Training The Trainers” Workshop


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  • Training The Trainers” Workshop

    2. 2. Keeping Confidence: Putting in Place a Trade Secret Protection Program <ul><li>Lien Verbauwhede </li></ul><ul><li>Consultant, SMEs Division </li></ul><ul><li>World Intellectual Property Organization (WIPO) </li></ul>
    3. 3. This Presentation <ul><li>PART 1 - Outline </li></ul><ul><ul><li>Definition </li></ul></ul><ul><ul><li>Legal requirements </li></ul></ul><ul><ul><li>Legal rights </li></ul></ul><ul><ul><li>Enforcement </li></ul></ul><ul><li>PART 2 - Proper Management of TS </li></ul><ul><ul><li>Protection strategies for trade secrets </li></ul></ul><ul><li>(PART 3 - Trade Secret or Patent?) </li></ul><ul><ul><li>Legal considerations </li></ul></ul><ul><ul><li>Business considerations </li></ul></ul>
    5. 5. Definition : What are trade secrets? any confidential information which provides an enterprise with a competitive edge can qualify as a trade secret  entitled to legal protection
    6. 6. Cotton Dyeing Technique <ul><li>5 th century BC: Greek historian Herodotus marveled at quality of Indian cotton. </li></ul><ul><li>Textile trade: cotton, silk, woven textiles. The beauty, brilliance, color range and fastness of Indian fabrics was held in high esteem. </li></ul><ul><li>India managed to keep the technique of cotton dyeing a secret from the world until the 17 th century . </li></ul>
    7. 7. A trade secret can relate to different types of information Trade Secret
    8. 8. <ul><li>Technical and scientific information: </li></ul><ul><ul><li>Product information </li></ul></ul><ul><ul><ul><li>technical composition of a product (e.g. paint) </li></ul></ul></ul><ul><ul><ul><li>technical data about product performance </li></ul></ul></ul><ul><ul><ul><li>product design information </li></ul></ul></ul><ul><ul><li>Manufacture information </li></ul></ul><ul><ul><ul><li>manufacturing methods and processes (e.g. weaving technique, technology for new fiber having significant tensile properties) </li></ul></ul></ul><ul><ul><ul><li>production costs, refinery processes, raw materials </li></ul></ul></ul><ul><ul><ul><li>specialized machinery </li></ul></ul></ul><ul><ul><li>Know-how necessary to perform a particular operation (e.g. how to dye with natural dyes) </li></ul></ul>
    9. 9. <ul><li>Technical and scientific info (contd.): </li></ul><ul><ul><li>Designs, drawings, patterns, motifs </li></ul></ul><ul><ul><li>Test data, laboratory notebooks </li></ul></ul><ul><ul><li>Computer codes </li></ul></ul>
    10. 10. <ul><li>Commercial information: </li></ul><ul><ul><li>Customer list </li></ul></ul><ul><ul><li>Business plan </li></ul></ul><ul><ul><li>Marketing strategy </li></ul></ul><ul><ul><li>Supplier arrangements </li></ul></ul><ul><ul><li>Customer buying preferences and requirements </li></ul></ul><ul><ul><li>Consumer profiles </li></ul></ul><ul><ul><li>Sales methods </li></ul></ul>
    11. 11. <ul><li>Financial information: </li></ul><ul><ul><li>Internal cost structure </li></ul></ul><ul><ul><li>Pricing information </li></ul></ul><ul><ul><li>Salary and compensation plans </li></ul></ul><ul><ul><li>Price lists </li></ul></ul>
    12. 12. <ul><li>Negative information: </li></ul><ul><ul><li>Details of failed efforts to remedy problems in the manufacture of certain products </li></ul></ul><ul><ul><li>Dead-ends in research (e.g. waterproof) </li></ul></ul><ul><ul><li>Unsuccessful attempts to interest customers in purchasing a product </li></ul></ul>
    13. 13. Legal requirements : What can be protected as a trade secret?
