What are Trade Secrets or Confidential Information?
These are commercially or technically valuable information kept secret by companies to give their businesses an advantage over their competitors. These include formulas, patterns, compilations, programs, data, devices, methods, techniques, or processes. In the US, the Uniform Trade Secrets Act defines trade secrets as “information, including a formula, pattern, compilation, program, device, method, technique, or process that derives independent economic value from not being generally known and not being readily ascertainable and is subject to reasonable efforts to maintain secrecy.”
Adopting Trade Secrets Strategy and Managing the Same
Keeping trade secrets as opposed to having a patent is appropriate when the company wants to retain exclusive use beyond the term of a patent, which is generally 20 years. This method is also utilized when a product is difficult to copy using reverse engineering technology. Trade secrets may also be a useful tool to protect traditional knowledge related to genetic resources. Confidential information must be well managed, as secrecy does not give the owner the exclusive rights to deal with its product or process. Hence, it is imperative that there should be measures in place to impose confidentiality obligations on the recipients of confidential information before any disclosure is made to them. A confidentiality obligation essentially means that the party upon whom this obligation is imposed is prohibited from disclosing or using the sensitive business information of another without the prior permission of such party to whom the obligation is owed. This obligation of confidentiality can only be created if the recipient of the information is aware of its nature and agrees to it. The obligation of confidentiality may arise through
- an expressed term in a contract; or
- an implied term; or
- the nature of the relationship between the parties.
Disclosure of confidential information commonly occurs in negotiations in relation to
- R&D agreements;
- service agreements;
- clinical trials; and
- consultancy agreements.
Protection is therefore critical to avoid any misuse of such information.
In the US, confidential information or trade secrets are protected only under state law through the Uniform Trade Secrets Act, while most other countries protect them with equitable action for breach of confidence (the laws of confidentiality). In order to safeguard a company’s confidential information or trade secrets under the laws of confidentiality, the company should create awareness among its employees of the importance of keeping such information a secret, and remind them of the consequences to the company if such information should fall into public domain before its protection is in place. Furthermore, there should be guidelines for its employees to observe, as well as clearly drafted confidentiality agreements. Non-disclosure agreements should be made easily available for employee adoption.
Trade Secrets FAQs
Can I rely solely on the laws of confidentiality for protection of my Trade Secrets?
Confidentiality can protect information obtained by a third party, only if they know that such information is subject to confidence. Therefore, injunctive relief is possible against a third party with whom no confidentiality agreement exists, as long as you can establish that the information is subject to some degree of confidence.
How should I protect my Trade Secret?
You should use either a confidentiality agreement or a non-disclosure agreement to stop recipients of your trade secrets/confidential information from revealing them during and after their association with you.
What if I discover someone has used my Trade Secret?
Common law provides protection for unauthorised use of trade secrets and breach of confidentiality agreements. If the party using your trade secret has signed a confidentiality agreement with you, you may sue such a party for breach of the agreement, and recover damages. In addition to damages, you may seek injunctive relief. If the party using your trade secret received your proprietary knowledge through another party, you would first have to establish the source of the leak, and then sue for breach of the agreement. If you fail to impose an obligation on a party to keep your trade secrets a secret, you will not be able to recover damages from them.
Are skills and knowledge gained by an employee in his trade or profession, acquired in the course of his employment, considered Trade Secrets/Confidential Information?
Yes, and the employee owes a duty of good faith or fidelity to his employer. He is required not to disclose any confidential information without the employer’s consent or use for his personal benefit or otherwise, during the course of employment and after the termination of the employment contract.
Aside from damages, what other types of remedies are available?
A person to whom confidential information has been communicated may be restrained by injunction, commonly known as aMareva Injunction, from publishing or using any trade secrets or confidential information. An aggrieved party can also rely on the Anton Pillar order, which is an order allowing an applicant, without notice to the respondent, to enter the respondent’s premises and inspect or seize documents or other items.
Can an employee take original work solely created by him in the course of his employment when he leaves?
Unless there is an agreement to the contrary, the copyright in the original work will generally be transferred to the employer, making it the employer’s property and the employee will not be permitted to take it.