Theft of Trade Secrets (Colorado 18-4-408 C.R.S.)

What is theft of a trade secret?

Under section 18-4-408 of the Colorado Revised Statutes, you commit theft of a trade secret when, with intent to deprive or withhold the control of someone else’s trade secret, or with an intent to appropriate a trade secret to your own or someone else’s use:

• You steal or disclose a trade secret to an unauthorized person, or
• Without authority, you make or cause to be made a copy of an article representing a trade secret.

Penalties for stealing trade secrets

Under 18-4-408 C.R.S., a first offense for stealing a trade secret is a misdemeanor that can be punished by:

• Up to 18 months in jail, and/or
• A fine of up to $5,000.

A second or subsequent conviction within 5 years of a prior conviction is, however, a felony. Penalties for felony theft of trade secrets in Colorado can include:

• Up to 3 years in prison, and/or
• A fine of up to $100,000.

However, if the product or service involved is used or intended for use in interstate or foreign commerce, theft of a trade secret can be punished under federal law — specifically, section 1832 of Title 18 of the United States Code.

Under 18 U.S.C. 1832 the penalties for stealing a trade secret can include:

• Up to 10 years in federal prison, and/or
• A fine of as much as the greater of:
  • $250,000, or
  • Twice your gross gain or the rightful owner’s gross loss from your use of the trade secret.¹

Defenses to trade secret theft

Trade secrets cases — whether criminal or civil — are complicated cases often involving corporate espionage and technical forensics.² As a result, defenses are equally complex.

However, common defenses often include (but are not limited to):

• The “secret” was obtained publicly or lawfully from a third-party source;
• You used only your own or publicly available information to develop the “secret” independently;
• The owner of the information did not take proper efforts to keep the information secret;
• You didn’t intend to harm the owner with use of the information;
• The rightful owner derived no independent value from the information not being publicly known; or
• The evidence against you was obtained through police misconduct or an illegal search and seizure.

To help you better understand the complexities of Colorado’s trade secret law, our Colorado criminal defense lawyers discuss the following, below:

• 1. What is a trade secret?
• 2. What constitutes theft of a trade secret?
• 3. Penalties for theft of trade secrets
• 4. Defending a charge of theft of trade secrets

1. What is a trade secret?

Colorado 18-4-408 (2) (d) defines “trade secret” as follows:

“Trade secret” means the whole or any portion or phase of any scientific or technical information, design, process, procedure, formula, improvement, confidential business or financial information, listing of names, addresses, or telephone numbers, or other information relating to any business or profession which is secret and of value. To be a trade secret the owner thereof must have taken measures to prevent the secret from becoming available to persons other than those selected by the owner to have access thereto for limited purposes.

Examples of trade secrets include (but are not limited to):

• The specific formula or recipe for a soft drink;
• Results of testing of new products;
• Consumer surveys;
• Designs for unreleased products;
• Accounting records; and
• Customer lists.

2. What constitutes theft of a trade secret?

There are a number of “elements of the crime” that a prosecutor must prove beyond a reasonable doubt before you can be found guilty of stealing trade secrets.

1. You must have intended to:

• Deprive or withhold from the rightful owner the control of a trade secret, or
• Appropriate the trade secret for your own use or the use of another;

2. You must have:

• Stolen or disclosed the trade secret to an unauthorized person, or
• Without authority, made or had made a copy of an article representing a trade secret;

3. The information you take must be secret and of value; and

4. The owner must have taken measures to prevent the secret from becoming available to persons other than those selected by the owner to have access thereto for limited purposes.

Additionally, to be found guilty of stealing a trade secret under federal law:

• The secret must be related to a product or service used in or intended for use in interstate or foreign commerce, and
• You must have intended or known that the offense would injure the rightful owner of the trade secret.

3. Penalties for theft of trade secrets

If charged under Colorado 18-4-408 C.R.S., a first offense for stealing trade secrets is a Colorado class 1 misdemeanor. Consequences of misdemeanor theft of trade secrets can include:

• 6 – 18 months in jail, and/or
• A fine of $500-$5,000.

