Trade Secrets Theft: Architect Convicted, Sentenced to Community Detention

September 18, 2019 | Fraud

An Auckland architect found guilty of stealing trade secrets from his former firm has been convicted and sentenced to community detention, in what may be a precedent-setting case in New Zealand.

Michael Davies was sentenced this morning in the Auckland District Court after a jury decided he had committed the crime of stealing confidential and commercially sensitive material.

The 46-year-old was charged with nine counts of stealing trade secrets for a pecuniary advantage and was found guilty of eight.

On the ninth charge, which related to plans for a school toilet project, Davies was found not guilty.

His lawyer Guyon Foley had earlier asked Judge Eddie Paul not to enter convictions and sought a discharge without conviction for his client.

Judge Paul, however, declined to grant him a discharge.

He instead convicted Davies and sentenced him to a short term of community detention and 220 hours of community work.

The maximum penalty for each charge is five years' imprisonment, Judge Paul said.

In April, Davies stepped down from his role as principal at the architecture firm Design Partners.

"The outcome of this trial could have an effect on the ability to do my job," he said when giving evidence.

Crown prosecutor Sam McMullan said Davies stole "thousands" of computer files from his old firm Context Architects as he left for Design Partners in early 2017.

"As he left he took numerous documents - thousands of documents isn't overstating it," McMullan said.

The court heard during the trial that Davies had downloaded such a large volume of documents to a USB drive that it alerted Context Architects' digital security computer system.

During a single day Davies downloaded some 1600 files.

Judge Paul said: "The offending must have been premeditated, Mr Davies ... It is not a momentary lapse in judgment where you press the button on your computer once."

The potential damage caused by the file heist "could have been significant" to Context Architects, the judge said.

The founding director of Context Architects, Lisa Hinton, has said she considered Davies a "very good architect".

The English-born Davies became one of the leaders of Hinton's firm when he was appointed a principal architect in July 2016.

He had more than two decades of experience working on commercial, residential, hospitality, civic and naval architecture projects.

Guyon Foley said Context Architects wished to "make an example" of Michael Davies.

In a victim impact statement, Hinton said: "This journey has had a huge impact on us personally, on our team and our business."

She continued: "For us this felt like a betrayal. We had always treated Michael with respect and goodwill."

When Davies was farewelled from Hinton's firm, his workmates had enjoyed a long lunch and further celebrations at the office, the court heard.

Hinton also feared the intellectual property theft may have seen the firm's clients lose trust in Context Architects' ability to keep their data safe.

Foley, however, said Hinton and Context Architects wished to "make an example" of Davies.

"That has undoubtedly been achieved."

Hinton said in her statement: "We have felt like we were the ones on trial."

Judge Paul agreed.

"The way the defence was run in this trial, there was criticism directed squarely at the victims of this offending," he said.

Foley had wondered why Hinton didn't look for her golden egg or secret recipe when it walked out her office doors when Davies left with the files.

"If it was really the golden egg, if it was really secret ... Why isn't there a policy about trade secrets if they're so secret?" Foley said.

The lawyer said his client was now volunteering his time with the Salvation Army.

Judge Paul said: "Frankly, he's probably the most overqualified volunteer they've ever had on their books."

Being an architect was a job Davies loved and excelled at, Foley said.

He was liked, kind, funny, caring and now accepts he took more files than he should have.

Prosecutor Sam McMullan said for the jury to reach their verdicts they must have decided Davies "was not truthful in giving his evidence".

Foley said the crime of stealing trade secrets had been introduced into New Zealand law at the start of the 21st Century as part of a "Western worldwide initiative to protect [intellectual property] from theft and threat of theft".

"Essentially it's the criminalisation of industrial espionage."

He said Davies' trial was "a test case" for New Zealand law.

"Computer software and hardware used to put Neil Armstrong on the moon ... To my mind that's a trade secret isn't it?" Foley had said.

He told the jury they had been "buried in a sea of files" during the document-heavy case.

What the jury found, however, was that Davies was a thief.

He stole Context Architects' annual business plan, project files, and pricing models which included details of contract negotiations with Housing New Zealand.

He also took the firm's ArchiCAD computer drawing template and the project file for a high-density residential development in Albany.

All of this material, the jury decided, were trade secrets.

Some of the documents Davies accepted he dishonestly took but he told the jury he "never had an intent that was crooked or dishonest".

Today, McMullan said for the jury to reach their verdicts they must have decided Davies "was not truthful in giving his evidence".

Davies claimed "there was nothing secret" about the files he claimed he took for personal use, professional liability and for his own portfolio of work.

"I didn't know what the definition of a trade secret is - I still don't know that I do," Davies told the court.

When interviewed by police after his arrest in October 2017, Davies said: "I downloaded them all for a reason ... I know I wasn't supposed to. I guess where does it go from here?"

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- Article originally on nzherald.co.nz.

Article by: Mike Gillam, Director

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