Trade Secret Ppt

7/30/2019 Trade Secret Ppt

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WIPO ASIA SUB-REGIONAL WORKSHOP ON THEUSE OF INTELLECTUAL PROPERTY (IP) BY SME

SUPPORT INSTITUTIONS FOR THE PROMOTION OFCOMPETITIVENESS OF SMEs IN THE FOOD

PROCESSING SECTOR

Lahore, Pakistan, June 5 and 6, 2007

Guriqbal Singh JaiyaDirector

SMEs DivisionWorld Intellectual Property Organization


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Idea: By keeping valuable information secret,you can prevent competitors from learning aboutand using it and thereby enjoy a competitiveadvantage in the marketplace.

What are tradesecrets?

Do-it-yourselfform of IP


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General principles:

Information that has commercial value and thathas been scrupulously kept confidential will

be considered a trade secret (TS).

Owner will be entitled to court relief againstthose who have stolen or divulged it in an illegal

manner.


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This Presentation

1. What information qualifies as a TS?

2. What makes something a TS?

3. When can you get court relief?

4. How are TS lost or stolen?

5. How to protect your TS?

6. May TS be sold?

7. How is TS protection enforced?

8. If you have the choice: TS or patent?

9. What to bear in mind if you sign CA?


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Question1

WHAT KIND OF INFORMATIONQUALIFIES AS A TRADE SECRET ?


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TRADE SECRET

Providescompetitive

advantage Potential tomake money

Kept

confidential


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TRADESECRET

Financial

information

Technical &scientific

information

Commercialinformation

Negativeinformation


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Computer technology

hardware + software (esp. source code)

whether < patent or copyright protection

algorithms, formulas, data flow charts, specificprocedures that are implemented in thesoftware or website

Software design documents

Technical data about product performance

Software development agreements

Pending patent applications

Typical examples in the software industry


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Question2

WHAT MAKES SOMETHING ATRADE SECRET ?

When do you have

legal protection?


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Three essential legal requirements:

1. The information must be secret

2. It must have commercial valuebecause its secret

3. Owner must have taken reasonable steps to keep itsecret


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not generally known among or easily accessible topersons within the circles that normally deal with thiskind of information

What is generally known in the software industry?

matters of common knowledge

information you find at library, online database, trade

journals, patent information, etc

price list on website

graphics & object code of software application you sell

off-the-shelf

1. Secret


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Not required that be known only by one person

e.g. based on supplier relationship, joint developmentagreement, due diligence investigation, etc.

If you license software which has limited distribution

possible to protect object code by contractual means

1. Secret


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Must confer some economic benefit on the holder

This benefit must derive specificallyfrom the fact thatit is not generally known (not just from the value ofthe information itself)

How to demonstrate:

benefits derived from use costs of developing the TS

licensing offers; etc.

actual or potential

2. Commercial value


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Under most TS regimes, you cannot have a TS unlessyou have taken reasonable precautions to keep the

information confidential

Reasonable case by case

reasonable security procedures

Non-disclosure agreements (NDA)

such that the information could be obtained

by others only through improper means

Importance of proper TS management program

3. Reasonable steps


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Caution: Who owns the TS?

TS (e.g. new technology or software) developed byemployee

TS developed by external contractor

To avoid disputes:

WRITTEN AGREEMENT+

ASSIGNin advance all trade secrets developed

during employment or commission


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Question3

WHEN CAN YOU GET COURTRELIEF ?


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COURT RELIEF if: TS + THEFT

Courts will only grant relief if someone hasimproperly acquired, disclosed or used the

information

Only theft if wrongful !


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2. Confidentiality agreementor NDA

e.g., employees, suppliers, consultants, financial

advisors

What is typically considered

wrongful?1. Duty of trust

implied or imposed by law

e.g., employees, directors, lawyers

3. Industrial espionage, theft, bribery, hacking


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What is lawful?Discovery of the secret by fair and

honest means

1. Independent creation

without using illegal means or violating agreementsor law

patent

TS protectionprovides

no exclusivity !


