Embed Size (px)
Citation preview
In Confidence: Putting In Place A Trade Secret Protection Program
Doha, Qatar11 April2011
Najmia Rahimi
Senior Program Officer,
Small and Medium-Sized Enterprises Division
Outline
What’s a Trade Secret?Definition and main criteriaWhy to protect trade secrets?Pros and cons of trade secrets’ protection
Trade secret management programBuilding it up in a company
Misappropriation of trade secretsHow trade secrets get stolenHow to protect them
Violation of trade secretsHow to establish an violationWhat are the remedies
Audit of trade secrets: main steps
What are trade secrets?
Do-it-yourself form of IP
Idea: By keeping valuable information secret, you can prevent competitors from learning about and using it and thereby enjoy a competitive advantage in the marketplace.
General principles:
Information that has commercial value. and that has been kept confidential will be considered a trade secret (TS).
Owner will be entitled to court relief against those who have stolen or divulged it in an illegal manner.
Question
What kind of information qualifies as a trade secret?
TRADE SECRET
Provides competitive advantage
Potential to make money
Kept confidential
TRADE SECRET
Financial information
Technical & scientific
information
Commercialinformation
Negativeinformation
Examples: Technical and scientific information
Product information
technical composition of a product (paint, medicine, beverage)
technical data about product performance
product design information
Manufacture information
manufacturing methods and processes (e.g. weaving technique)
production costs, refinery processes, raw materials
specialized machinery
Know-how necessary to perform a particular operation
Examples: Technical and scientific information cont.
Computer technologyhardware + software (esp. source code)whether < patent or copyright protectionalgorithms, formulas, data flow charts, specific procedures that are implemented in the software or websiteSoftware design documentsSoftware development agreements
Drawings, designs, motifs, patterns
Laboratory notebooks
Pending patent applications
Examples: Commercial information
Customer lists
Customer profiles, buying preferences, requirements
Business plans and strategies
New product names
Supplier arrangements
Sales methods
Personnel performance
Info re: new business opportunities
Examples: Financial information
Financial projections
Cost & pricing information
Sales data, price lists
Internal cost structure
Salary and compensation plans
Examples: Negative information
Details of failed efforts to remedy problems in the manufacture of certain products
Dead-ends in research (e.g. waterproof)
Unsuccessful attempts to interest customers in purchasing a product
What’s a Trade Secret?
Let’s start with the Norden Case!Past ten years the IT specialist A was working in a company A in high-tech designs application business. Starting this year, A was hired by the company Norden which produces T-Shirts and another apparel. During the first weeks of his work in Norden, A developed a new very efficient process of application 3D images on T-shirts. The manager of Norden asked A how he made such invention which worked perfectly. The specialist A said that he had gotten certain knowledge from the previous company he used to work at. The manager of Norden was surprised and asked if such information was not secret. A said that he did not hear about anything ‘secret’ in the previous company…
Trade Secret is Information
Any: technical, commercial, financial, strategic, logistical, scientific, etc.
Not generally known to the relevant business circles or to the public
Confers economic (commercial) benefit to its owner because of the fact that it is secret
Is subject to reasonable efforts to maintain its secrecy.
What’s a Trade Secret?
Going back to the Norden Case…Past ten years the IT specialist A was working in a company A in high-tech designs application business. Starting this year, A was hired by the company Norden which produces T-Shirts and another apparel. During the first weeks of his work in Norden, A developed a new very efficient process of application 3D images on T-shirts. The manager of Norden asked A how he made such invention which worked perfectly. The specialist A said that he had gotten certain knowledge from the previous company he used to work at. The manager of Norden was surprised and asked if such information was not secret. A said that he did not hear about anything ‘secret’ in the previous company…
One of the most famous examples: formula of Coca-Cola drink
Pros and Cons of Trade Secret Protection
Advantages
No registration, therefore, no registration costs
Immediate effect
No other substantive requirements to be met (e.g. of novelty or originality)
No disclosure requirement
No written description requirement
Unlimited period of protection
Pros and Cons of Trade Secret Protection
Disadvantages Difficult to maintain for a longer period Limited scope of protection, more difficult enforcement of rightsNo protection against legitimate discovery of the same information, invention, etc. by others (e.g. through ‘reverse engineering’)No possibility to stop others from developing the same invention by legitimate means (protection against improper acquisition, use or disclosure of confidential information only)
How to build up a trade secret management program in a company?
Going back to the Norden Case…
What should have been done by the company A (where the IT specialist A was previously working) in order he, later hired by Norden, did not take ‘secret’ information from the company A?
