The Trouble with the TPP series continues with a surprising and troubling aspect of the intellectual property chapter: the criminalization of trade secret law (prior posts include Day 1: US Blocks Balancing Provisions, Day 2: Locking in Digital Locks, Day 3: Copyright Term Extension, Day 4: Copyright Notice and Takedown Rules, Day 5: Rights Holders “Shall” vs. Users “May”, Day 6: Price of Entry, Day 7: Patent Term Extensions, Day 8: Locking in Biologics Protection, Day 9: Limits on Medical Devices and Pharma Data Collection). The trade secret issue was flagged by Professor Dan Breznitz of the Munk School of Global Affairs in a column in the Globe and Mail late last year.  While some have tried to downplay the issue, the reality is that the TPP represents a radical shift on trade secrets law for most participating countries, who can expect years of pressure to gradually expand the scope of criminal penalties for trade secret violations.

Trade secrets represent an ill-fitting part of intellectual property law. While rules for patents and copyright seek to strike a balance between rights and access (patents requiring disclosure of the invention and copyright balancing creator and user rights), trade secrets do not involve any disclosure. In fact, trade secrets must remain secret to constitute a trade secret. Most TPP countries provide civil remedies for unauthorized trade secret disclosures, so that if a company believes that there has been a violation, they must initiate a case before the courts to seek damages. The TPP dramatically changes trade secret law by also requiring criminal penalties, raising the spectre of government prosecutions for violations. Article 18.78 includes requirements for criminal penalties and procedures for trade secret violations.

The inclusion of criminal penalties for trade secret violations comes directly from lobbying by the U.S. Chamber of Commerce, which made the issue a top priority. Agreement was presumably reached by creating some flexibility for TPP countries. The provision contains a mandate to include penalties for at least one of three forms of trade secret breach involving at least one of five different types of harm (commercial advantage or gain, intent to injure an owner, etc.). The flexibility has led some to argue that countries like Canada are already compliant with the bare minimum in the provision given the existence of an economic espionage provision in the Security of Information Act (Canada).

Yet meeting the bare minimum is unlikely to last for long. The U.S. Chamber of Commerce identifies both Canada and Australia as examples of countries that it believes have weak remedies, procedural obstacles and an insufficient deterrent under existing law. The examples it provides (in Canada’s case, focused on 2004 allegations that WestJet stole confidential data from an internal Air Canada website) would not be covered by the SIA’s economic espionage provision. Rather, the examples are focused on conventional, domestic commercial issues that could be (and have been) dealt with through civil law means, yet the U.S. wants the issue escalated to a criminal matter.

In addition to the concerns about criminalization, Professor Jeremy deBeer notes that the expansion into trade secrets raises potential constitutional concerns. In a study on CETA issues, deBeer argued that “ordinarily, there would be little doubt that trade secrets and confidential information are matters within provincial jurisdiction over ‘Property and Civil Rights’.”  While the federal government has given itself the power to regulate these issues, there remains the prospect of a constitutional challenge.