INTERNATIONAL

PROTECTION OF TRADE
SECRETS

Submitted by:

Prerna Singh (8177)

Siddharth Singh (8199)

LL.B. (C)

2018-2021
WHAT ARE TRADE SECRETS?
Trade secrets are a highly valuable form of intellectual property that nearly all businesses in all
industries and sectors possess. However, they are frequently overlooked by businesses, partly
because there is confusion about what actually constitutes a trade secret. So what is a trade secret?

According to the World Intellectual Property Organization (WIPO), any confidential business
information that is of considerable commercial value to businesses and that provides an enterprise
with a competitive edge may be considered a trade secret. In practice, this could be:

▪ sales methods
▪ distribution methods
▪ consumer profiles
▪ advertising plans
▪ pricing strategies
▪ lists of suppliers and clients
▪ manufacturing processes
In other words, more often than not trade secrets are the ‘know-how’ that a business builds up over
time. Typically, the longer the SME is in business the more valuable its trade secrets will become,
and the more its business grows the more its competitors will seek to discover this valuable
working knowledge. Therefore, it is increasingly important to take steps to protect trade secrets.

Unlike some other forms of IP rights, such as patents and copyrights that have a finite term, trade
secrets can theoretically enjoy an infinite term of protection, so long as the trade secret remains
just that – a secret. Furthermore, to be enforceable by law it is generally required that as well as
not being known to the public and providing economic benefits to the holder, the secret should be
subjected to reasonable efforts to protect it (and there should be evidence of these efforts).
As trade secrets are not always in tangible form, they may be stored in printed documents, CDs or
DVDs, computer files and hard drives, USB drives, or even in your head. As it is not always
practical or possible to keep trade secrets locked away, keeping them safe usually involves using
a combination of physical, technical, and contractual barriers. Although some businesses go to
great lengths to protect their trade secrets, any business can and should take simple, sensible
precautions, keeping in mind the three forms of barrier:
▪ Physical barriers may include simply marking documents ‘CONFIDENTIAL’, keeping
sensitive documents in a safe, undisclosed location, and locking files away after business
hours. In addition, access to areas where sensitive business documents are stored should be
restricted to certain employees. SMEs should limit access and copying rights to the
personnel who actually need it. All visitors should be logged, required to sign a non-
disclosure agreement before being granted access to sensitive areas of company’s premises,
and should not be left unattended.
▪ Technical barriers address the use of information technology (IT). Consulting an IT
security specialist can help companies to design a cost-effective IT security system.
However, even simple, inexpensive means of IT security measures can be used such as
employing the proper use of passwords, commercially available encryption, and logging
features. In addition, it is important to have a written technology policy in place and to ensure
that your employees abide by it. For example, as it is extremely easy for employees to email
sensitive documents to third parties or to transfer files using USB drives or CD/DVDs,
companies might want to consider restricting the ability of their employees to use USB
drives and burn CD/DVDs. Employees should be given a copy of company’s technology
policy written in both English and the local language (possibly as an appendix to their
employment contract) and be required to sign an agreement stating they received and
understand the policy.
▪ Contractual barriers generally involve the use of non-disclosure or confidentiality
agreements. In fact, such agreements are generally considered as one of the best ways to
protect trade secrets. companies should require every existing employee and all new
employees to sign an employment contract with non-disclosure or confidentiality
provisions. This should be in both English and the local language to prevent an employee
from claiming that he or she did not understand the confidentiality obligations. Such
agreements should also be entered into with suppliers, subcontractors, and business partners
who are given any level of access to company’s trade secrets.
INTERNATIONAL PROTECTION OF TRADE
SECRETS:

I. NAFTA

The North American Free Trade Agreement (NAFTA), which came into force in January 1994,
was the first international trade agreement to include obligations to protect intellectual property
rights. Although the World Trade Organisation subsequently adopted the Agreement on Trade-
Related Aspects of Intellectual Property Rights (TRIPs), the intellectual property provisions of the
NAFTA remain an important source of obligations for the three NAFTA state parties (the United
States, Canada and Mexico) and of the rights of intellectual property holders in these countries.

The rationale for incorporating intellectual property provisions in a trade agreement is to ensure
that intellectual property law enforcement is consistent with free trade principles of market access
and non-discrimination. Trade will be inhibited if the laws of one country do not protect the
intellectual property of its trading partners, but over-zealous enforcement of intellectual property
rights can also inhibit trade by putting importers at a competitive disadvantage.