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What is lawful?

2. Reverse engineering

Common practice among software companies:studying competitors' products

to make software that can interoperate with thesoftware being studied

to make a product that will compete with it

E.g. decompile object code to reveal its structure andfigure out the interface specifications for interoperabilitypurposes

E.g. look at a program's input and outputs


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2. Reverse engineering

Solution: contractually forbid reverse engineering(in software license agreement)

Technological protection measures

BUT! Legality in question Inconsistent with copyright or antitrust laws?


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Question4

HOW ARE TRADE SECRETS LOSTOR STOLEN ?


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A Growing Problem.

Why Does It Occur?

Way we do business today (increased use ofcontractors, temporary workers, out-sourcing)

Declining employee loyalty: more job changes

Organized crime : discovered the money to bemade in stealing high tech IP

Storage facilities (DVD, external memories, keys)

Expanding use of wireless technology


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Reverse engineering, independent discovery

Improper licensing

Burglaries by professional criminals targetingspecific technology

Network attacks (hacking)

Laptop computer theft Inducing employees to reveal TS

Examples


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departing or disgruntled employees

intentional (malicious)

inevitable (knowledge acquired) by ignorance

80% of trade secret loss

< employees, contractors, trusted insiders!


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CaseCoca-Cola Trade Secret Trial

Prosecutors say a former Coca-Cola secretary tookconfidential documents from the beverage giant

and samples of products that hadn't been launchedwith the aim of selling them to rival Pepsi

Faces up to 10 years in prison if convicted ofconspiracy.

AP Business, January 15, 2006


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CaseCompany accused of misappropriating TS

from an inventor

Inventor of new design forvacuum cleaner presenteddesign to vacuum cleanermanufacturer. Signed NDAcovering the design.

Manufacturer obtained patenton the design one year after theinventor disclosed the design to

them, and made estimated saleprofits of $100,000,000.

2004: lawsuit settled. Companypaid $30,000,000 to inventor.


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CaseHigh-Tech Company vs. Employee

Technical manager (employee) of high-tech companyX resigned Went to work for another high-tech

company Y

Departing employee used and disclosed TS

Company X filed suit against departing employee

Court order: Departing employee prevented fromperforming work for his new employer (Y) inconnection with any product that competes with Xs

products.


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Question5

HOW TO PROTECTYOUR TRADE SECRETS?


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1. Identify trade secrets

Accurate record keeping is important.


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2. Develop a protection policy

Advantages of a written policy:

Clarity (how to identify and protect)

How to reveal (in-house or to outsiders)

Demonstrates commitment to protection important in litigation


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Educate and train:

Clear communication and repetition

Copy of policy, intranet, periodic training & audit, etc.

Make known that disclosure of a TS may result intermination and/or legal action

Monitor compliance, prosecute violators


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3. Restrict access

to only those persons having a

need to knowthe information

computer system should limit each

employees access to data actually

utilized or needed for a transaction


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4. Mark documents

Help employees recognize TS

prevents inadvertent disclosure

Uniform system of marking documents

paper based

electronic (e.g. confidential button onstandard email screen)


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5. Physically isolate and protect

Separatelocked depository

Authorization

Access control

log of access: person, document reviewed

biometric palm readers

Surveillance of depository/company premises guards, surveillance cameras

Shredding

Oversight; audit trail


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6. Restrict public accessto facilities

Log and visitors pass

Accompany visitor

Sometimes NDA/CA

Visible to anyone walking through a companys

premises

type of machinery, layout, physical handling of work in progress, etc

Overheard conversations

Documents left in plain view

Unattended waste baskets


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7. Maintain computer secrecy

Secure online transactions, intranet, website

Password; access control

Mark confidential or secret (legend pop, or before andafter sensitive information)

Physically isolate and lock: computer tapes, discs,other storage media

No external drives and USB ports

Monitor remote access to servers

Firewalls; anti-virus software; encryption


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8. Measures for employees

1. New employees

Brief on protection expectations early

Obligations towards former employer!

