Matt Malone is an assistant professor at Thompson Rivers University’s Faculty of Law.
The arrest of Hydro-Québec employee Yuesheng Wang on Monday for allegedly obtaining trade secrets from the utility on behalf of China puts Canada in uncharted waters. It represents the first major use of Canada’s criminal trade secrets laws and should prompt a shift toward cracking down on economic espionage. This is an area where Canada has lagged the efforts of its peers for years – and still has a long way to go to get it right.
Canada has two major criminal trade secrets laws. One criminalizes trade secrets theft for the benefit of, or in association with, a foreign economic entity. The other, and more recent criminal law, makes it an offence for anyone to obtain or communicate a trade secret by deceit, falsehood or other fraudulent means. Mr. Wang has been charged with both. It is the first time either has been used.
Canada’s long-time reluctance to prosecute trade secrets theft should come as no surprise to anyone. The agency prosecuting criminal offences on behalf of the federal government does not have a section or unit devoted to intellectual property crime. An access to information request I filed last year showed no government attorney is devoted to investigating or prosecuting such crime as part of their job mandate.
This is a sharp contrast to our allies. The United States has been ramping up enforcement against trade secrets theft for decades. Since 1996, at least 419 defendants have been charged with criminal theft of trade secrets.
Meanwhile, the U.S. Trade Representative has expressed considerable worry about Canada’s lacklustre enforcement of intellectual property law – keeping Canada on its watchlist of countries with lacklustre enforcement since 2010. American industry has also lobbied hard for Canada to do more to protect trade secrets. One of the few trade secrets laws we do have – one of the two Mr. Wang was charged under – only exists due to American insistence that Canada pass such a law.
But focusing on criminal prosecution should not be the only answer. While there is certainly a role for the government, leaving enforcement solely in its hands may produce adverse effects. For example, the American approach to cracking down on trade secrets theft seems increasingly inseverable from the wider creep of xenophobia into its politics – as witnessed in then-president Donald Trump’s nominal China Initiative in 2018 and President Joe Biden’s decision to retain that program for two years when he assumed power.
If Canada follows the U.S. in cracking down on Chinese trade secrets theft in particular, it should also think carefully about the costs of dealing with a China that is more than ready to retaliate. Recall that the underlying action against Huawei leading to Canada’s detention of company executive Meng Wanzhou in Vancouver and China’s retaliatory arrest of the two Michaels stemmed, in part, from an American criminal lawsuit about trade secrets theft.
Furthermore, Canadian law enforcement, intelligence agencies and prosecutors clearly do not excel at enforcement in this area. The dearth of action and guidance from the government urgently needs supplementation by the private sector, which is often a smarter, better, nimbler and more interested enforcer.
While Canadian law makes available certain civil tools such as the breach of confidence and breach of fiduciary obligations to private parties, these judge-made devices are ill-equipped for the digital era and come with significant disadvantages.
The Canadian Intellectual Property Institute, the Alberta Law Reform Institute, the Uniform Law Conference of Canada and many like myself have proposed Canada proceed with passing a civil trade secrets law akin to the Patents Act, the Copyright Act and the Trademarks Act. Such a law would let private parties – not just government – bring lawsuits for misappropriation and infringement. It is unfortunate that, so far, no government has heeded these calls.
For trade secrets and confidential information, there is no question that, with so much value inhering in intangible assets, providing adequate protection for trade secrets and confidential information is a prerequisite in the digital economy. Getting it right is crucial.