By / March 19, 2014

Trade Secrets and Confidential Business Information

Trade Secrets (also called “confidential business information” or “undisclosed information” do not benefit from the same protection as other intellectual…

© intheskies / Fotolia
Trade secrets and confidential business information
© intheskies / Fotolia

Trade Secrets (also called “confidential business information” or “undisclosed information” do not benefit from the same protection as other intellectual property. Unlike patented inventions or novels protected by copyright, the holder of a trade secret is not the owner of an exclusive right over its creation and therefore competitors can freely use or develop the same formula. Trade Secrets are only legally protected where third parties have obtained the confidential information by illegitimate means. Trade Secrets are particularly important for smaller businesses that lack the resources to manage intellectual property rights (IPRs.) There are substantial differences in the laws in place in EU countries on protection against trade secret misappropriation, some countries have no specific laws on the issue and furthermore businesses have difficulties understanding and accessing the systems of other MS when they become victims of misappropriation of confidential know-how. On the 28th November 2013, The Commission published its Proposal for a Directive on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure. The aim of the Proposal is to provide an adequate level of protection and an effective means of redress if trade secrets are misused or stolen

This Keysource contains a selection of recent articles, analysis and stakeholder opinion on protection of Trade Secrets.

Overview

European Union: EC Proposes A New Directive On The Protection Of Trade Secrets / Tobias Cohen Jehoram and Daniël Ceulen, Mondaq, 02 January 2014. Click on “Close me” when you are ask to sign in
Provides a summary of the key points of the Commissions proposal

Harmonizing European Legislation on Protection of Trade Secrets / Emmanuel G Baud and Randy Kay, World Intellectual Property Report, January 2014
This article outlines the background and main points of the proposal. It also contains a short analysis of what the authors believe are the shortcomings of the Proposal

Commission moves to stem theft of trade secrets / Jeremy Flemming, Euractiv, 29 November 2013
Provides an overview of the reasons for the Commission’s proposal to harmonise the law on trade secret in the Member States

What is a Trade Secret / World Intellectual Property Organisation (WIPO)
WIPO provides a good overview of ‘Trade Secret’, how to protect your business and also some examples of what can be construed as a trade secret.

Seven reasons why trade secrets are increasingly important / Almeling, David S. Berkeley Technology Law Journal, Fall 2012, Vol. 27 Issue 2, p.1091-1118.
The author, an experienced trade secrets litigator, identifies seven factors why ‘trade secret’ is important. (1) digital technology; (2) a mobile workforce; (3) the rising value of intellectual property, of which trade secrets are a part; (4) the widespread adoption of the Uniform Trade Secrets Act; (5) trade secrets’ flexible definition; (6) an increase in international threats; and (7) the shifting calculus between whether to pursue patent or trade secret protection. Whether each of these factors will continue to fuel trade secret growth remains uncertain; societal norms fluctuate, political winds shift. But taken together, these seven trends suggest that the business of trade secrets will only assume greater importance in the years ahead.

Trade Secret Law and Information Development Incentives / Michael Risch, The Law and Theory of Trade Secrecy: A Handbook of Contemporary Research. Ed. Rochelle C. Dreyfuss and Katherine J. Strandburg. Edward Elgar Publishing, 2010, 39 p. Click “download “to access the full text of this article
This article explores the differences between trade secret law and other Intellectual Property law including copyright, patent and trademark law.

Stakeholder views

Trade Secrets and Confidential Business Informations / DG Internal Market.
All key Commission documents are available here.

Study on trade secrets and confidential business information in the internal market , 11.07.2013
This study carried out by Baker & McKenzie for the Commission incorporates a survey covering 537 companies, including 323 small and medium size companies (less than 250 employees) undertaken at the end of 2012. It also provides a detailed review of the legal frameworks governing trade secrets in the then 27 Member States, the United States of America, Japan and Switzerland.

Netherlands embraces European Draft Trade Secrets / by Dirk-Jan Ridderinkhof, Hogan Lovells, World Intellectual Property Report, 04.03.2014.
In general, the Netherlands welcome the draft Directive and its intention to harmonise the protection of trade secrets accross the EU. However, they note some open questions, especially as far as the formulation and the level of detail are concerned. They also would like to stay as close as possible to the IP enforcement directive in order to avoid a fragmentation of the Dutch civil law.
See BNC-fiche 2013-2014, 22 112, Nr. 1779 and for the reactions of other countries IPEX, the platorm for EU Interparliamentary Exchange.

Report on Trade Secrets for the European Commission / Hogan Lovells International LLP, 2011, 48p
They authors carried out a comparative law assessment of the legal protection against trade secret infringement and parasitic copying in the different Member States. This study provides an overall view of the legal regimes and practical operation of the systems of law governing these matters throughout the European Union.

Is the EU obliged to improve the protection of trade secrets? An inquiry into TRIPS, the European Convention on Human Rights and the EU Charter of Fundamental Rights / Marco Bronckers and Natalie McNelis, European Intellectual Property Review 2012, 34(10), p. 673-688. Available from Westlaw, Click “skip” to read the article
Examines the EU’s obligations to protect trade secrets as intellectual property under the World Trade Organisation Agreement on Trade-Related Aspects of Intellectual Property Rights 1994 art.39.2, the European Convention on Human Rights 1950 Protocol 1 art.1 and the Charter of Fundamental Rights of the European Union 2000 art.17. Discusses the current state of EU law on the protection of trade secrets, and calls for the European Commission to affirm their status as intellectual property. Reviews the trade secret regimes in individual Member State

Economic espionage and trade secret theft: An overview of the legal landscape and policy responses / Covington & Burling LLP, September 2013, 19p.
In the face of increasing threats of cyberespionage and theft of trade secrets, the United States is taking, and the European Union is actively considering, steps to update their respective laws, policies and practices. This article describes the United States’ trade secret protection and enforcement system. It also provides a summary of the inconsistencies of trade secret protection across EU Member States, and brief discussions of perceived deficiencies and efforts to address them in both systems.