    14. 14. <ul><li>Three essential legal requirements : </li></ul><ul><ul><li>1. The information must be secret </li></ul></ul><ul><ul><li>2. It must have commercial value because it’s secret </li></ul></ul><ul><ul><li>3. Owner must have taken reasonable steps to keep it secret </li></ul></ul>
    15. 15. <ul><ul><li>1. The information must be secret </li></ul></ul><ul><ul><ul><li>“Not generally known among or readily accessible to persons within the circles that normally deal with this kind of information” </li></ul></ul></ul><ul><ul><ul><li>Price list on your website is no trade secret </li></ul></ul></ul><ul><ul><ul><li>No absolute requirement  NDA/CA </li></ul></ul></ul><ul><ul><ul><ul><li>e.g. based on supplier relationship, joint development agreement, due diligence investigation, etc. </li></ul></ul></ul></ul>
    16. 16. <ul><li>2. It must have commercial value because it’s secret </li></ul><ul><ul><ul><li>Confers some economic benefit to the holder </li></ul></ul></ul><ul><ul><ul><li>This benefit must derive specifically from the fact that it is not generally known, not just from the value of the information itself </li></ul></ul></ul><ul><ul><ul><li>Not easy to know exact value of trade secret because it is a secret </li></ul></ul></ul>
    17. 17. <ul><li>3. Owner must have taken reasonable steps to keep it secret </li></ul><ul><ul><ul><li>Under most trade secret regimes: trade secret is not deemed to exist unless its holder takes reasonable steps to maintain its secrecy </li></ul></ul></ul><ul><ul><ul><li>‘Reasonable’  case by case </li></ul></ul></ul><ul><ul><ul><li>Importance of proper TS management program </li></ul></ul></ul>
    18. 18. <ul><li>Only protection against improperly acquiring, disclosing or using : </li></ul><ul><ul><li>People who are automatically bound by duty of confidentiality (incl. employees) </li></ul></ul><ul><ul><li>People who have signed non-disclosure agreement </li></ul></ul><ul><ul><li>People who acquire a trade secret through improper means (such as theft, industrial espionage, bribery) </li></ul></ul>Legal rights :
    19. 19. <ul><li>Some people cannot be stopped from using information under trade secret law: </li></ul><ul><ul><li>People who discover the secret independently , without using illegal means or violating agreements or state law </li></ul></ul><ul><ul><li>People who discover through reverse engineering </li></ul></ul>
    20. 20. Reverse Engineering : Taking apart an object to see how it works in order to duplicate or enhance the object
    21. 21. Examples Zipper Bikini Lycra
    23. 23. Enforcement: What can you do if someone steals or improperly discloses your trade secret?
    24. 24. <ul><li>Trade secret protection may be based on... </li></ul><ul><ul><li>Contract law </li></ul></ul><ul><ul><ul><li>When there is an agreement to protect the TS </li></ul></ul></ul><ul><ul><ul><ul><li>NDA/CA </li></ul></ul></ul></ul><ul><ul><ul><li>Where a confidential relationship exists </li></ul></ul></ul><ul><ul><ul><ul><li>Attorney, employee </li></ul></ul></ul></ul><ul><ul><li>Principle of tort / unfair competition </li></ul></ul><ul><ul><ul><li>Misappropriation by competitors who have no contractual relationship </li></ul></ul></ul><ul><ul><ul><ul><li>Theft, espionage, subversion of employees </li></ul></ul></ul></ul>
    25. 25. <ul><ul><li>Criminal laws </li></ul></ul><ul><ul><ul><li>e.g. for an employee to steal trade secrets from a company </li></ul></ul></ul><ul><ul><ul><li>theft, electronic espionage, invasion of privacy, etc. </li></ul></ul></ul><ul><ul><ul><li>circumvention of technical protection systems </li></ul></ul></ul><ul><ul><li>Specific trade secret laws </li></ul></ul><ul><ul><ul><li>USA: Uniform Trade Secrets Act; Economic Espionage Act </li></ul></ul></ul>
