1. Trade Secrets and Conflict of Interest
Chapter 5
Trade Secrets
and
Conflict of Interest

2. Trade Secret Trade Secret
Information used in the conduct of a business that isn’t commonly known by others.
A process, method, plan, formula or other information unique to a manufacturer, which gives it an advantage over competitors
A trade secret can be defined as (i) information (ii) that remains secret to others (iii) through reasonable means to protect its secrecy and (iv) creates actual or potential economic value for its owner.

3. Examples The ingredients/chemical composition of a product
The details of a manufacturing process
The design of the machine
Methods of quality control
Results of marketing surveys
Financial projections
List of customers & suppliers
Computer programs etc.

4. Some Real-Life Examples of Trade Secrets
Coca-Cola’s recipe for its Coca-Cola is one of the most famous trade secrets in the world. It’s a trade secret because only a select few within the Coca-Cola Corporation know the exact recipe for the soft drink
Google’s algorithm for its search engine is also a very valuable trade secret. Google uses an algorithm that ranks websites based on many factors including inbound links, page rank, relevant text, anchor tags, etc.
processes that Intel uses to make its integrated circuits for computers. Intel likely has patents on many of these processes, but certain aspects of the processes may very likely not be patented and are simply left "secret" to others

5. Trade Secret
Some distinction between confidential business information & trade secret
Confidential Business Information
Information concerning specific matters which are kept secret
Not used to manufacture anything or provide a service
Example
The salary of an employee

6. The Mission Statement of IPO-Pakistan is as follows:  
“Integrating and upgrading IP infrastructure for improved service delivery; increased public awareness and enhanced enforcement coordination for achieving the goal of being an IP based nation.”

7. LEGISLATION IN PAKISTAN ACCORDING TO IPO
The existing legislation on Intellectual Property i.e. Copyrights, Patents and Trademarks has been upgraded and the revised laws have been promulgated.
Trade mark, patent, industrial designs,
Integrated circuits, copy rights, geographical indications, plant breeders rights etc.

8. Intellectual property rights
Patents
A patent is a right of exclusion granted by a government to the inventor of an article, device, substance, process or method which is new, inventive and useful in return for its development and disclosure to the public.
Patents provide the inventor with the right to exclude others from exploiting the invention for the life of the patent, which is generally up 20 years from filing.

9. patents
any new and useful advance can be patented, for example mechanical devices, electric circuits, chemical compounds, genetically altered life forms and the application of computer software and algorithms.
Business methods and manufacturing process can also be patented, especially if they involve computers and information technology

10. Trade Marks The Trade Marks Ordinance 2001 defines a trademark
Any mark capable of being represented graphically which is capable of distinguishing goods or services of one undertaking from those of other undertakings.
A sign can include a letter, word, name including personal name, signature, figurative element, numeral, device, brand, heading, label, ticket, aspect of packing, shape, color, sound or any combination of these features.
Trademark laws allow businesses to protect the symbolic information that relates to their goods and services, by preventing the use of such features by competitors.
To receive trademark protection, a mark usually must be distinctive. Distinctiveness generally applies to any coined or fanciful word or term that does not closely resemble an existing mark.

11. Some famous trade marks

12. Copyright
Copyright is a set of exclusive rights granted to the owner for a limited time to protect the particular form, way or manner in which an idea or information is expressed. Examples are
literary & artistic work, music, films, paintings, sculptures, computer programs and database etc
Copyright is Moral and economic rights of authors/ writers, publishers, performers and producers of sound recordings (phonograms). Duration of Copyright protection is life time of the author plus 50 years thereafter.

13. How trade secret is different?
Trade secrets are very different from patents, copyrights and trademarks. While patents and copyrights require you to disclose your information in the application process (information that eventually becomes public), trade secrets require you to actively keep the information secret.
Trade-secret protection can potentially last longer than that of patents (20 years) and copyrights (100 years).

