Transcript In Confidence: Putting In Place A Trade Secret Protection Program Najmia Rahimi Senior Program Officer, Small and Medium-Sized Enterprises Division Doha, Qatar 11 April.

In Confidence:
Putting In Place A Trade
Secret Protection
Program
Najmia Rahimi
Senior Program Officer,
Small and Medium-Sized Enterprises Division
Doha, Qatar
11 April
2011
Outline
What’s a Trade Secret?
Definition and main criteria
Why to protect trade secrets?
Pros and cons of trade secrets’ protection
Trade secret management program
Building it up in a company
Misappropriation of trade secrets
How trade secrets get stolen
How to protect them
Violation of trade secrets
How to establish an violation
What 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
Kept
confidential
Potential to
make money
Financial
information
Technical &
scientific
information
TRADE SECRET
Commercial
information
Negative
information
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 technology
hardware + software (esp. source code)
whether < patent or copyright protection
algorithms, formulas, data flow charts, specific procedures that
are implemented in the software or website
Software design documents
Software 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 Tshirts. 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 Tshirts. 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 rights
No 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
clauses
To clarify what confidentiality means
are taken so far, as far as external
persons are concerned
Thank You
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