    26. 26. <ul><li> Remedies </li></ul><ul><li>1. Order to stop the misuse </li></ul><ul><li>2. Monetary damages </li></ul><ul><ul><ul><li>actual damages caused as a result of the misuse (lost profits) </li></ul></ul></ul><ul><ul><ul><li>amount by which defendant unjustly benefited from the misappropriation (unjust enrichment) </li></ul></ul></ul><ul><li>3. Seizure order </li></ul><ul><ul><ul><li>can be obtained in civil actions to search the defendant's premises in order to obtain the evidence to establish the theft of trade secrets at trial </li></ul></ul></ul><ul><li>4. Precautionary impoundment </li></ul><ul><ul><ul><li>of the articles that include misused trade secrets, or the products based on the misuse </li></ul></ul></ul>
    27. 27. <ul><li>To establish violation, the owner must be able to show : </li></ul><ul><ul><li>Infringement provides competitive advantage </li></ul></ul><ul><ul><li>Reasonable steps to maintain secret </li></ul></ul><ul><ul><li>Information obtained, used or disclosed in violation of the honest commercial practices ( misuse ) </li></ul></ul>
    28. 28. Protection in India <ul><li>Under Indian common law and British precedents, there is protection for trade secrets </li></ul><ul><li>All remedies are available : </li></ul><ul><ul><li>injunctive relief, damages, accounting of profits, and the return of all property containing the TS information </li></ul></ul><ul><ul><li>A seizure order can be obtained in civil actions to search the defendant's premises in order to obtain the evidence to establish the theft of trade secrets at trial. </li></ul></ul><ul><li>Apart from the common law, India has not adopted any civil or criminal statutes or laws relating to trade secrets. </li></ul>
    30. 30. The Story of the Bridgport Loom... <ul><li>1811: James Lowell vacation in Scotland </li></ul><ul><li>In fact, Lowell was a spy </li></ul><ul><li>Water powered weaving machine. Performed work done by hundreds of artisans. Allowed British to command world textile trade. American cotton had to be shipped to England where it was woven into cloth, and then resold to American merchants. </li></ul>
    31. 31. The story of NRB Textiles & Johnston Industries… <ul><li>NRB + Johnston lawsuit: Competitor paid 2 consultants (posing as research student + Swiss investor) $500,000 for info on customers, suppliers, and manufacturing operations of 9 textile companies. </li></ul><ul><li>Used stolen information to lure customers away after first reducing prices. </li></ul><ul><li>Also introduced a fabric very similar to one manufactured by Johnston and then marketed it to Johnston's customers. </li></ul>
    32. 32. Loss of trade secrets - a growing problem (1) <ul><li>Why is this occurring? </li></ul><ul><ul><li>Way we do business today (increased use of contractors, temporary workers, out-sourcing) </li></ul></ul><ul><ul><li>Declining employee loyalty, more job changes </li></ul></ul><ul><ul><li>Organized crime : discovered money to be made in stealing high-tech IP </li></ul></ul><ul><ul><li>Storage facilities (CD-ROM, floppies, etc) </li></ul></ul><ul><ul><li>Expanding use of wireless technology </li></ul></ul>
    33. 33. Loss of trade secrets - a growing problem (2) <ul><li>Examples of outside threats </li></ul><ul><ul><li>Burglaries by professional criminals targeting specific technology </li></ul></ul><ul><ul><li>Attempted network attacks (hacks) </li></ul></ul><ul><ul><li>Laptop computer theft: source code, product designs, marketing plans, customer lists </li></ul></ul><ul><ul><li>Inducing employees to reveal TS (Apple case) </li></ul></ul><ul><ul><li>Corporate spies </li></ul></ul>
    34. 34. Loss of trade secrets - a growing problem (3) <ul><li>Examples of inside threats </li></ul><ul><ul><li>80% of information crimes < employees, contractors, trusted insiders! </li></ul></ul><ul><ul><li>Malicious destruction/erasure of R&D data by disgruntled employee </li></ul></ul><ul><ul><li>Theft by departing employee (e.g. of business plans) </li></ul></ul><ul><ul><li>Ignorance </li></ul></ul>
