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Civil Remedies for Economic Espionage

Espionage is the practice of using covert means to obtain confidential information from non-public sources.1 Meanwhile, economic espionage is concerned with the unlawful targeting and theft of critical intelligence, such as trade secrets and intellectual properties.2 The value of such information lies in the ability of its owner to exclusively exploit the said information for economic gain. Because there is inherent economic value in such confidential information, a legal framework which protects against economic espionage is, therefore, a necessity.

Once exposed, confidential information can also no longer be made secret, and the owner of such information loses the ability to exploit such information to the exclusion of others. Hence, civil remedies are also necessary to alleviate the losses which may be a consequence of economic espionage. This article will explore the concept of economic espionage and identifies how the laws of Malaysia have attempted to remedy economic espionage.

 

Economic Espionage in Malaysia

Unlike the United States of America (“the US”) and its Economic Espionage Act 1996, there is no specific law in Malaysia which governs economic espionage. However, as economic espionage often involves the use of technology, and is similar to the crime of theft, there are a few pieces of Malaysian legislation which may be referred to in cases of economic espionage.3 Firstly, when economic espionage involves cybersecurity breaches, provisions contained in the Communication and Multimedia Act 1998 and Computer Crimes Act 1997 are relevant.4 Secondly, when economic espionage is committed against Malaysia, laws such as the Security Offence (Special Measures) Act 2012 and Prevention of Terrorism Act 2015 may be relevant.5

Lastly, as the act of economic espionage is similar to the act of theft, the Penal Code may also be relevant in this case.6 However, the abovementioned laws have their weaknesses in that they are incapable of providing adequate protection for economic espionage.7 For example, section 378 of the Penal Code defines theft as “whoever, intending to take dishonestly any moveable property out of the possession of any person without the person’s consent, moves that property in order to such taking, is said to commit theft”. The “movable property” in question also includes the “corporeal property of every description”.8 Nonetheless, in view of the lack of a statutory definition of economic espionage and the definition of “moveable property” as defined above, it would appear that economic espionage may not necessarily be considered theft according to the Penal Code.9 Overall, Malaysia has yet to criminalise economic espionage and there is no well-founded legislation that governs and defines economic espionage.

 

Civil Remedies

While Malaysia has no legislation which specifically governs economic espionage, this does not necessarily mean there are no available remedies for the commission of such a wrong. Economic espionage involves the theft of confidential information by a person working for a particular entity. One way to protect against trade secret theft or economic espionage is through the use of non-disclosure agreements.10 The disclosure of confidential information to a third party can be a breach of the confidentiality requirement that an employee may be bound by during the course of his employment.11 Such disclosure of information may also involve the disclosure of trade secrets.12

To date, there are no reported cases with regards to economic espionage in Malaysia that have been committed against it. Nevertheless, the divulgence of trade secrets may be considered analogous to economic espionage.

As such, cases involving the divulgence of the trade secrets of companies may serve as a reference for the types of civil remedies which could be available in cases of economic espionage. For instance, the case of Yukilon Manufacturing Sdn Bhd & Anor v Dato’ Wong Gek Meng & Ors (No 4),13 involved the first and second defendants utilising information gleaned from a joint venture with the first plaintiff to manufacture similar products with the fourth defendant.14 To prevent further losses to the first plaintiff, the court granted an injunction preventing the first and second defendants from continuing to manufacture and deal with products that closely resembled the plaintiffs’ product.15 A Mareva Injunction was also obtained to prevent the first and second defendant from removing from the jurisdiction, dissipating or dealing within the jurisdiction any assets of the fourth defendant.16 Lastly, an Anton Piller order was also granted for the plaintiffs to enter the premise of the fourth defendant to search for articles and/or documents for inspection and to remove them from the premises to the safe-keeping of the plaintiffs’ solicitors.17 As economic espionage is analogous to the theft of trade secrets, the remedies offered in the case of Yukilon may potentially be granted in cases of economic espionage as well.

In cases of economic espionage and/or theft of trade secrets, the prevention of further damage should be prioritised. This would include preventing any further divulgence of trade secrets and/or obtaining damages for any losses suffered thus far. For example, in the case of Ganesh Raja A/L Nagaiah & Ors v NR Rubber Industries Sdn Bhd,18 the Court granted an injunction to prevent the defendants from using the plaintiff’s confidential information for their business to the detriment of the plaintiff.19 The Court in this case also granted an Order that damages be assessed by the Registrar.20

 

Economic Espionage in Other Jurisdictions

As set out above, the US has specific legislation governing economic espionage. The ambit of such legislation was enlarged in year 2016 when the US Congress enacted the Defend Trade Secrets Act (“DTSA”) to provide for private civil actions including ex parte orders “providing for the seizure of property necessary to prevent the propagation or dissemination of trade secret”.21

DTSA is codified under 18 U.S.C: Crimes and Criminal Procedure. The civil remedies available under 18 U.S.C, section 1836 include the granting of injunctions22, the awarding of damages23, exemplary damages24, and the awarding of costs in cases where the claim of the misappropriation of the trade secret is made in bad faith.25

Additionally, Japan revised its Unfair Competition Prevention Act (“UCPA”) that provides civil and criminal remedies for trade secrets.26 Civil remedies provided in this act include injunctions against actual or likely infringement,27 damages of actual loss,28 and restoration of business reputation.29 The UCPA also aims to increase the effectiveness of civil remedies,30 which includes a reduction of the burden of proof for plaintiffs.

