In one of the first cases of its kind in New Zealand, the conviction of an Auckland architect in September 2019 highlights the potential criminal consequences for dishonestly taking trade secrets.*
Prior to stepping down as a principal of his architecture firm, the architect downloaded thousands of files, including business plans, project files, pricing models and drawing templates, prior to starting a role at a different firm. A Police investigation led to the man’s arrest and conviction for trade secret theft.
In New Zealand, the protection of trade secrets and the punishment for the dishonest misuse of trade secrets is typically approached in terms of civil law (for example, by using non-disclosure agreements, confidentiality clauses in employment contracts, and the doctrine of breach of confidence), rather than criminal law. However, if someone suffers loss because an offending party breaches contractual or equitable duties, they can only get a remedy by suing the offender. Such civil lawsuits are a time-consuming and expensive ordeal for all involved.
In contrast, the criminalisation of trade secret theft under Section 230 of the Crimes Act means victims are not responsible for the investigation or prosecution. This is instead handled by the Police. There are also harsher penalties, including the possibility of a prison sentence.
Under Section 230, trade secrets are defined as any information that:
(a) is, or has the potential to be, used industrially or commercially; and
(b) is not generally available in industrial or commercial use; and
(c) has economic value or potential economic value to the possessor of the information; and
(d) is the subject of all reasonable efforts to preserve its secrecy.
The architect in this case was sentenced to community detention, but the Court has the power to impose sentences of up to five years imprisonment for someone found guilty of trade secret theft.
This case has illustrated how the criminality of trade secret theft has far more serious consequences than the civil remedies for a breach of confidence or breach of contract. Being on the receiving end of a Police prosecution and facing a custodial penalty is a world away from monetary damages.