    35. 35. <ul><li>With sufficient effort or through illegal acts, competitors can usually obtain your trade secrets. </li></ul><ul><li>So long as you demonstrate reasonable efforts  information remains a trade secret and is legally protected as such. </li></ul><ul><li>Conversely, if no reasonable effort  risk losing the trade secret, even if the information is obtained by competitors illegally. </li></ul>
    36. 36. What can be done?  10 basic protection strategies
    37. 37. 1. Identify trade secrets <ul><li>Considerations in determining whether information is a TS: </li></ul><ul><ul><li>Is it known outside the company? </li></ul></ul><ul><ul><li>Is it widely known by employees and others involved within the company? </li></ul></ul><ul><ul><li>Have measures been taken to guard its secrecy? </li></ul></ul>
    38. 38. <ul><li>Prioritize: </li></ul><ul><ul><li>What is the value of the information for your company? </li></ul></ul><ul><ul><li>What is the potential value for your competitors? </li></ul></ul><ul><ul><li>How much effort/money spent in collecting or developing it? </li></ul></ul><ul><ul><li>How difficult would it be for others to acquire, collect or duplicate it? </li></ul></ul>
    39. 39. 2. Develop a protection policy <ul><li>Advantages of a written policy: </li></ul><ul><ul><li>Clarity (how to identify and protect) </li></ul></ul><ul><ul><li>How to reveal (in-house or to outsiders) </li></ul></ul><ul><ul><li>Demonstrates commitment to protection  important in litigation </li></ul></ul>
    40. 40. 3. Educate employees <ul><ul><li>Prevent inadvertent disclosure (ignorance) </li></ul></ul><ul><ul><li>New employees : </li></ul></ul><ul><ul><ul><li>Brief on protection expectations early </li></ul></ul></ul><ul><ul><ul><li>NDA/NCA/non-solicitation clauses </li></ul></ul></ul><ul><ul><ul><li>Obligations towards former employer! </li></ul></ul></ul><ul><ul><li>Departing employees : </li></ul></ul><ul><ul><ul><li>Exit interview, letter to new employer, treat fairly & compensate reasonably for patent work, further limit access to data </li></ul></ul></ul>
    41. 41. <ul><ul><li>Educate and train : </li></ul></ul><ul><ul><ul><li>Copy of policy, intranet, periodic training & audit, etc. Make known that disclosure of a TS may result in termination and/or legal action </li></ul></ul></ul><ul><ul><ul><li>Clear communication + repetition </li></ul></ul></ul><ul><ul><li>TS protection must be part of the enterprise culture </li></ul></ul><ul><ul><ul><li>Every employee must contribute to maintain the security environment (e.g. anonymous security hotline) </li></ul></ul></ul><ul><ul><li>Monitor compliance, prosecute violators (in a consistent manner) </li></ul></ul>
    42. 42. 4. Restrict access <ul><ul><li>to only those persons having a </li></ul></ul><ul><ul><li>need to know </li></ul></ul><ul><ul><li>the information </li></ul></ul><ul><ul><li> Both paper and computer </li></ul></ul><ul><ul><li> C omputer system should limit each </li></ul></ul><ul><ul><li>employee’s access to information actually </li></ul></ul><ul><ul><li>required for his job </li></ul></ul>
    43. 43. 5. Mark documents <ul><ul><li>Help employees recognize trade secrets  prevents inadvertent disclosure </li></ul></ul><ul><ul><li>Uniform system of marking documents </li></ul></ul><ul><ul><ul><li>paper based </li></ul></ul></ul><ul><ul><ul><li>electronic (e.g. ‘confidential’ button on standard email screen) </li></ul></ul></ul>confidential
    44. 44. WARNING : This document contains trade secret information of Lien Verbauwhede. Unauthorized disclosure is strictly prohibited and may result in serious legal consequences.