Assign all rights to inventions developed

in the course of employment

NDA/CA

Non-compete provision Reqts

Limits


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2. Current employees

Prevent inadvertent disclosure(ignorance)

Train and educate

NDA for particular task

3. Departing employees

further limit access to data exit interview

letter to new employer

treat fairly & compensate reasonably

for patent work


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Question6

MAY TRADE SECRETS BE SOLDOR LICENSED?


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SALE

Most TS sales occur as part of the sale of the business

LICENSE

e.g. in combination with patent license

e.g. software license for highly specialized program

Advantage: additional revenues

Disadvantage: risk of disclosure (potential loss)

In some countries, restrictions


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TS Licensing

Definition of the secret subject matter

what is to be kept confidential?

marked as such or broad clause?

Permitted use

disclosure to employees, professional advisors?

modification of technology?

Precautions to be taken Exclusions


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TS Licensing

Duration of secrecy obligations

Royalties

Sanctions

Should not be subject to alternative dispute

resolution


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TS Licensing

Can licensee be obligated tocontinue paying TS royalties evenif the information has entered the

public domain?

In case of license for patent + related TS:

Can licensee be obligated to continue payingTS royalties when patent expires or is

invalidated?


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TS Licensing

Mass-marketed software:

Possible to negotiate NDA with everyend-user?

Software Escrow:

A viable alternative to source codelicense?


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Question7

HOW IS TRADE SECRETPROTECTION ENFORCED?

What can you do ifsomeone steals or

improperly disclosesyour TS?


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1. Contract law

When there is an agreement to protect the TS

NDA/CA

anti-reverse engineering clause

Where a confidential relationship exists

attorney, employee, independent contractors

2. Principle of tort / unfair competition

Misappropriation by competitors who have nocontractual relationship

theft, espionage, subversion of employees

TS protection may be based on...


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3. Criminal laws

e.g. for an employee to steal trade secrets from acompany

e.g. unauthorized access to computers

theft, electronic espionage, invasion of privacy, etc.

circumvention of technical protection systems

4. Specific trade secret laws

US: Uniform Trade Secrets Act; EconomicEspionage Act


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Law of the Republic of Belarus onOpposition to Monopolistic Activities andCompetition Development

www.belgospatent.org/russian/docs/konkur.doc

Civil Code, art 140

Trade Secret is information which has a value,unknown and unaccessible for third parties.

Criminal Code, art 254, 255

Administrative Code, art 22.13

Art 10 of the Paris Convention

Relevant laws in Belarus


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1. Order to stopthe mise

2. Monetarydamages

actual damages caused as a result of the misuse (lost profits) amount by which defendant unjustly benefited from the misappropriation

(unjust enrichment)

3. Seizure order

can be obtained in civil actions to search the defendant's premises inorder to obtain the evidence to establish the theft of TS at trial

4. Precautionary impoundment

of the articles that include misused TS, or the products that resulted ofmisusing

Remedies


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To establish violation, the owner must be able toshow :

infringement provides competitive advantage

reasonable steps to maintain secret

information obtained, used or disclosed inviolation of the honest commercial practices(misuse)


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Question8

PROTECTING INVENTIONS:

TRADE SECRETS OR PATENTS?


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What is difference between

TS and Patent?


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no registration- less costs (but: costs to keep secret)

- immediately available

can last longer- but: limited to economic life

- uncertain lifespan: leak out is irremediable

no public disclosure- but: practical need to disclose

- if leak out: TS lost

Trade Secrets

registration- fees (registration + maintenance)

- takes time to get patent

limited in time- generally: max 20y

- but: can be invalided

public disclosure- publication 18m after filing

- if P not allowed: no TS

Patents

Trade Secrets Patents


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Large subject matterProtection of virtually anything

maintained in secret by a business

that gives competitive advantage

Only protection againstimproper acquirement/use

More difficult to enforce- some countries: no laws

- ability to safeguard TS during litigation

Trade Secrets

Subject matter limited:- Requirements: new, non obvious, useful

- Scope: patent claim

Exclusive rightsmonopoly to exploit

the invention

"Power tool"

Patents


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1. ANY innovative idea should be kept as a

secret in the beginning

to preserve option of patenting (or industrial design) atlater stage

Things to bear in mind


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INNOVATIVE IDEA

Secret !