However, a second or subsequent offense within 5 years of a prior offense will be charged as a Colorado class 5 felony. Punishment for felony theft of trade secrets can include:

• 1-3 years in prison (with 2 years mandatory parole), and/or
• A fine of $1,000-$100,000.

If, instead, you are charged under 18 U.S.C. 1832, penalties for stealing a trade secret can include:

• Up to 10 years in federal prison (without the possibility of parole), and/or
• A fine that can be as much as the greater of:
  • $250,000, or
  • Twice your gross gain or the rightful owner’s gross loss from your use of the trade secret.

And regardless of which law you are charged under, you may also face a civil suit for damages by the rightful owner of the trade secret(s).

4. Defending a charge of theft of trade secrets

There are a lot of moving parts to a Colorado charge of stealing trade secrets and the prosecutor must prove each element beyond a reasonable doubt.

A skilled trade secrets defense lawyer should, therefore, focus on the weakest elements of the prosecution’s case. While the best defense to a trade secrets criminal charge depends on your particular set of facts, common defenses often include:

• The “secret” was obtained publicly or lawfully from a third-party source.

To sustain a conviction for theft of trade secrets, the prosecutor must prove you got the information improperly. If it was publicly available, it wasn’t a secret at all. And if you got it from a third party, without knowing that they improperly obtained it, you aren’t guilty.

• You used only your own or publicly available information to develop the “secret” independently.

Sometimes a process, formula or discovery is being worked on by more than one person or company. If you developed the same thing as someone else using your own know-how and/or publicly available or lawfully obtained information, you are not guilty under 18-4-408 C.R.S.

• The owner of the information did not take proper efforts to keep the information secret.

To be a trade secret, the owner must have taken measures to prevent it from becoming available except to people with a need to know. If the reason you got access to the trade secret was that the owner failed to take such measures, you aren’t guilty of theft of trade secrets.

• You didn’t intend to harm the owner with use of the information.

Even if you wrongfully acquired a trade secret, you haven’t committed a crime unless you did so with the intent to deprive or withhold control of the trade secret from the rightful owner, or the intent to appropriate the secret to your own or someone else’s use.

Example: You and a friend make a $5 bet about the ingredients in a local burger company’s “secret sauce.” You get yourself hired as a temp in their offices and gain access to their files to look it up. Although you have wrongfully acquired the trade secret, you haven’t deprived the owner of control of it or appropriated it your own or someone else’s use. So you shouldn’t be found guilty under 18-4-408 C.R.S.

• The rightful owner derived no independent value from the information not being publicly known.

To be a trade secret under Colorado law, information must be both secret and valuable. Under federal law, some of the value must come specifically from it being unknown.

As a result, if the information isn’t valuable, or there is no value in it being secret, it doesn’t count as a trade secret and you aren’t guilty of violating the Colorado or federal criminal trade secrets laws, no matter how you acquired the information.

• The evidence against you was obtained through police misconduct or an illegal search and seizure.

Under the Fourth Amendment to the United States Constitution, you have the right to be free of unreasonable searches and seizures. Among other things, this means the cops can’t search you or your belongings without a warrant except in certain, very specific situations (such as to look for weapons after you have been arrested).

As a result, if the evidence against you is wrongfully obtained through an illegal search and seizure, that evidence must be thrown out. Unless there is independent evidence, this often means the case against you will be dropped or the charges reduced to something less serious.

Call us for help…

If you or someone you know has been charged with theft of trade secrets, our Colorado criminal attorneys may be able to help.

We have a great deal of experience defending complex criminal cases, including those involving technical information and/or corporate espionage.

Communities our criminal attorneys serve include Denver, Colorado Springs, Aurora, Fort Collins, Lakewood, Thornton, Arvada, Westminster, Centennial and Boulder.

If your loved one is in custody, our attorneys can visit him or her at any of the Colorado detention centers, including the Summit County Jail.

For cases in California, please see our page on Penal Code 499c – theft of trade secrets in California.

We can be reached through the confidential form on this page or by telephone at our Denver home office:

Colorado Legal Defense Group
4047 Tejon Street
Denver, CO 80211
(303) 222-0330

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