    45. 45. 6. Physically isolate and protect <ul><ul><li>Separate locked depository </li></ul></ul><ul><ul><li>Access control </li></ul></ul><ul><ul><ul><li>authorization </li></ul></ul></ul><ul><ul><ul><li>log of access: person, document reviewed </li></ul></ul></ul><ul><ul><ul><li>biometric palm readers </li></ul></ul></ul><ul><ul><li>Surveillance of depository/company premises </li></ul></ul><ul><ul><ul><li>guards, surveillance cameras </li></ul></ul></ul><ul><ul><li>Shredding </li></ul></ul>
    46. 46. 7. Maintain computer secrecy <ul><ul><li>Secure online transactions, intranet, website </li></ul></ul><ul><ul><li>Authorization (password), access control </li></ul></ul><ul><ul><li>Mark confidential or secret (legend pop, or before and after access to sensitive information) </li></ul></ul><ul><ul><li>Physically isolate and lock: computer tapes, discs, other storage media </li></ul></ul><ul><ul><li>No external drives and USB ports </li></ul></ul><ul><ul><li>Monitor remote access to servers </li></ul></ul><ul><ul><li>Firewalls, anti-virus software,encryption </li></ul></ul>
    47. 47. 8. Restrict public access to facilities <ul><ul><li>Log and visitor’s pass </li></ul></ul><ul><ul><li>Accompany visitor </li></ul></ul><ul><ul><li>Sometimes NDA/CA </li></ul></ul><ul><ul><li>Visible to anyone walking through a company’s premises </li></ul></ul><ul><ul><ul><li>type of machinery, layout, physical handling of work in progress, etc </li></ul></ul></ul><ul><ul><li>Overheard conversations </li></ul></ul><ul><ul><li>Documents left in plain view </li></ul></ul><ul><ul><li>Unattended waste baskets </li></ul></ul>
    48. 48. 9. Third parties <ul><ul><li>Sharing for exploitation </li></ul></ul><ul><ul><li>Consultants, financial advisors, computer programmers, website host, designers, subcontractors, joint ventures, etc. </li></ul></ul><ul><ul><li>Know the recipient </li></ul></ul><ul><ul><li>Disclose least amount of info necessary </li></ul></ul><ul><ul><li>Confidentiality agreement, non-disclosure agreement </li></ul></ul>
    49. 49. 10. Unsolicited submissions <ul><ul><li>Unsolicited suggestions, inventions, ideas </li></ul></ul><ul><ul><li>Beware, esp. if relate to ideas/inventions that your company is presently developing </li></ul></ul><ul><ul><li>Often: claim that unsolicited information was stolen </li></ul></ul><ul><ul><li>Notify submitter that your company will not enter into confidentiality relationship </li></ul></ul><ul><ul><li>Request submitter to sign acknowledgement that your company is not obligated to use the information and owes no duty of confidentiality </li></ul></ul>
    51. 51. Introduction <ul><li>Certain types of inventions may be protectable under patent + trade secret law. </li></ul><ul><li>However, not under both. </li></ul>
    52. 52. <ul><li>Choice between patent protection and trade secret protection is a </li></ul><ul><li> LEGAL and BUSINESS </li></ul><ul><li>decision </li></ul>
    53. 53. Legal Considerations
    54. 56. Business and Marketplace Considerations
    55. 57. 1. Market life of the subject matter Some products have commercial life of only a few months Patent typically takes 25m to be issued  Patent protection may not exist until after market life of the product has expired  TS allows immediate commercial use
    56. 58. 2. Difficulty of maintaining the subject matter secret <ul><ul><li>Time, willingness and funds to: </li></ul></ul><ul><ul><ul><li>Develop internal policies </li></ul></ul></ul><ul><ul><ul><li>Implement protection program </li></ul></ul></ul><ul><ul><ul><li>Initiate immediate legal action to protect trade secrets from disclosure (preliminary injunction) </li></ul></ul></ul><ul><ul><li>Risk of disclosure  number of persons needing access to the TS </li></ul></ul><ul><ul><ul><li>Employees </li></ul></ul></ul><ul><ul><ul><li>Need for investors </li></ul></ul></ul><ul><ul><ul><li>External contractors </li></ul></ul></ul>
    57. 59. 3. Likelihood of subject matter being reverse engineered <ul><li>Easy to control RE? </li></ul><ul><ul><li>Products widely sold to consumers  difficult to prevent RE  P </li></ul></ul><ul><ul><li>Products sold to limited number of persons  control, e.g. license agreement which forbids RE and requires licensee to maintain the technology secret  TS </li></ul></ul><ul><li>Difficult/expensive to do RE? </li></ul><ul><ul><li>Secret  manufacturing method or formula  difficult  TS </li></ul></ul><ul><ul><li>Secret embodied in product  easy (e.g. raw material)  P </li></ul></ul>