Initially Later stage

Not patentable patentable

patent

TS

Strategicbusinessdecision

TSPart of the idea

TS

ID


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2.Choice between patent or TS must

be made both from legal andbusiness perspectives

(if patentable)


P t t bl Mark Sokoloff


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Patentableidea

Publicdisclosure

necessary?

Technologychangingrapidly?

Easy to RI,independ.discover?

TS

P

Def.publ Revenue

potential> IP costs?

New

area oftechnology?

Licensing

opportunity?

N N

NN

NN

Y

Y

Y

Y

Y


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3.If you apply for a patent, only give up whatis necessary

The decision to apply for a patent does notnecessarily require giving up all of ones TS!

However, patent application must contain :

enough to enable skilled person to practice the invention

the best mode known to the applicant for practicing theinvention

(Software P in USA: required to disclose source code?)


INNOVATIVE IDEA


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INNOVATIVE IDEAinventions on A, B, C

A

C

TS

B

TS PA

B

C

Applying for patent onC may not requiregiving up TS on A & B


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4. If you apply for a patent, your TS may still

be protected for a while

In most countries: only publication after18m. You maywithdraw application any time < publication

In USA: possible to request non-publication of thepatent application until the patent is issued



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5. Once patent published TS lost in ALLCOUNTRIES

patent documents easily accessible to public

if patent application published and later rejected youlose both patent and TS rights

some technology (e.g. software) may be patentable inUSA but not in Belarus or Europe



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Question9

WHAT TO BEAR IN MIND IF YOUSIGN A CONFIDENTIALITY

AGREEMENT FOR A CLIENT ?


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Developer may be given access to

Clients confidential information whileworking for Client. Developer agrees notto use or disclose such informationexcept as directed by Client.


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Software or web developers who work for clientsasking to sign CA Insist on CA that is :

- reasonable in scope- defines precisely what information you must

keep confidential

- limited in time (max. 5 years)

- exceptions


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TRADE SECRETS FOR

SOFTWARE COMPANIES

CONCLUSIONS


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TS protection for financial, commercial &(secret) technical information:

develop effective internal TS program to maintaintrade secret status

TS protection for Software:

restrict access

impose obligation of confidentiality to anyonewho has access


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Certain aspects of software cannot bemaintained as a trade secret

information or technology that must be disclosed to thepublic in order to market the product

information or technology which is part of a product sold tothe public and can be reverse-engineered

mass-marketed software

where competition is so intense, that very likely to beindependently developed by others within short time

if great deal of personnel movement between competitors

if customers require access to software for archive, back-up,updating, maintenance, debugging, etc.


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Alternative or additional protection forsoftware:

make reverse engineering difficult (compiled code) technological protection measures

copyright protection

software patents

Be careful about signing confidentialityagreements


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Thank You!

[email protected]

www.wipo.int/sme

The Importance of Trade Secretsfor Software Companies


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Remember...

TS: No registration, but 3 requirements for legalprotection

No need for absolute secrecy, but reasonablemeasures

Developing and maintaining TS program

< good business practice to prevent

< legal requirement to enforce TS protection


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TS: Only legal protection against dishonestacquisition/disclosure/use

You can sue someone who violated your TS,but that often doesnt save the TS

Consider alternative protection

Remember...


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The choice between TS and patent protection foran invention is irrevocable

Therefore: carefully consider all relevantadvantages and disadvantages from each choiceboth from legal and business viewpoint

Remember...


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Patent and TS are often complementary to each

other:

Patent applicants generally keep inventions secret until thepatent application is published by the patent office.

A lot of valuable know-how on how to exploit a patentedinvention successfully is often kept as a trade secret.

Some businesses disclose their trade secret to ensure that noone else is able to patent it (defensive publication).

Remember...