14. Relationship between intellectual property and trade secret
Trade secrets along with patents, copyrights and trade marks commonly regarded as intellectual property as they belong to owner.
But there is some difference between these THREE and trade secret.
Patent, copyright & trade marks
Like tangible property.
Owner has a right of exclusive use.
Also has a right to sell, license, or assign ownership to others as he desires.
Does not depend on keeping the inf. secret

15. Relationship between intellectual property and trade secret
(includes sales methods, distribution methods, consumer profiles, advertising strategies, lists of suppliers and clients, and manufacturing processes etc)
remains protected as long as it remains unknown to others
It is a right to not have the secret
Misused or wrongfully acquired by others
(especially after leaving the org. and working with another employer)

16. Misappropriation of a trade secret
There are also illegal ways to try and obtain a trade secret – referred to as misappropriation of a trade secret.
Misappropriation occurs when another acquires a trade secret by improper means or discloses or uses the trade secret without the consent of the owner of the trade secret

17. REASONS WHY TRADE SECRETS ARE INCREASINGLY IMPORTANT
NEW TECHNOLOGY
One reason for the ascendancy of trade secrets is that technology is
making their misappropriation easier.
Before computers, trade secret information was usually stored in physical form.
Hackers throughout the world can break into networks and access confidential company information, including trade secrets.
Du Pont/Gary Min case

18. One solution to this problem
The confidential data access should have been restricted to certain users by using biometric computer authentication instead of passwords for computer authentication
Biometrics
Biometrics uses certain characteristics of a person such as fingerprints, retinal pattern, or even speech pattern to uniquely identify a person, grant access for an authorized user and clearly reject unauthorized users

19. A CHANGING WORK ENVIRONMENT
No longer do workers think of themselves as “lifers,” devoting their careers to a single employer.
new generation instead value mobility and entrepreneurism . The result is that these workers are more likely to move from job to job than past generations.

20. INCREASING VALUE OF TRADE SECRET INFORMATION
Our current information-based economy represents a shift from the previous economy, which was based on physical assets such as natural resources and capital goods.
Obvious examples the dozens of modern industries that rely extensively on intellectual property for their value.
These include the software industry, entertainment industries such as music and movies, Internet-based industries, and life science industries such as genetics.

21. FLEXIBLE (AND EXPANDING) SCOPE OF TRADE SECRETS
Another cause of the increase in trade secret litigation is the flexible definition of trade secrets. Because a “trade secret” is broadly defined as any information that is secret, derives economic value from that secrecy, and is the subject of reasonable measures to maintain its secrecy.
The definition of a trade secret is potentially so broad that the meaning of “trade secret” is often defined by what it is not.
concept of an employee’s “tool kit,” or his generalized skills, knowledge, training, and experience, to cabin the scope of trade secret law.

22. One recent example of trade secret theft involving China is the case of Xiang Dong “Mike” Yu, a project engineer for the Ford Motor Company
He smuggled Ford trade secrets to China while on a job hunt that led to a position with one of Ford’s competitors, Fox Conn PCE Industry, Inc
Yu copied 4,000 Ford documents, estimated to be worth between $50 million and $100 million, onto an external hard drive and delivered them to a Fox Conn manager at that manager’s residence in Shenzhen.
The documents contained trade secret design specifications for engines and electric power supply systems.
The United States government launched an aggressive prosecution under the federal Economic Espionage Act,
In the words of the U.S. Attorney in Detroit, Barbara L. McQuade, to “protect the intellectual property of our U.S. automakers, who invest millions of dollars and decades of time in research and development to compete in a global economy.”
Yu pleaded guilty, and in 2011, a federal judge sentenced him to nearly six years in prison followed by deportation to China

23. Arguments for trade secret protection
First argument views trade secret as a property and attempts to apply common law principles of property rights to them.
Second argument is trade secrets are considered in terms of the right to compete & principles of fair competition.
Third argument holds that employees who disclose trade secrets to others or who use them for their own gain violate an obligation of confidentiality that is part of the employer-employee relationship.