    58. 60. Example no. 1 <ul><li>Decades ago, Coca-Cola decided to keep its soft drink formula a secret </li></ul><ul><li>The formula is only know to a few people within the company </li></ul><ul><li>Kept in the vault of a bank in Atlanta </li></ul><ul><li>Those who know the secret formula have signed non-disclosure agreements </li></ul><ul><li>It is rumored that they are not allowed to travel together </li></ul><ul><li>If it had patented its formula, the whole world would be making Coca-Cola </li></ul>
    59. 61. <ul><li>In the past, you could not buy Coca-Cola in India, because Indian law required that trade secret information be disclosed </li></ul><ul><li>In 1991, India changed its laws, and Coca-Cola can now be sold in the country </li></ul>
    60. 62. Examples no. 2 <ul><li>Secret technique for jeans washing </li></ul><ul><li>Secret textile weaving techniques for saris </li></ul><ul><li>Content of dye mixtures </li></ul>
    61. 63. Example no. 3 <ul><li>Glamourmom® applied for patent for breastfeeding bra </li></ul><ul><li>Allows mothers to discretely and confidently breastfeed </li></ul><ul><li>Built-in soft cup frame and elastic shelf provides full nursing bra support. </li></ul><ul><li>But unlike any other nursing bra on the market, it covers the tummy. L ooks like a regular top. </li></ul>
    62. 64. 4. Likelihood of subject matter being independently developed <ul><li>Complexity of invention </li></ul><ul><li>Number of competitors working in the field </li></ul><ul><li>Potential payoff for achieving market success </li></ul><ul><ul><li>e.g. drug that cures cancer </li></ul></ul><ul><li>Alternative option: defensive publication </li></ul>
    63. 65. 5. Type of subject matter <ul><ul><li>New basic technology </li></ul></ul><ul><ul><ul><li>“ pioneer patent” </li></ul></ul></ul><ul><ul><ul><li>many licensees: allows to set low licensing fees  competitors have no incentive to risk patent litigation </li></ul></ul></ul><ul><ul><li>Minor improvement in well-developed field </li></ul></ul><ul><ul><ul><li>P will be narrowly construed </li></ul></ul></ul><ul><ul><ul><li>easy to invent around </li></ul></ul></ul><ul><ul><ul><li>or: competitors likely to use preexisting technology </li></ul></ul></ul><ul><ul><li>Protectable in all countries? </li></ul></ul><ul><ul><ul><li>in some countries not patentable? </li></ul></ul></ul><ul><ul><ul><li>too costly to protect in all countries? </li></ul></ul></ul>
    64. 66. Example - Invention for putting a permanent image on a piece of apparel <ul><li>Condé System Inc. produces DyeTrans Wearables™ by using a patented process to treat fabric so it captures photographic-quality artwork and text in the fabric rather than on the surface of the fabric. </li></ul><ul><li>The fabric remains soft and absorbent with less pile than cotton or cotton blends and resists wrinkling and shrinkage. </li></ul>Source:
    65. 67. <ul><li>Potential long market life </li></ul><ul><li>Potential many licensees </li></ul><ul><li>Would be difficult to keep secret </li></ul><ul><ul><li>many licensees </li></ul></ul><ul><ul><li>risk for reverse engineering </li></ul></ul>Patent: only 20y, but exclusive rights
    66. 68. TS v Patent - Conclusions <ul><li>The choice between trade secret and patent protection for an invention is irrevocable . </li></ul><ul><li>Therefore: carefully consider all relevant advantages and disadvantages from each choice both from legal and business viewpoint. </li></ul>
    67. 69. TS v Patent - Conclusion <ul><li>Patent and trade secrets are often complementary to each other: </li></ul><ul><ul><li>Patent applicants generally keep inventions secret until the patent application is published by the patent office. </li></ul></ul><ul><ul><li>A lot of valuable know-how on how to exploit a patented invention successfully is often kept as a trade secret. </li></ul></ul><ul><ul><li>Some businesses disclose their trade secret to ensure that no one else is able to patent it ( defensive publication ). </li></ul></ul>
    68. 70. Remember... <ul><ul><li>TS: No registration, but 3 requirements for legal protection </li></ul></ul><ul><ul><li>No need for absolute secrecy, but ‘ reasonable measures’ </li></ul></ul><ul><ul><li>Developing and maintaining TS program </li></ul></ul><ul><ul><ul><li>< good business practice to prevent </li></ul></ul></ul><ul><ul><ul><li>< legal requirement to enforce TS protection </li></ul></ul></ul>
    69. 71. <ul><ul><li>Only legal protection against dishonest acquisition/disclosure/use </li></ul></ul><ul><ul><li>Consider alternative protection </li></ul></ul><ul><ul><li>Get legal advice, whenever useful </li></ul></ul>
    70. 72. <ul><li>Thank You! </li></ul><ul><li>WIPO’s website for SMEs : </li></ul><ul><li> </li></ul>
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