants quickly realized that information that was hidden from competitors could provide a distinct advantage in manufacturing or commerce? Those without the information, on the other hand, would naturally use any means at their disposal to obtain it. Because of the commercial advantages afforded by secret information, most legal systems of the time developed means to preserve secrecy. (4)

Today, we are in a period commonly referred to as the "Age of Information." Tremendous advancements in technology have made information vitally important to the workings of many commercial enterprises. Without the necessary "know-how" (5) to operate modern manufacturing and communications equipment, a business would be hard-pressed to survive. (6) Managing these vast quantities of information has consumed an increasing amount of energy. This trend is even reflected in the makeup of the labour force. By 1976 the number of people working in information-related industries in the United States surpassed the number of workers in traditional occupations. (7)

As information has grown in importance, so have the benefits of secrecy. Because information plays such a crucial role in a technology-driven society, parties with exclusive knowledge of valuable information enjoy a tremendous advantage over their competitors. Nevertheless, the development of technology has also created a dilemma: although technology creates greater incentives to keep information secret, it also makes secrecy more difficult to maintain. Technology itself has produced a number of new devices which make the task of espionage much easier. (8) The increased reliance on computers has been a major factor in this phenomenon, since computers are quite accessible to the industrial spy. (9) As a result of these factors, the level of industrial espionage has risen sharply over the past few decades, generating an estimated annual cost to businesses in the United States alone of as much as twenty billion dollars. (10)

Historically, most modern legal systems have provided a civil remedy for the wrongful taking of secret information. While societies have not hesitated to resort to criminal penalties when government secrets are unearthed or revealed, they have proven less willing to use the criminal law to police private industrial espionage. (11)

The past 25 years have seen a reversal in this historical trend. The increase in espionage has given rise to a widely held perception that civil remedies, by themselves, do not provide a sufficient deterrent to industrial espionage. (12) Because of this perception, a number of legal systems have experimented with the criminal law to provide a deterrent. Different systems have used different approaches.

Attempts to apply criminal law in Anglo-American countries have met with only limited success. Because the criminal statutes of most of these jurisdictions do not deal specifically with the misappropriation of information, prosecutors have been forced to fall back on other provisions of the criminal law. These prosecutors generally have relied on traditional property crimes, such as larceny and fraud. Unfortunately, information and knowledge do not coincide neatly with the law's traditional focus on tangible property. Because of these conceptual problems, some courts have refused to extend the criminal law's property offences to the realm of information.

The purpose of this article is to explore the extent to which the criminal law of property can be used to police the misappropriation of confidential information. In discussing this issue, the long-standing debate concerning the extent to which information can be classified as property will be examined. The first part of this article will attempt to demonstrate that this debate is unhelpful in resolving the fundamental question. The article then explores the efforts that have been made in Great Britain, Canada and the United States to apply property offences to industrial espionage. It will be argued that these offences have certain features that make them unsuitable for cases involving information. The final portion of this paper will suggest an alternative approach based upon the different types of values inherent in confidential information. It will be argued that existing property offences fail to protect these unique values.

It should be noted that the ensuing discussion is not confined to trade secrets, but will include all confidential information. The reasons for doing so are twofold. First, the analysis relies quite heavily on decisions from the Commonwealth countries. These countries, as a rule, do not distinguish between trade secrets and other types of confidential information, but instead treat the misappropriation of all types of confidential information under the single head of "breach of confidence." (13) Second, it is analytically consistent to speak of trade secrets and confidential information in the same breath. As the Commonwealth approach recognizes, trade secrets are a subset of confidential information. Although this article will draw distinctions between trade secrets and other types of confidential information, it will do so only after isolating those characteristics of trade secrets that make them deserving of separate treatment.

  1. Applying Property-Based Criminal Laws to the Misappropriation of Information

    1. Information as "Property"

      As the preceding discussion indicates, the value of confidential commercial information has risen significantly in the past few decades...

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