24. Some ways to protect a trade secret
Restrict access to the information (lock it away in a secure place, such as a bank vault).
Limit the number of people who know the information.
Have the people who know the trade secret agree in writing/sign not to disclose the information (sign non-disclosure agreements).
Mark any written material pertaining to the trade secret as proprietary.
Non-competition agreements.

25. Noncompetition Agreements
because of difficulty of imposing legal restraints on employees after they leave,
many companies require employees to sign a non competition agreement when hired.
Restrict an employee from working for a competitor after leaving a company
For a certain period of time
Within a given geographical territory
But these agreements are almost entirely for the benefit of employer and inflict a burden on employees (in 12 states of U.S they are prohibited entirely)

26. Confidentiality Agreements
Most employees sign contractual obligation
A confidentiality agreement (also called a nondisclosure agreement or NDA) is a legally binding contract in which a person or business promises to treat specific information (a secret design, an idea for a new website, financial information etc) as a trade secret and promises not to disclose the secret to others without proper authorization.
limit the right of employees to use their skills and knowledge regarding postemployment competition
By relying on an enforceable obligation of confidentiality
Companies place unnecessary restraints on employee mobility and career prospects

27. Confidentiality Agreements
Most employees sign contractual obligation
A confidentiality agreement (also called a nondisclosure agreement or NDA) is a legally binding contract in which a person or business promises to treat specific information (a secret design, an idea for a new website, financial information etc) as a trade secret and promises not to disclose the secret to others without proper authorization.
limit the right of employees to use their skills and knowledge regarding postemployment competition
By relying on an enforceable obligation of confidentiality
Companies place unnecessary restraints on employee mobility and career prospects

28. Example of NDA of NBP (Initial part of Form)
CONFIDENTIALITY AND NON‐DISCLOSURE AGREEMENT (NDA)
EFFECTIVE DATE: ______________
NAME OF PROJECT WITH ITS ID: ________________________________________
VALIDITY OF NDA: FIVE YEARS WITH EFFECT FROM EFFECTIVE DATE
1.0. Parties involved in this Non‐Disclosure Agreement
This Non‐Disclosure Agreement exists between (Insert Name of your company) (hereinafter referred to as “Recipient”) and National Bank of Pakistan.
2.0 Commencement Date of this Non‐Disclosure Agreement
This Non‐Disclosure Agreement commences on the date indicated at the top of this page.
3.0 Purpose of this Non‐Disclosure Agreement
This Non‐Disclosure Agreement serves to protect all confidential information and intellectual property developed for and owned by NBP for Hiring Consultancy Services for BPR & COSO Implementation.

29. Trade Secret Protection (U.S.A)
Espionage, commonly known as spying, is the practice of secretly gathering information about a foreign government or a competing industry, with the purpose of placing one's own government or corporation at some strategic or financial advantage. Federal law prohibits espionage when it jeopardizes the national defense or benefits a foreign nation
Economic Espionage Act of 1996 (EEA)
Made the made the theft of trade secrets a federal offence
Intended to prevent the theft of trade secrets for the benefit of foreign governments

30. More sophisticated management regarding confidentiality
Improving security procedures in the workplace
Segmenting information
Increased pensions
Post employment consulting contracts
another incentive for employees to leave with valuable TS can be reduced by
greater recognition of employees for their contributions

31. Competitor Intelligence Gathering
The ethical and legal limits on competitor intelligence gathering are generally concerned with the method used to acquire the information
Ethics of competitor intelligence gathering

32. Unethical methods for gathering competitor intelligence
Unethical methods for gathering competitor intelligence are:
Theft and Receipt of Unsolicited Information
Misrepresentation
Improper Influence
Covert Surveillance
Dumpster diving
Dumpster diving is looking for treasure in someone else's trash. (A dumpster is a large trash container.)

