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Industrial espionage laws - is protecting trade secrets and business intelligence good for the economy?

Media Release

30 March 1999

Are current Australian legal safeguards against industrial espionage adequate or are criminal sanctions such as those recently introduced in the US more appropriate?

The latest Trends & Issues in Crime and Criminal Justice paper from the Australian Institute of Criminology concludes that criminalisation is unlikely to provide a significantly greater deterrent and would constitute an expensive exercise.

Industrial Espionage: Criminal or Civil Remedies by Dr Gillian Dempsey, states that, although its incidence and prevalence are unknown, industrial espionage is a fact of contemporary commercial life.

"Recent developments in technology have made intercepting communications easier to do and more difficult to detect", AIC Director, Dr Adam Graycar said.

Considering its civil laws in this area weak, in 1996 the US Congress enacted the Economic Espionage Act, which criminalised industrial espionage. The Act provides for action to be pursued outside the US if necessary and increased penalties from ten to 15 years maximum imprisonment.

But Dr Dempsey states that the US assumption that innovations are produced largely through the efforts of individual firms flies in the face of evidence that in a modern economy, production is led by alliances between firms sharing R&D costs and solving problems together.

"Unlike the US, which has statutory protection for trade secrets, Australia's contractual and equitable intervention for the protection of trade secrets is grounded in the enforcement of relationships of trust and confidence."

"Part of the rationale for offering patent and copyright protection is to encourage the dissemination of information throughout the economy by providing an incentive to disclose trade secrets", she said.

"If Australia provides more protection for trade secrets, the result may be a move away from patent and copyright protection for intellectual property, as seen in Britain, and a resulting reduction in cooperation and innovation. The costs of detection and policing are also likely to be high", Dr Graycar said.

"So, although individual firms may benefit from such legislation, it may not be in the overall interests of the Australian economy in the long-term."

The paper suggests that Australia would be better placed with its current system together with encouraging individual businesses to protect their own economic intelligence by investing in appropriate security technology.