WIPO - CEDA REGIONAL ROVING SYMPOSIUM ON INTELLECTUAL

PROPERTY FOR SMES Paramaribo, Suriname; Castries, St. Lucia; Kingston,

Jamaica; and Santo Domingo, Dominican RepublicJuly 2005

Keeping Confidence: Trade Secrets in Business Strategy

Christopher M. Kalanje, Consultant, SMEs Division, WIPO

Review

• Objective– Enhancing awareness on the potential

of trade secrets as a business tool

• Road map “WHIR”– What are trade secrets– How can trade secrets be protected– Identify strategic use of trade secrets

– Recapitulation of basic points

What are trade secrets

What are trade secrets contd.

• Confidential information not generally known

• Derives independent economic value, actual or potential

• Gives the holder competitive edge

• Involves reasonable efforts to maintain its secrecy

Psst!

What are trade secrets contd.

A trade secret can relate to different types of information

Technical and scientific information

Commercial information

Financial information

Negative information(depending on the law of a country)

What are trade secrets contd.

• Technical and scientific– Technical composition of a product and

blending formulas • formula (beverages, detergents, paint)

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http://www.shoutitout.com/faq.asp

What are trade secrets contd.

• Technical and scientific contd.

– Know-how necessary to perform a particular operation• how to dye with natural Dyes

– Manufacturing methods/specifications and• device process, tool (weaving technique, baking

clay, metal casting, embroidery)

– Designs, drawings, patterns, motifs– Test data, laboratory notebooks – Computer codes

What are trade secrets contd.

• Commercial information

– Business strategy/plan • marketing strategy, partnership strategy,

supplier arrangements, sales methods

– List of suppliers and clients• consumer profiles

– Customer buying preferences and requirements

What are trade secrets contd.

• Financial information

– Internal cost structure

– Pricing information, salary and compensation plans

– Employees agreements

What are trade secrets contd.

• Negative information

– Details of failed efforts to remedy problems in the manufacture of certain products

– Dead-ends in research

– Unsuccessful attempts to interest customers in purchasing a product

How can Trade Secrets be Protected

• Not easy to know exact value of trade secret because it is a secret

• In US alone loss of proprietary information, trade secrets and critical technologies cost companies between $ 50 - 250 billion per year (sources: Gowlings Technology Seminar Series 2005; D. Degnan and J. Taros)

• Such valued information must be protected (How?)

How can Trade Secrets be Protected contd.• Trade secrets can be protected by

– Physical and technical measures– Common law/tort law (a civil wrong for which

the law provides a remedy)

– Contract law (employees, business partners, potential investors or partners, consultants etc.)

• Non-disclosure / Confidentiality agreements • Non-compete clause• Non-solicitation clause

– Unfair competition law (Misappropriation by competitors who have no contractual relationship)

• Theft, espionage, subversion of employees

How can Trade Secrets be Protected contd..

– Specific trade secret law– Criminal laws

•e.g. for an employee to steal trade secrets from a company

• theft, electronic espionage, invasion of privacy, etc.

•circumvention of technical protection systems

• Most Caribbean countries protect trade secrets through Unfair competition Act

How can Trade Secrets be Protected contd.

• IMPORTANTIMPORTANT

• Trade secrets only give protection against improperly acquisition, disclosing or using

• People who discover the secret independently cannot be stopped from using it

How can Trade Secrets be Protected contd.

• What should be done?

• Identify trade secrets owned by your company– Is it known outside the

company?– Is it widely known by

employees and others involved within the company?

– Have measures been taken to guard its secrecy?

How can Trade Secrets be Protected contd.

Trade SecretPolicy

AbC Company

Create a confidentiality policy•Consequences of improper use or disclosure of confidential information•Clearly state what information is deemed confidential by company•Establish code of conduct in handling confidential information•Designate reference point in the event of uncertainty•Enforce policy

How can Trade Secrets be Protected contd.

– Educate employees

How can Trade Secrets be Protected contd.

• Notify employees of their obligations when employment begins (employment agreement)

• Ensure that exiting employees are aware of their obligations (employment agreement)

• Regular checks on compliance

• Respect other people trade secrets

How can Trade Secrets be Protected contd.

Source of images: http://images.search.yahoo.com/search/images

- How trade secrets are lost

Outright theft

How can Trade Secrets be Protected contd.• Take reasonable measures to protect trade

secretsPut markers

ConfidentialTop secret

PasswordUse proprietary notices

Trade secrets as a strategic business tool

Trade secrets as a strategic business tool contd.

• Keeping secrets: A necessity in IP strategy

• It works better if not used as a stand alone

• Need business acumen

Trade secrets as a strategic business tool contd.

• Keeping secrets: A necessity in IP strategy– A business idea– Creative idea with patentability

potentials– New song, story etc– New design

•Keep it a secret before your next move!

Trade secrets as a strategic business tool contd.It works better if not usedas a stand alone

Angostura® Aromatic Bitters

Trade Secret(1824)

Trademark

Trade secrets as a strategic business tool contd.

Coca-cola®(drink)

Trade secrets(1886)

Trademark

It works better if not used as a stand alone

Trade secrets as a strategic business tool contd.

• Need business acumen

• Trade Secrets– No registration (no

fees)– No defined duration– Maintenance costs– Non-disclosure

(except need to know, contractual binding disclosures)

• Patents/Industrial designs/ Trademarks*– Registration (fees)– Defined duration – Maintenance fee– Disclosure* If not maintained

they lapse

Trade secrets as a strategic business tool contd.• Licensing

•cross-licensing negotiations

• Partnership negotiations (e.g., Strategic

alliances, Joint ventures)• M&A• Patent application (applies to other IP tools too)

•what part of invention should be kept a secret

• Market positioning•strategic use of client names and profile

Conclusion

Essential legal requirements

Information must be secret

Information must have economic value because it is a secret

Owner must take reasonable steps to keep it secret

Conclusion contd.

Remember

Identify them

Protect them

Use them strategically

Finally