Penal Code 499(c) PC - Theft of Trade Secrets

Penal Code 499c is the California statute that makes it a crime to steal trade secrets. A “trade secret” is generally defined as information of a business that has a value for not being known to the public (e.g., a pizza parlor's recipe for its sauce).

Examples:

  • Gloria works at a deli, and upon getting fired, she immediately steals the deli's recipe for its famous “secret sauce.”
  • Len works at a cancer research center and steals one of the company's programs that can detect a certain strand of cancer.
  • Elli works for a business that makes “orange fizz” and she makes a copy of the company's secret fizz formula.

Luckily, there are several legal defenses that a person can raise. These include showing that an accused party:

  • did not engage in thievery;
  • did not steal a “trade secret;” and/or,
  • was the victim of a violation of California entrapment laws.

Penalties

Theft of a trade secret is charged as a felony under California law (as opposed to a misdemeanor or an infraction). The crime is punishable by:

  • imprisonment in the county jail for up to three years; and/or,
  • a maximum fine of $5,000.

Our California criminal defense attorneys will highlight the following in this article:

trade secrets california law
California Penal Code 499(c) PC is the California statute that says the theft of a company's trade secret is a crime.

1. The legal definition of theft of trade secrets

Penal Code 499(c) PC is the California statute that says the theft of a company's trade secret is a crime.1

The statute sets forth specific definitions for the terms “theft” and “trade secret.”

According to PC 499(b), “theft” occurs when a person intends to deprive a trade secret from its owner, and either:

  1. steals, takes, carries away, or uses a trade secret without authorization;
  2. uses fraud to show that the trade secret belongs to him;
  3. unlawfully gains access to the trade secret and makes a copy of the same; or,
  4. gains access to the trade secret by violating certain relationship boundaries and makes a copy of the same.2

Under Penal Code 499(a)(9), a “trade secret” means:

  • information that has an economic value for not being known to the public, and
  • information that a company takes reasonable efforts to maintain its secrecy.3

Trade secrets are often in the form of information, but they may also include:

  • formulas,
  • patterns,
  • compilations,
  • programs,
  • devices,
  • methods,
  • techniques, or
  • processes.4

2. Legal Defenses

A person can challenge the charges by raising a legal defense. A good defense can often get a charge reduced or even dismissed. Please note, though, that it is critical for an accused to hire a knowledgeable criminal defense attorney to get the most effective defense.

Three common defenses are:

  1. no “theft”
  2. no “trade secret;” and/or,
  3. entrapment

2.1. No “theft”

Please recall that Penal Code 499(b) provides a very specific definition of what “theft” is. This means that it is a valid legal defense for an accused to show that his actions did not come under the umbrella of the PC 499(b) definition of “theft.”

2.2. No “trade secret”

Please also recall that PC 499(a)(9) sets forth a specific definition of what a “trade secret” is. A solid legal defense, therefore, is for an accused to show that, while he may have stolen or taken something from a business, the item did not rise to the level of a trade secret. Please note, though, that the accused could still likely be found guilty of the taking under another California theft law.

2.3. Entrapment

In many cases, suspects are often arrested and accused after an undercover sting operation. Any later charges of theft of a trade secret, though, must get dropped if an officer lured a suspect into committing the crime.

This “luring” is known as entrapment. It applies to overbearing official conduct on the part of police officers - like pressure, harassment, fraud, flattery, or threats. Entrapment is an acceptable legal defense provided that the accused shows he only committed the crime because of the entrapment.

woman behind bars
A violation of this law can result in a fine and/or jail time

3. Penalties, punishment, and sentencing

Theft of a trade secret is charged as a felony under California law. The crime is punishable by:

  • imprisonment in the county jail for up to three years; and/or,
  • a maximum fine of $5,000.5

Note that in lieu of jail time a judge may order a defendant to felony probation.

4. Related Offenses

There are three crimes related to theft of trade secrets. These are:

  1. grand theft – PC 487;
  2. embezzlement – PC 503; and,
  3. burglary – PC 459.

4.1. Grand theft – PC 487

The crime of theft under California law is defined as the unlawful taking of someone else's property.6

When the property taken is valued at more than $950, then the theft is considered the California crime of grand theft, per California Penal Code 487 PC.