NAFTA is the first international agreement to afford protection for trade secrets. Due to NAFTA,
Mexico has comprehensive national provision for the protection of trade secrets. NAFTA requires
each member country to provide legal means to prevent unauthorized disclosure of trade secrets
that are in a tangible form, Under NAFTA, countries may not limit the duration of projection of
trade secretes or discourage or impede the voluntary licensing of trade secrets.

This feature which is a first for any international agreement should alleviate some of the reluctance
to do business because of the lack of trade secrets protection,

CONTENT OF THE NAFTA’S IP PROVISIONS

A. NAFTA’s Chapter 17, which sets out the provisions on intellectual property rights, defines
the scope of intellectual property rights broadly to refer to: “copyright and related rights,
trademark rights, patent rights, rights in layout and design of semiconductor integrated
 circuits, trade secret rights, plant breeders’ rights, rights in geographical indications and
industrial design rights” (Art 1721).
B. The first article of Chapter 17 (Art 1701(1)) establishes a similarly broad obligation for
each NAFTA state party: to provide nationals of other NAFTA countries with adequate and
effective measures to protect and enforce intellectual property rights while ensuring that such
measures do not become barriers to legitimate trade. Each NAFTA party is required to
implement the substantive provisions of the key international intellectual property
conventions, including the Geneva Convention for the Protection of Producers of
Phonograms against Unauthorised Duplication of the Phonograms, the Berne Convention for
the Protection of Literary and Artistic Works and the Paris Convention for the Protection of
Industrial Property. In addition, each NAFTA party is required to grant national treatment to
nationals of other parties in protecting and enforcing intellectual property rights. In other
words, a state party cannot grant more favorable intellectual property protection to its own
nationals than to nationals of other NAFTA parties.
C. Chapter 17 then sets out a series of obligations relating to each area in its definition of
intellectual property.
D. Chapter 5 Part 1 Article 507: Confidentiality

i. Each Party shall maintain, in accordance with its law, the confidentiality of confidential
business information collected pursuant to this Chapter and shall protect that information
from disclosure that could prejudice the competitive position of the persons providing the
information.
ii. The confidential business information collected pursuant to this Chapter may only be
disclosed to those authorities responsible for the administration and enforcement of
determinations of origin, and of customs and revenue matters.

E. Data protection:

i. Articles 1711(5) and (6) of the NAFTA establish data protection provisions that require
NAFTA state parties to grant at least five years’ protection to undisclosed test and other
data. Article 1711(6) provides expressly, with respect to this data, that “no person other
 than the person that submitted [the data] may, without the latter’s permission, rely on such
data in support of an application during” the next five years.

US pharmaceutical manufacturers argue that this provision should apply any time a second
person (eg, a generic manufacturer) relies on a previous filing by an innovative
pharmaceutical manufacturer in support of its generic filing. This is how the data protection
provisions are applied in the US, Europe and Australia, among other countries. However,
Canadian courts have interpreted the five-year data protection as applying only where
Health Canada officials actually examine the data - that is, pull the file and review it. This
overly narrow interpretation has opened the door for generic drug manufacturers to file
copycat drugs that rely for their safety and efficacy on the previous filings and approvals
of the innovative drug manufacturer.

Unless Canada changes its practice in this respect, one can anticipate a challenge from the
US government or a US pharmaceutical manufacturer claiming lack of compliance by
Canada with its NAFTA data protection requirements.

II. GATT

On April 15, 1994, the major industrialized nations of the world, including the United
States, concluded the Final Act resulting from the Uruguay Round of GATT (General
Agreement on Tariffs and Trade). GATT established the WTO and promulgated various
trade-related agreements on protection of undisclosed information including TRIPS or the
Trade Related Aspects of Intellectual Property Rights.

Under GATT, “undisclosed information” must be protected against use by others without
the consent of the owner if the use is contrary to honest commercial practices. Also, there
is third party liability for misappropriation if third parties knew or were grossly negligent
in not knowing that such information had been obtained dishonestly.

III. TRIPS
While it is still a moot point as to whether trade secrets are a form of Intellectual property,
the general opinion at the GATT negotiations was that unauthorized use of confidential
information, belonging to others, in an unfair practice.

A. ARTICLE 39 of TRIPS stipulates that Undisclosed information, often treated as

synonymous with trade secrets, can be protexted as provided for in Article 10bis of the
Paris Convention. Under Cluase 2 od the Article 39 of TRIPS, all members will protect
undisclosed information from commercial exploitation and under Clause 3, data or
information submitted to Government for regulatory or other approvals have to be
protected from leakage to or theft by third parties.
B. Article 39 TRIPS:

(1) In the course of ensuring effective protection against unfair competition as

provided in Article 10bis of the Paris Convention (1967), Members shall protect
undisclosed information in accordance with paragraph 2 and data submitted to
governments or governmental agencies in accordance with paragraph 3.

