WIPO/NIFTWIPO/NIFTNational Seminar on the Importance National Seminar on the Importance

of IP for the Handicrafts Sectorof IP for the Handicrafts Sector

Hyderabad, India, April 5-7, 2005Hyderabad, India, April 5-7, 2005

Keeping Confidence: Keeping Confidence: The Role of Trade Secret Protection The Role of Trade Secret Protection

in Business Successin Business Success

Lien VerbauwhedeLien VerbauwhedeConsultant,Consultant, SMEs Division

World Intellectual Property Organization (WIPO)

This PresentationThis Presentation

• PART 1 - Outline– Definition

– Legal requirements

– Rights

– Enforcement

• PART 2 - Protection Strategies

PART 1PART 1

WHAT ARE TRADE SECRETS ?WHAT ARE TRADE SECRETS ?

What are trade secrets?What are trade secrets?

Broadly speaking

• any confidential information • which provides an enterprise with a

competitive edge

can qualify as a trade secret

entitled to legal protection

Metal Mirrors of AranmulaMetal Mirrors of Aranmula

Metal Mirrors of AranmulaMetal Mirrors of Aranmula

• Some undisclosed metals are alloyed with copper and tin to cast the Aranmula kannadi in typical clay moulds.

• The exact proportions of the two metals and the techniques of crafting it into an excellent reflecting surface is always kept as a trade secret.

• The method is the age-old lost-wax process in traditional style after melting the metals in a furnace fitted with a manual blower.

• Today, only five artisan families know the the metallurgical secret of the Aranmula kannadi, the world-famous metal mirrors.

Cotton Dyeing TechniqueCotton Dyeing Technique

• 5th century BC: the Greek historian Herodotus, marveled at the quality of Indian cotton.

• Textile trade: cotton, silk, woven textiles. The beauty, brilliance, color range and fastness of Indian fabrics was held in high esteem.

• India managed to keep the technique of cotton dyeing a secret from the world until the 17th century.

What are trade secrets?What are trade secrets?

A trade secret can relate to different types of information:

– technical and scientific– commercial– financial– negative information

Examples Examples (1)(1)

• Technical and scientific information:

– technical composition of a product• paint

– manufacturing methods• weaving technique, baking clay, metal casting, embroidery

– know-how necessary to perform a particular operation

• how to dye with natural Dyes?

– designs, drawings, patterns, motifs

Examples Examples (2)(2)

• Commercial information:

– list of clients– customer buying preferences – supplier arrangements– business plan– marketing strategy

Examples Examples (3)(3)

• Financial information:– internal cost structure– price lists

• Negative information:– details of failed efforts to remedy problems

in the manufacture of certain products– unsuccessful attempts to interest customers

in purchasing a product

What qualifies as a trade secret?What qualifies as a trade secret?

• Three essential legal requirements:

1. The information must be secret *• wheel technique for pottery is no trade secret

2. It must have commercial value because it’s secret

3. You must have taken reasonable steps to keep it secret

* “not generally known among or readily accessible to persons within the circles that normally deal with this kind of information”

• Only protection against improperly acquiring, disclosing or using:

– people who are automatically bound by duty of confidentiality (incl. employees)

– people who have signed non-disclosure agreement

– people who acquire a trade secret through improper means

• theft, industrial espionage, bribery

• Some people cannot be stopped from using information under trade secret law:

– people who discover the secret independently, without using illegal means or violating agreements or state law

– people who discover through reverse engineering

Independent discovery and reverse engineering : no trade secret protection

- bamboo blinds -

Reverse engineering

- van Eyck’s visual effects -

Reverse engineering - van Eyck

• van Eyck's methods for achieving his breathtaking visual effects

• Washington National Gallery of Art - technical study:

• microscopic examination of the surface

• technical analysis of the painting

• infrared reflectography underdrawing is visible

• Procedure - Altarpiece of the Holy Lamb in Ghent: a first layer in grayish blues establishing light and shade; a second solid blue layer to soften the contrast of the first; a final, rich blue glaze of ultramarine in a water-based protein medium such as glue

• Composition of paint: linseed oil, no water-based protein admixtures to the oil

• Technique: preliminary layer of vermilion, different layers of glaze

TRADE SECRET PROTECTION PROVIDES

NO EXCLUSIVITY

What can you do if someone steals What can you do if someone steals or improperly discloses or improperly discloses

your trade secret? your trade secret?

