Putting In Place a Trade Secret Protection Program IP and Creative SMEs; IP Reforms – International and Comparative Perspectives Geneva 26 May 2010 Mrs. Lien Verbauwhede Koglin Consultant, SMEs Division, WIPO

Do-it-yourself form of IP What are Trade Secrets? Do-it-yourself form of IP Idea: By keeping valuable information secret, you can prevent competitors from learning about and using it and thereby enjoy a competitive advantage in the marketplace.

General Principles: Information that has commercial value and that has been scrupulously kept confidential will be considered a trade secret (TS). Owner will be entitled to court relief against those who have stolen or divulged it in an illegal manner.

This Presentation 1. What information qualifies as a TS? 2. What makes something a TS? 3. When can you get court relief? 4. How are TS lost or stolen? 5. How to protect your TS? 6. How is TS protection enforced?

Question 1 WHAT KIND OF INFORMATION QUALIFIES AS A TRADE SECRET ?

Provides competitive advantage Potential to make money TRADE SECRET Provides competitive advantage Potential to make money Kept confidential

TRADE SECRET Technical & scientific information Financial information Negative information Commercial information

Question 2 WHAT MAKES SOMETHING A TRADE SECRET ? When do you have legal protection?

Three Essential Legal Requirements: The information must be secret It must have commercial value because it’s secret Owner must have taken reasonable steps to keep it secret

Required that be known only by one person? 1. Secret Required that be known only by one person? What if many employees need to know? What if others need to know? suppliers, joint development agreement, due diligence investigation, etc. What if you want to license technology?

1. Secret “not generally known among or easily accessible to persons within the circles that normally deal with this kind of information” What is ‘generally known’ ? matters of common knowledge information you find at library, online database, trade journals, patent information, etc price list on website graphics & object code of software application you sell off-the-shelf

Not required that be known only by one person 1. Secret Not required that be known only by one person If you need to share If you license technology which has limited distribution  possible to protect confidential information by contractual means

Must confer some economic benefit How to demonstrate 2. Commercial value Must confer some economic benefit How to demonstrate benefits derived from use costs of developing the TS licensing offers, etc. actual or potential

3. Reasonable steps Under most TS regimes, you cannot have a TS unless you have taken reasonable precautions to keep the information confidential ‘Reasonable’  case by case reasonable security procedures Non-Disclosure Agreements (NDA) such that the information could be obtained by others only through improper means Importance of proper TS management program

Question 3 WHEN CAN YOU GET COURT RELIEF ?

COURT RELIEF if: TS + “THEFT” Courts will only grant relief if someone has improperly acquired, disclosed or used the information Only theft if wrongful !

What is Typically Wrongful? 1. Duty of trust implied or imposed by law e.g., employees, directors, lawyers 2. Confidentiality agreement or NDA e.g., employees, suppliers, consultants, financial advisors 3. Industrial espionage, theft, bribery, hacking, eavesdropping

TS protection provides no exclusivity ! What is Lawful? 1. Independent Creation Discovery of the TS without using illegal means or violating agreements or law  patent TS protection provides no exclusivity !

What is Lawful? 2. Reverse Engineering Take product apart and see how it works Common practice among software companies: studying competitors' products to make software that can interoperate with the software being studied to make a product that will compete with it E.g. decompile object code to reveal its structure and figure out the interface specifications for interoperability purposes

2. Reverse Engineering Solution: contractually forbid reverse engineering (in software license agreement) Technological protection measures BUT! Legality in question Inconsistent with copyright or antitrust laws?

Question 4 HOW ARE TRADE SECRETS LOST OR STOLEN ?

A Growing Problem – Why Does It Occur? 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: external memories, keys Expanding use of wireless technology: devices for interception of communication without consent

Examples Reverse engineering, independent discovery Improper licensing Burglaries by professional criminals targeting specific technology Network attacks (hacking) Laptop computer theft Inducing employees to reveal TS

80% of trade secret loss < employees, contractors, trusted insiders! intentional (disgruntled employees - malicious) inevitable (departing employees - knowledge acquired) by ignorance

Question 5 HOW TO PROTECT YOUR TRADE SECRETS?

1. Identify Trade Secrets Accurate record keeping is important

2. 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

Monitor compliance, prosecute violators Educate and train: Clear communication and repetition Copy of policy, intranet, periodic training & audit, etc. Make known that disclosure of a TS may result in termination and/or legal action Monitor compliance, prosecute violators

to only those persons having a 3. Restrict Access to only those persons having a need to know the information  computer system should limit each employee’s access to data actually utilized or needed for a transaction

4. Mark Documents Help employees recognize TS  prevents inadvertent disclosure Uniform system of marking documents paper based electronic (e.g. ‘confidential’ button on standard email screen)

5. Physically Isolate and Protect Separate locked depository Authorization Access control log of access: person, document reviewed biometric palm readers Surveillance of depository/company premises guards, surveillance cameras Shredding

6. 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

7. Maintain Computer Secrecy Secure online transactions, intranet, website Password; access control Mark confidential or secret (legend pop, or before and after sensitive information) Physically isolate and lock: computer tapes, discs, other storage media No external drives and USB ports Firewalls; anti-virus software; encryption

8. Measures for Employees 1. New employees Brief on protection expectations early Obligations towards former employer! Assign all rights to inventions developed in the course of employment NDA/CA Non-compete provision Requirements Limits

2. Current employees Prevent inadvertent disclosure (ignorance) Train and educate NDA for particular task 3. Departing employees further limit access to data exit interview letter to new employer treat fairly & compensate reasonably for patent work

Non-Competition Clauses (covenants not to compete) in Labor Contracts After employee leaves prior employer: May he work for competitor? May he work in related job? May he open a competing business? Is covenant not to compete enforceable?

Some jurisdictions: NC covenant binding if ‘reasonable’ limited in time limited in area limited in type of industry special compensation to be paid to employee for his obligation not to compete Some jurisdictions: in writing + payment

9. Measures for Third Parties Sharing for exploitation Consultants, financial advisors, computer programmers, website host, designers, subcontractors, joint ventures, etc. Confidentiality agreement, NDA Limit access on need-to-know basis

TRADE SECRETS FOR BUSINESSES CONCLUSIONS

(1) TS Protection for Financial, Commercial and Technical Information : develop effective internal TS program to maintain trade secret status restrict access impose obligation of confidentiality to anyone who has access

(2) Certain Aspects of Business/Products cannot Be Maintained as a TS : information or technology that must be disclosed to the public in order to market the product information or technology which is part of a product sold to the public and can be reverse-engineered mass-marketed technology or products where competition is so intense, that very likely to be independently developed by others within short time if great deal of personnel movement between competitors

(3) Alternative or Additional Protection for TS : Make reverse engineering difficult (compiled code) Technological protection measures Patents or utility models Copyright protection (4) Be careful about signing confidentiality agreements and non-compete covenants

Putting In Place a Trade Secret Protection Program Thank You! lien.verbauwhede@wipo.int www.wipo.int/sme