(2) Natural and legal persons shall have the possibility of preventing information
lawfully within their control from being disclosed to, acquired by, or used by others
without their consent in a manner contrary to honest commercial practices 1 so long as
such information: (a) is secret in the sense that it is not, as a body or in the precise
configuration and assembly of its components, generally known among or readily
accessible to persons within the circles that normally deal with the kind of information
in question; (b) has commercial value because it is secret; and (c) has been subject to
reasonable steps under the circumstances, by the person lawfully in control of the
information, to keep it secret.

(3) Members, when requiring, as a condition of approving the marketing of

pharmaceutical or of agricultural chemical products which utilize new chemical
entities, the submission of undisclosed test or other data, the origination of which
involves a considerable effort, shall protect such data against unfair commercial use. In
addition, Members shall protect such data against disclosure, except where necessary
 to protect the public, or unless steps are taken to ensure that the data are protected
against unfair commercial use.

Prior to the TRIPS Agreement, the protection of trade secrets was not considered
part of intellectual property protection, but rather of generic unfair competition
rules. With the adoption of the TRIPS Agreement undisclosed information was listed
among the different forms of intellectual property protection in Article 1.2 and the
specifically dedicated Article 39 was created. The provision specifies the terms and
conditions of protection between both private parties and in relation to government
authorities to which such information must be submitted. The first paragraph of
Article 39 describes the structure of the provision: undisclosed information in general
is protected as defined in Para. 2 and data submitted to governmental authorities
and agencies are protected as defined in Para. 3. besides this structural aspect, Para. 1
ties the protection of undisclosed information to the protection against unfair
competition of Article 10bis of the Paris Convention. Technically, the TRIPS
provision can be seen as an extension of the list of prohibited acts under Article
10bis (3) of the Paris Convention. The fact that the protection of undisclosed
information of art. 39 is under the umbrella of unfair competition of art. 10bis
Paris Convention affects the legal nature as well as the substance of protection:
similarly to unfair competition law, Article 39 grants no absolute rights to the
person that legally possesses the secret information and protection is triggered
only if an element of dishonesty or unfairness is involved (Paras 2 and 3,
respectively). So, while trade secret and patent protection may be available for
the same subject matter, the scope of protection is very different: whereas there is no
limitation on the term of trade secret protection and no element of disclosure,
trade secret protection does not preclude reverse engineering and use and its holder
cannot exclude others from the market.

IV. ASEAN COUNTRIES:

Trade secrets are protected by laws in many South-East Asian countries like Indonesia, Thailand,
Singapore and Malaysia for example. All of these countries have specific requirements for trade
secret protection by law, which normally include that:

1. The information is confidential (i.e. non-public)

2. It has real or potential economic value
3. Necessary measures have been taken to protect its secrecy.
Thailand also requires that the trade secrets have to be recorded with the Thai Department of
Intellectual Property (DIP) in order to be enforceable in Thailand. Only basic information is
required for this recordal, and efficient recording strategies can be set up without actually
disclosing essential contents of the trade secret.

SMEs should make sure to document the trade secrets protection measures they take. It is also
essential to maintain sufficient records of the flow of information in and out of the company,
including keeping records of meetings, discussions, emails, written correspondence, and the
transfer of electronic files so that a company can conduct an investigation and have evidence in
case it suspect that its trade secrets have been misappropriated. In many South-East Asian countries
like Indonesia and Thailand, for example, it is necessary to prove that the secret has been taken by
the suspected party. This, however, can be difficult as the litigation procedure in may South-East
Asian countries like Indonesia is not equipped with sufficient discovery mechanisms to uncover
the relevant evidence.

Companies can assist the courts by having their own security monitoring in place, including CCTV
recording and recorded entry/exit data of rooms where physical documents are held, as well as
electronic monitoring of file access and copying etc. Companies can also engage local
investigators, however this approach should me made with caution as in some South-East Asian
countries like Indonesian, law accords individuals’ strict privacy rights and infringers could
complain that their own rights have been infringed, potentially weakening any case against them.

It should be kept in mind that unlike other forms of intellectual property there is usually very little
a business can do once a trade secret has been disclosed. Therefore, it is vital that SMEs take
preventative measures in advance of making use of their confidential business information in
South-East Asia.