33. CONFLICT OF
INTEREST

34. Conflict of Interest Conflict of Interest occurs when
A personal interest comes into conflict with an obligation to serve the interests of another
A personal interest interferes with a person’s acting
A conflict of interest is a set of circumstances that creates a risk that professional judgment or actions regarding a primary interest will be unduly influenced by a secondary interest.

35. Conflict of interest
This term is used to describe the situation in which a public official or fiduciary(trustee) who, contrary to the obligation and absolute duty to act for the benefit of the public or a designated individual, exploits the relationship for personal benefit, typically pecuniary (monitory/related to money)

36. Conflict of Interest
A conflict of interest could impair an individual's ability to perform his or her duties and responsibilities objectively
another working definition states:
A conflict of interest is a situation in which financial or other personal considerations have the potential to compromise or bias professional judgment and objectivity it is a set of circumstances that creates a risk that professional judgment or actions regarding a primary interest will be unduly influenced by a secondary interest
A conflict of interest involves the abuse -- actual, apparent, or potential -- of the trust that people have in professionals

37. Conflict of Interest
The conflict in a conflict of interest exists whether or not a particular individual is actually influenced by the secondary interest.
Conflicts of interest can involve financial or non-financial interests of the staff member/employee and the interests of
A business partner or associate,
family member
friend or person in a close personal relationship with the staff member.

38. Examples of conflict of interest
A manager provides paid consulting services on the weekend to a company customer or supplier.
A person working as the equipment purchaser for a company may get a bonus proportionate to the amount he's under budget by year end. However, this becomes an incentive for him to purchase inexpensive, substandard equipment. Therefore, this is counter to the interests of those in his company who must actually use the equipment

39. Examples of conflict of interest
An employee starts a company that provides similar services to similar clients as those of her full time employer.
An employee who is a member of a company employee selection team fails to disclose that he is related to a job candidate whom the company team is considering for a position.
A staff member involved in the admission, supervision, assessment or examination of a student with whom they have, or have had, a close personal or financial relationship.

40. Examples of conflict of interest
An employee works part time in the evening for a company that makes a product that competes with the products of his full time employer.(An employee takes a second job working for a competitor)
A member of the company board of directors accepts fees and provides advice to a company that is in direct competition with the company on whose board of directors he sits.
An HR director decides to investigate a charge of harassment, using internal resources she controls, against a fellow corporate executive whom she has known and worked with professionally for years.

41. Examples of conflict of interest
The 'Judge' for a custody hearing on a minor child is related to one of the parents of the child. This judge would be considered to have a conflict of interest because they were related to one of the parents and may pass judgment for the parent they are related to, regardless of the evidence in the case.
An employee uses the employer's proprietary information for his or her own business venture

42. Actual and Potential Conflicts of Interest
An actual conflict of interest occurs when
A personal interest leads you to act against the interests of
Someone whose interests the you are obligated to serve (employer/client)

43. Actual and Potential Conflicts of Interest
A potential conflict of interest occurs when there is the possibility that a person will
Fail to fulfill an obligation to act in the interests of another
Even though the person has not yet done so

44. Policy regarding conflict of interest (Novartis)
The Policy is based on Section 5 of the Novartis Code of Conduct:
“Nobody, whether an individual, a commercial entity, or a company with a relationship to a Novartis employee, may improperly benefit from Novartis through his or her relationship with the employee or as a result of the employee’s position in the company. Furthermore, no employee may personally benefit in an improper way.

45. The Kinds of Conflict of Interest
There are four kinds of conflicts of interest:
Exercising biased judgment
Engaging in direct competition
Misusing a position
Violating confidentiality

46. Managing Conflict of Interest
Major means that can manage conflicts of interest
Objectivity, avoidance, or disclosure
Competition
Rules and policies
Independent judgment
Structural Changes