Enforcement Enforcement

EnforcementEnforcement

• Remedies

1. Order to stop the misusing

2. Compensation for damages caused as a result of the misuse

3. Recover profits (‘unjust enrichment’)

4. In India: seizure order can be obtained to search the violator's premises in order to obtain the evidence to establish the theft

of trade secrets at trial

EnforcementEnforcement

• To establish violation, the owner must be able to show :

– infringement provides competitive advantage– reasonable steps to maintain secret– information obtained, used or disclosed in

violation of the honest commercial practices (misuse)

PART 2PART 2

BUSINESS STRATEGIES BUSINESS STRATEGIES TO HANDLE & PROTECT TO HANDLE & PROTECT

TRADE SECRETSTRADE SECRETS

Loss of trade secrets - Loss of trade secrets - a growing problem a growing problem (1)(1)

• Why is this occurring?

– way we do business today (increased use of contractors, temporary workers, out-sourcing)

– declining employee loyalty, more job changes– organized crime : discovered the money to be

made in stealing high tech IP– storage facilities (CD-ROM, floppies, etc)– expanding use of wireless technology

Loss of trade secrets - Loss of trade secrets - a growing problem a growing problem (2)(2)

• Examples of outside threats

– burglaries by professional criminals targeting specific technology

– attempted network attacks (hacks)– laptop computer theft: source code, product

designs, marketing plans, customer lists– calls headhunters, presenting themselves as

employee– corporate spies

Loss of trade secrets - Loss of trade secrets - a growing problem a growing problem (3)(3)

• Examples of inside threats

– 80% of information crimes < employees, contractors, trusted insiders!

– malicious destruction/erasure of R&D data by avenging employee

– theft by former employee of business plans– ignorance

What can be done?What can be done?

9 basic protection strategies9 basic protection strategies

1. Identify trade secrets1. Identify trade secrets

Considerations in determining whether information is a trade secret:

– Is it known outside your enterprise?– Is it widely known by employees and

others involved within your enterprise?– Have measures been taken to guard its

secrecy?

– What is the value of the information for your business?

– What is the potential value for your competitors?

– How much effort/money spent in collecting or developing it?

– How difficult would it be for others to acquire, collect of duplicate it?

2. Develop a protection policy2. 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

3. Educate employees3. Educate employees

– Prevent inadvertent disclosure (ignorance)

– Employment contract : • Brief on protection expectations early

• NDA/CA/NCA

• obligations towards former employer!

– Departing employees : • exit interview, letter to new employer, treat fairly &

compensate reasonably for patent work, further limit access to data

– Educate and train: • Copy of policy, periodic training & audit, etc. Make known

that disclosure of a trade secret may result in termination and/or legal action

• Clear communication and repetition

– TS protection must be part of the enterprise culture• Every employee must contribute to maintain the security

environment

– Monitor compliance, prosecute violators

4. 4. Restrict accessRestrict access

to only those persons having a

need to know

the information

5. Mark documents5. Mark documents

– Help employees recognize trade secrets prevents inadvertent disclosure

– Uniform system of marking documents• paper based• electronic (e.g. ‘confidential’ button on

standard email screen)

6. Physically isolate and protect6. Physically isolate and protect

– Separate locked depository

– Authorization

– Access control• log of access: person, document reviewed

– Surveillance of premises• guards, surveillance cameras

– Shredding

7. Maintain computer secrecy7. Maintain computer secrecy

– Secure online transactions, intranet, website– Access control (authorization, password)– Mark confidential or secret (legend pop, or

before and after sensitive information)– Physically isolate and lock: computer tapes,

discs, other storage media– Monitor remote access to servers– Firewalls; anti-virus software; encryption

8. Restrict public access to facilities8. Restrict public access to facilities

– Log and visitor’s pass

– Accompany visitor

– Sometimes NDA/CA

– Visible to anyone walking through a company’s premises

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

– Overheard conversations

– Documents left in plain view

– Unattended waste baskets

9. Third parties9. Third parties

– Sharing for exploitation

– Consultants, financial advisors, computer programmers, website host, designers, subcontractors, joint ventures, etc.

– Confidentiality agreement, non-disclosure agreement

– Limit access on need-to-know basis

RememberRemember

No registration, but 3 requirements for legal protection

No need for absolute secrecy, but ‘reasonable measures’

Developing and maintaining TS program< good business practice to prevent

< legal requirement to enforce TS protection

Only legal protection against dishonest acquisition/disclosure/use

Consider alternative protection

TRADE SECRET PROTECTION

IS LIKE

AN INSURANCE …

Thank You!

WIPO’s website for SMEs :

http://www.wipo.int/sme