Trade secrets are not new forms of IP (they were captured in the OECD BEPS regulation) but they have gained increased prominence recently, with the UK, US, Eu, China and Japan launching new trade secret regulation (in part oriented to combatting cyber theft) and with a slew of high profile trade secret cases in the courts. IP attorneys tend to focus on registered rights, whereas used strategically trade secrets can be one of the most important IP protections for a business.
Recent high profile cases:
Trade secrets help build and maintain competitive advantage
A trade secret is a formula, practice, innovation, know-how, process, design, instrument, pattern, commercial method, or compilation of information which is not generally known or reasonably ascertainable by others, and by which a business can obtain an economic advantage over competitors or customers. The scope of trade secrets is virtually unlimited.
Specifically, for a practice or process or knowledge of a company to be considered a trade secret it must include four concepts:
a) it is business-related technical or commercial information,
b) it must not be known to the public,(i.e. it is secret),
c) its secrecy must provide an actual or potential economic advantage for the company,
d) there must be a reasonable effort to protect it against disclosure (i.e. the company exercises reasonable measures to maintain it as a secret).
The subject matter of trade secrets is usually defined in broad terms and also includes sales methods, distribution methods, consumer profiles, marketing plans, supplier lists, client details, and manufacturing processes.
Perhaps the most famous trade secret is the Coca-Cola formula reputedly stored in a vault in the city of Atlanta. Google’s proprietary search algorithm; KFC’s blend of eleven herbs and spices; the compound WD-40, that distinctive spray with thousands of uses, are other famous examples of trade secrets.
For innovations, this is not to say trade secrets should not become patents but you cannot patent everything, especially as there are time and budget constraints to patenting. Trade secrets hold value as long as they are protected and treated as secrets in a well documented process and can be included in well crafted license agreement T&Cs. Trade secrets can provide protection for many decades for example the Coca Cola recipe, whereas patents generally only last 20 years.
Legal changes. Recently, the EU, UK, USA Japan and China amended their legal framework for trade secrets. The new laws are more precise than previous ones as to their scope and the types of secrets they regulate. These legal changes concern how trade secrets can be objects for licensing and knowledge sharing as functions of collaboration and open innovation.
2016 USA Defend Trade Secrets Act
2016 Europe Trade Secret Directive
2018 Japan Unfair Competition Prevention Act
2017, 2019 China - Anti Unfair Competition Law
What matters is how managers of trade secrets teach and train their organization to keep those as secrets, how the secrets are used for sharing knowledge within an organization and with third parties, and how the secrets are combined with other measures, such as patents and copyright, to create and maintain competitive advantages.
UK’s First Injunction Secured under Trade Secrets Regulations
February 1, 2021
US company Celgard, LLC has secured an interim injunction against its rival, Chinese company Shenzhen Senior Technology Material Co Ltd (“Senior”), that prevents Senior from importing or supplying its battery accessory products into the UK
In a number of respects, the Trade Secrets Regulations codify principles which were already established in English law. However, the judgment makes clear that claimants retain their equitable rights in confidential information and have additional rights under the Trade Secrets Regulations. Further, the confirmation that the UK is an appropriate forum in which to hear major international disputes is welcome news to many doing business in the UK, particularly in light of Brexit.
#intellectualproperty #smallbusiness #SME #tradesecrets
Copyright Exalt IP 2021
Author: John Pryor Exalt IP