Economic Impact of Trade Secret Theft: A framework for companies to safeguard trade secrets and Mitigate potential threats /Center for Responsible Enterprise and Trade &; PricewaterhouseCoopers LLP, February 2014, 36p
The report focuses on four issues that are critical to understanding trade secret theft and how to improve companies’ ability to protect their most valuable information. An estimate of trade secret theft across advanced industrial economies, a threat assessment focusing on what threat actors are most active in targeting trade secrets, an original framework for companies to assess the value of their own trade secrets and finally a look forward 10-15 years in the future to consider what forces and drivers may make trade secrets more or less secure.

Analysis

The Corporate Preference for Trade Secret / Andrew A. Schwartz, Social Science Research Networ (SSRN), 23.12.2013, 39p. Click “download” to access the full text of this article
Many inventions can be legally protected either by patent or by trade secrecy, and a conventional wisdom exists on how to select between them. This Article adds to that literature by showing that corporations should have an inherent preference for trade secret over patent for reasons relating to their legal form. Among them is the idea that corporations are perpetual entities and therefore perfectly suited to reap the perpetual returns that only a trade secret can offer. The Article also addresses the potential for a conflict between the inherent corporate preference for trade secret and the preferences of corporate managers, who may prefer patent for reasons of their own

Trade Secrets: the other IP right / James Pooley, Innovation and Technology Sector, WIPO, June 2013
What kind of intellectual property (IP) is most often relied on by business to protect competitive advantage? Most people would answer with one of the best known areas of IP: patents, copyright, trademarks or designs. But they would be wrong. The most common form of protection used by business is secrecy.

Trade secret protection… in the cloud / Lennin Hernández González, Entertainment Law Review, Vol. 24, Issue 7, 2013, p.245-249. Available from Swetswise database, click on “skip” to read the article
This article considers the difficulties of protecting trade secrets and other confidential information saved in cloud computing systems. It discusses the legal nature of a “trade secret”, including its uncertain status as a form of intellectual property. Defines “cloud computing”, and notes its various models. Assesses whether the owner of a trade secret can argue that it has taken reasonable steps to maintain its secrecy if it has uploaded the data to the cloud. Calls for additional legal safeguards for confidential information in the cloud.

Trade Secret Subject Matter / Johnson, Eric E., Hamline Law Review, Volume 33, Issue 3 (2010) pp 545-582
Not all secrets held by a business can be legally protected as trade secrets. Yet the boundaries of trade-secret-protectable subject matter have never been well explained. Limitations are implicitly recognized by courts, but the principles upon which these limitations are based are largely unarticulated. A key limitation is that a trade secret must have “independent economic value,” but this phrase has been left undefined. This article articulates the scope of trade secret subject matter. Independent economic value is defined in a way that is in accord with the the decisions of the courts and the bedrock concepts of trade secret law as elucidated by the leading authorities. That definition is then set within an analytical framework. The resulting framework allows courts to make thorough, well-reasoned, and transparent decisions about what prospectively qualifies as protectable subject matter under trade secret law, and what doesn’t.

Employee Know-How, Non-compete Clauses and Job Mobility across Civil and Common Law Systems / Caenegem, William Van, International Journal of Comparative Labour Law and Industrial Relations, Vol. 29, Issue 2, 2013. p.219-238. Click on “IP authentication” to read the article
The law relating to trade secrets and to enforcement of non-compete and confidentiality clauses in the post-termination phase impacts on the ability of employees to find new employment and to use knowledge accumulated in previous employment when they do. This article compares the approaches in select common law and civil law jurisdictions to these areas of law. The law is complex, not harmonized and often unpredictable, and a number of significant policy goals come into conflict. The article concludes that while calls for restricting non-competes have merit, they should be assessed in the context of the contiguous laws concerning other contractual clauses and trade secrets.

The Broad Spectrum of Trade Secret Damages / Perdue, Glenn, Intellectual Property Litigation, Vol. 23, Issue 3, Spring 2012, p2-8
Which type of compensatory damages can a victim of misappropriation of trade secret expect from the US law? Is it different depending on the situation? This article gives an overview of the situation with court case examples and insists that each case is different and requires a different approach.

Identifying Trade Secrets: A Condition Precedent for Trade Secret Litigation / Ritchie, George F. & Himmelrich, Ned T., Intellectual Property Litigation, Vol. 22, Issue 4, Summer 2011, p5-7
The authors discuss trade secret litigation in the United States. They outline the issues involved in such litigation and in particular the issues that could be compromised, including customer information and standard operation procedures during litigation proceedings.

Does Insurance Cover IP Theft or Trade Secret Infringement? / Selvin, Peter S, Intellectual Property Litigation, Vol. 22, Issue 4, Summer 2011, p10-13
This article analyses insurance cover for intellectual property theft or trade secret violation in the US with example of case law.

Secrets of the Trade: Tactical and Legal Considerations from the Trade Secret Plaintiff’s Perspective / Schaller, William Lynch, Review of Litigation, Vol. 29, Issue 4, Summer 2010, p729-858
This article offers an overview over the US trade secret law from the point of view of the plaintiff.


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