What steps should the company A have taken?
Trade secret management program in a company: Steps
1 Step - To create a system of identifying trade secrets
2 Step – To develop a company’s security policy, including trade secret policy
3 Step – To educate all employees on issues which are related to information, including trade secrets, security
4 Step – To establish a system of rules in situations when a new employee is hired or company’s employee is leaving
5 Step – To include certain restrictions in contracts
Trade secret management program in a company: Steps
6 Step - To restrict access to paper records
7 Step – To mark documents
8 Step – To arrange a company’s premises and used devices, etc. in order to keep confidentiality
9 Step – To maintain computer secrecy
10 Step – To take care of trade secrets which are shared with external partners
How trade secrets get stolen?
Further in the Norden Case…The employee A explained to the manager of Norden that he had found a description of an improved chemical composition of the glue and specific printing material in a waste-paper basket in the company A. He said he had compared that information with the information he could find in the confidential documents’ folder saved on the company’s A servers. The manager of Norden was very much surprised how the employee A could have had an access to such documents, as it usually requires a password. A explained that he took that password from his colleague who had actually ‘hacked’ it.
Misappropriation of trade secrets
1. Unfair acquisition of trade secret
That is, theft, fraud, coercion, industrial espionage or other unlawful or dishonest acts.
Misappropriation of trade secrets
2. Acquisition of a trade secret with knowledge about its prior illegal acquisition, or without such knowledge, but being grossly negligent in falling to know such previous illegal act, and, in any case, using or disclosing trade secret acquired in such a way.
Misappropriation of trade secrets
3. After a trade secret was acquired innocently, using or disclosing it after learning about its prior illegal acquisition by another person.
Misappropriation of trade secrets
4. Using or disclosing a trade secret in breach of contractual obligations to maintain the trade secret.
4.1. Acquisition of a trade secret that was disclosed while breaching contractual obligations (knowing or with gross negligence about this fact), and using or disclosing such trade secret.
4.2. After a trade secret was acquired by innocently breaching contractual obligations, using or disclosing it after learning about the breach of contractual obligations or being grossly negligent in falling to learn about such illegal act.
How trade secrets get stolen: What would be your comments on the Norden Case?
The employee A explained to the manager of Norden that he had found a description of an improved chemical composition of glue and materials for printing on textile in a waste-paper basket in the company A. He said he had compared that information with the information he could find in the internal documents folder saved on the company’s A servers. The manager of Norden was very much surprised how the employee A could have had an easy access to such documents, as it usually requires a password. A explained that he took that password from his colleague who had actually ‘hacked’ it.
Protection of trade secrets
Most countries do not have specific laws on trade secrets.
Protection of trade secrets is established in:
Civil Laws
In Unfair Competition Laws (for instance, in Germany)
In Contract Law (in many countries)
In Criminal Law (for instance, in the EU countries, USA, Russia)
How to establish violation of trade secrets?
1 - To clarify if information was secret
2 – To establish if reasonable steps were taken to maintain this information secret
3 - To show that infringement was made or competitive advantage was gained by misappropriating a trade secret by a person/company
4 – To establish that there was a misuse of a trade secret in violation of honest business practices
Remedies Against Violations of Trade Secrets
Court order to stop illegal acts (injunction)
Monetary compensation (damages, lost of profits, unjust enrichment, etc.)
Seizure order (to check defendant’s premises, to take evidence, etc.)
Precautionary confiscation/seizure of articles that contain trade secrets or products resulting from their use/misuse
Destruction of infringing articles
In some countries, imposition of punitive damages
Audit of Trade Secrets
Coming back to the Norden Case…The general manager of Norden is planning an audit of information possessed by his company, including also all confidential information. The manager arranged a meeting with his human resources and other departments in order to discuss the main aspects of such audit, but first he wants to know the main steps of an audit procedure. What would be those main steps?
Audit of Trade Secrets: Steps
Identification of most important trade secrets
Consultations with R&D division
Sales, marketing and human resources
Information management
Contacts with customers, etc.
Verification of a company’s ownership over those trade secrets
Checking all documents, contracts, assignments, licenses, etc.
Audit of Trade Secrets: Steps
Verification that confidentiality procedures are duly followed
Contacting human resources, security departments which maintain trade secrets
Verification that employees and all third persons do not disclose trade secrets
Contacting human resources department in order to establish if contracts include confidentiality clausesTo clarify what confidentiality means are taken so far, as far as external persons are concerned
