Theft of Trade Secrets – Colorado Law – CRS § 18-4-408

CRS 18-4-408 is the Colorado statute that prohibits theft of a trade secret. This is when you steal a trade secret, disclose a trade secret to an unauthorized person, or make an unauthorized copy of an article representing a trade secret, and you have the intent to either:

Stealing a trade secret is a misdemeanor in Colorado punishable by:

• Up to 120 days in jail, and/or
• A fine of up to $750

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 is theft of a trade secret?
• 3. What are the penalties in Colorado?
• 4. How do I fight the charges?

1. What is a trade secret?

Colorado Revised Statute 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.¹

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 is theft of a trade secret?

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

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; AND
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; AND
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.²

Federal law

Trade secret theft is a federal crime as well.

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. In addition, you must have intended or known that the offense would injure the rightful owner of the trade secret.³

3. What are the penalties in Colorado?

Stealing trade secrets in Colorado is a class 2 misdemeanor. Consequences of misdemeanor theft of trade secrets can include:

• Up to 120 days in jail, and/or
• A fine of up to $750⁴

Federal penalties

If you are convicted of trade secret theft under 18 U.S.C. 1832, the federal penalties are:

• 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.⁵

Regardless of whether you are charged under state or federal law, you may also face a civil suit for damages by the rightful owner of the trade secret(s).⁶

4. How do I fight the charges?

The best defense to a trade secrets theft charge in Colorado depends on your particular set of facts. Six commonly-used defenses include:

1. 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 was not a secret at all. If you got it from a third party, without knowing that they improperly obtained it, you are not guilty.
2. 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 CRS 18-4-408.
3. 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 are not guilty of theft of trade secrets.
4. 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 is not valuable, or there is no value in it being secret, it does not count as a trade secret and you are not guilty of violating Colorado or federal criminal trade secrets laws, no matter how you acquired the information.
5. 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 cannot 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.
6. You did not intend to harm the owner with use of the information. Even if you wrongfully acquired a trade secret, you have not 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 for 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 have not deprived the owner of control of it or appropriated it for your own or someone else’s use. So you should not be found guilty under CRS 18-4-408.

Trade secrets cases — whether criminal or civil — are complicated cases often involving corporate espionage and technical forensics. As a result, defenses are equally complex.⁷

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. Therefore, a skilled trade secrets defense lawyer will focus on the weakest elements of the prosecution’s case.

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

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