Grand theft is a type of wobbler offense under California law. This means that it can be charged as either a misdemeanor or a felony.

The maximum potential sentence for misdemeanor grand theft is up to one year in county jail.7

For a felony grand theft conviction, a defendant may be imprisoned in the county jail for a term of:

  • sixteen months,
  • two years, or
  • three years.8

4.2. Embezzlement – PC 503

Embezzlement is a crime under California Penal Code 503 PC.

The offense is defined as when a defendant fraudulently appropriates property that

  1. belongs to someone else, and
  2. has been entrusted to the defendant.9

Embezzlement in California is punished as a form of California grand theft or California petty theft, depending on the value and type property that is stolen or borrowed.10

If the property is either

  • worth more than $950,
  • an automobile, or
  • a firearm,

then California embezzlement is a form of grand theft. 11

As such, it is a wobbler offense, meaning that it can be charged as either a misdemeanor or a felony, depending on the facts of the case.

Misdemeanor grand theft embezzlement can lead to up to one year in county jail, while felony grand theft embezzlement can lead to up to three years.12

With property worth less than $950, an embezzlement is a form of petty theft—a misdemeanor punishable by up to six months in county jail.13

4.3. Burglary – PC 459

Per California Penal Code 459 PC, it is a crime for a person to commit burglary.

Under PC 459, “burglary” is when a person:

  1. enters any residential or commercial building or room,
  2. with the intent to commit a felony or a theft once inside.14

One commits the crime of burglary merely by entering the structure with the requisite criminal intent, even if the intended felony or theft is never actually completed.

California burglary law is divided into “first-degree burglary” and second-degree burglary.” First-degree burglary is burglary of a residence. Second-degree burglary is burglary of any other type of structure (including stores and businesses).15

First-degree burglary is a felony. The potential consequences include a state prison sentence of two, four or six years.16

Second-degree burglary is a wobble. Meaning it can be charged as either a felony or a misdemeanor.

A felony charge carries a possible county jail sentence of 16 months, two years or three years.17

A misdemeanor charge carries a possible county jail sentence of up to one year.18

Were you accused of stealing a trade secret in California? Call us for help…

california trade secret legal defense attorney
Call us for help at (855) LAW-FIRM

If you or someone you know has been accused of a crime under Penal Code 499(c) PC, we invite you to contact us for a free consultation. We can be reached 24/7 at 855-LawFirm. (For similar accusation in Colorado, please see our article on Theft of Trade Secrets (Colorado 18-4-408 C.R.S.)).

Legal References:

  1. California Penal Code 499(c) PC. This section states: “Every person who promises, offers or gives, or conspires to promise or offer to give, to any present or former agent, employee or servant of another, a benefit as an inducement, bribe or reward for conveying, delivering or otherwise making available an article representing a trade secret owned by his or her present or former principal, employer or master, to any person not authorized by the owner to receive or acquire the trade secret and every present or former agent, employee, or servant, who solicits, accepts, receives or takes a benefit as an inducement, bribe or reward for conveying, delivering or otherwise making available an article representing a trade secret owned by his or her present or former principal, employer or master, to any person not authorized by the owner to receive or acquire the trade secret, shall be punished by imprisonment in a county jail not exceeding one year, or by imprisonment pursuant to subdivision (h) of Section 1170, or by a fine not exceeding five thousand dollars ($5,000), or by both that fine and imprisonment.”

  2. California Penal Code 499(b) PC.

  3. California Penal Code 499(a)(9) PC.

  4. See same.

  5. California Penal Code 499(c) PC.

  6. California Penal Code 484 PC.

  7. California Penal Code 489 PC.

  8. See same.

  9. California Penal Code 503 PC.

  10. California Penal Code 484 PC.

  11. California Penal Code 490 PC.

  12. Based on People v. Davis, (1998) 19 Cal.4th 301, 307.

  13. CALCRIM 1804.

  14. California Penal Code 459 PC.

  15. California Penal Code 460 PC.

  16. CALCRIM 1700.

  17. California Penal Code 461 PC.

  18. See same.

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