The United Kingdom also has in place the Official Secrets Acts 1911-1989 that protects its country from espionage and unauthorised disclosures.31 In a civil context, English law, especially in cases of breach of confidence, provide for a wide variety of civil remedies which include search and seizure orders, injunctive relief, damages, accounting for profits, third party liability, constructive trusts over assets, and an order to reveal the source of disclosed information.32

 

Conclusion

Ultimately, there is no specific law that provides for civil remedies for economic espionage in Malaysia. There is no reported case law in Malaysia regarding economic espionage as well. However, the characteristics of economic espionage resemble that of the theft of trade secrets.

As such, case laws in relation to the divulgence of trade secrets can act as guidance to the type of civil remedies suitable in cases of economic espionage. In addition, remedies provided in other jurisdictions can also serve as a guideline for the civil remedies which may be available in cases of economic espionage. The above jurisdictions offer civil remedies such as damages, injunctions, and equitable remedies33 that are also available in Malaysia.

Despite the lack of legislation specifically governing economic espionage in Malaysia, the civil remedies currently available in Malaysia are relevant to at least alleviate the losses caused by economic espionage or a similar wrong.

 

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  1. Centre for the Protection of National Insurance, “Espionage” (11 March 2021, CPNI), accessed 25 April 2022.
  2. Investopedia, “Economic Espionage”, (n.d., Investopedia), accessed 20 April 2022.
  3. Juriah Abd Jalil et al, ‘Business Under Threat: The Criminal Liability of Trade Secret Theft in Malaysia?’ (2020), International Journal of Business and Society, Vol. 21, 49-65, 58.
  4. Ibid.
  5. Ibid.
  6. Ibid.
  7. Ibid.
  8. Section 22 of Penal Code.
  9. Juriah Abd Jalil et al (n 5) 60.
  10. FindLaw, ‘Using Non-Disclosure Agreements to Protect Against Trade Secret Theft’, (19 May 2016, FindLaw), accessed 25 April 2022.
  11. Ashgar Ali Ali Mohamad, ‘Implied Term of Trust and Confidence in Contract of Employment’ [2005] 3 MLJ xxi, xxix.
  12. Ecooils Sdn Bhd v Raghunath Ramaiah Kandikeri [2014] 7 MLJ 309, page 323.
  13. [1998] 7 MLJ 551.
  14. Ibid.
  15. Ibid.
  16. Ibid at page 552.
  17. Ibid.
  18. [2016] 12 MLJ 461.
  19. Ibid.
  20. Ibid.
  21. Stimmel, Stimmel & Roeser, “The Economic Espionage Act”, (n.d., Law Offices of Stimmel, Stimmel & Roeser), accessed 21 April 2022.
  22. 18 U.S.C Section 1836(b)(3)(A).
  23. 18 U.S.C Section 1836(b)(3)(B).
  24. 18 U.S.C Section 1836(b)(3)(C).
  25. 18 U.S.C Section 1836(b)(3)(D).
  26. Intellectual Property Office, “The Economic and Innovation Impacts of Trade Secrets”, (19 April 2021, Gov.UK), accessed 21 April 2022.
  27. Article 3 UCPA.
  28. Article 4 UCPA.
  29. Article 14 UCPA.
  30. Thomas Landman, ‘The Secret Protection in Japan and United States: Comparison and Recommendations’, (2019), Brooklyn Journal of International Law, Vol. 44 Issue 2, 714-761, 750.
  31. LawCom, “Reforms to UK’s antiquated spying laws published by law commission”, (1 September 2020, Law Commission), accessed 21 April 2022.
  32. Bradley Limpert & Oxiana Iatsyk, Technology Contracting: Law, Precedents and Commentary, (2005), Carswell.
  33. Cheong May Fong & Lee Yin Harn, Civil Remedies, (Second Edition 2016, Sweet & Maxwell)

 

Written by:

Natalia Izra Dato’ Nasaruddin (Partner) natalia.izra@azmilaw.com

Iris Tang Shu Ni (general@azmilaw.com)

Gabrielle Lim Wai Yee (Trainee Solicitor) gabriellelim@azmilaw.com