When is a thief not a thief?

Trade secrets cannot be stolen, according to the law. But, says Grania Langdon-Down, change may be afoot to protect such intellectual property.

Should someone stealing boardroom secrets face criminal charges? Should there be any distinction between the harm caused by theft and by the misuse of trade secrets?

Due to an anomaly in UK law, trade secrets cannot be stolen because they do not constitute "property" for the purposes of the Theft Act. The "thief" can only be prosecuted for taking the paper on which the information is written and not for the information itself, even though its theft may cost the company millions.

Attempts to change the law over the past 30 years have come to nothing. However, the Confederation of British Industry and other industry bodies have continued pressing for change, arguing that existing sanctions under civil law are inadequate in protecting confidential information.

The issue was further highlighted earlier this year during an abortive takeover bid for the Co-operative Wholesale Society. Confidential internal documents were passed to the rival and CWS launched a private criminal prosecution for theft against three of those involved.

The case was taken over by the Crown Prosecution Service and discontinued on procedural grounds when it became clear that confidential information could not be stolen. The CPS will reconsider the case once the investigations by Greater Manchester Police are completed.

Now the Law Commission, the Government's legal reform body, has set out its provisional ideas for criminalising the misuse of trade secrets.

It suggests defining a trade secret as information which is not generally known, which derives its value from that fact and which the owner has expressly or implicitly indicated it wished to keep secret.

The commission, which wants comments on the proposals by 20 March next year, questioned whether there should be an additional requirement that the information is used in a trade or business, and, if so, whether the definition should include or exclude professional secrets and pure research. It has also called for views on whether the acquisition of confidential information should be criminalised.

One of the commission's main concerns is that the proposed offence, or the threat of prosecution for it, could be used to apply undue pressure on defendants to settle civil claims. It therefore proposes prosecutions should only be brought with the consent of the Director of Public Prosecutions on indictment. The Home Office would set the penalties, likely to mirror those for theft.

A "whistleblowers" or public interest defence would protect the disclosure of information necessary to prevent, detect or expose a crime, fraud or breach of duty or matters that threatened the community.

Stephen Silber QC, the law commissioner responsible for the consultation paper, said the case for creating a new offence was strong, given the economic importance of protecting business investment in research.

A change in the law was also necessary to keep pace with developments in related areas, such as copyright, trade marks, data protection and computer misuse, and to bring the UK into line with most US states and Europe.

Mr Silber said: "The sort of things at risk are tender information and non-patentable commercial information, such as the cheapest mode of manufacturing a particular drug or research into an Aids cure which may have been fruitless but which saves another company going over the same ground.

"You can sue someone for stealing the information but even if the court could impose exemplary damages, from a practical point of view, many defendants haven't got any money." He said the only deterrent likely to counterbalance the chance of making a profit or paying off a grudge was the threat of jail or some other punitive sanction.

Vanessa Marsland is a partner specialising in intellectual property matters at City solicitors Clifford Chance, and a director of the Federation Against Software Theft.

Ms Marsland said: "I think this is legislation whose time has come. Technology has made it so much easier to steal confidential information in spades."

She said sensitive areas that would need debate included the extent of the public interest defence, the extent to which the right to bring private prosecutions should be subject to the consent of the DPP and the question of employees.

The Law Commission suggests that the employees should not be automatically excluded from the offence. If they were, it would enable someone to betray their employer by selling secrets to a competitor with impunity.

Instead it proposed that the new offence should exclude the use or disclosure of information which, under the law of confidence, constituted the enhancement of an employee's personal knowledge or experience.

The Government has signalled its concern over the issue. However, some legal experts question whether it will be prepared to commit the necessary resources to make it work.

Robert Anderson, senior partner in Lovell White Durrant's intellectual property group, said the commission's proposals were a move in the right direction. "I think it is possible to have a workable offence but it would depend on having people in the CPS able to cope with it. In such highly technical cases, it could be difficult to obtain convictions on jury trial. It is important that any new legislation should not fall into disrepute like fraud cases have."

Misuse of Trade Secrets, Law Commission, Conquest House, 37-38 John Street, London WC1N 2BQ.