What you need to know to protect you trade secrets in Thailand

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Innovation and Thailand 4.0:
Trade Secrets and Business
Kowit Somwaiya
Managing Partner
14th
March 2017
www.lawplusltd.com

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Basic Requirements for Trade Secret
Protection
• Three requirements for a trade secret to be eligible for legal protection in
Thailand:
– the information must be a secret, i.e. not be publicly known or accessible by
persons who are normally connected with the information;
– the information must possess a commercial value derived from its secrecy;
and
– the controller of the information must have taken appropriate measures to
maintain the secrecy.
• No registration is required in order to gain protection.

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Unknown to
the public and
not accessible
by connected
persons
Basic Requirements for Trade Secret
Protection
Provides
competitive
advantage and
possesses a
commercial
value
Kept confidential:
“appropriate
measures to
maintain the
secrecy.”

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Tips for Trade Secret Protection 1
1. Identify trade secrets: Accurate record keeping is important.
2. Develop a protection policy, monitor compliance and prosecute violators
3. Restrict access to only those persons having a “need to know” the information
4. Mark documents “confidential”
5. Physically isolate and protect
6. Restrict public access to facilities
7. Maintain computer secrecy
8. Have measures for employees, e.g. non-disclosure and non-competition clauses
9. Have measures for third parties, e.g. non-disclosure agreements
Most of trade secret losses are caused by
employees, contractors, trusted insiders!

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Tips for Trade Secret Protection 2
• Who owns the trade secret in the following situations?
– Trade secret developed by employee
– Trade secret developed by external contractor
• Under the Trade Secret Act, the term “owner of trade secrets” means the
person who discovered, invented, compiled or created the trade secret.
• To avoid disputes: WRITTEN AGREEMENT + ASSIGNMENT in advance for
all trade secrets developed during employment or commission

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Trade Secret Commercialization
• ASSIGNMENT
– Most trade secret assignments occur as part of the sale of the business.
• LICENSE
– Trade secret license
– In combination with other IPR license
• e.g. patent license (hybrid agreement), franchise agreement
– Advantage: additional revenues
– Disadvantage: risk of disclosure (potential loss)
• TRADE SECRET AS COLLATERAL

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Trade Secret License
• In general, a trade secret license is a private agreement whereby the owner
(licensor) grants the recipient (licensee) with permission to use some or all of the
secret information.
• The licensor retains full title and all ownership rights associated with the trade
secret.
• Exclusive / non-exclusive license
• Most technology transfers require licensing not only of a patent or a patent
portfolio, but of an accompanying trade secrets as well – the whole “package” is u
sually needed to take commercial advantage of the patented technology.
• Black Box dilemma**

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Black Box Dilemma & Non-Disclosure
Agreement
• Black Box Dilemma: the trade secret owner cannot ‘let the cat out of the bag ’ and the
potential licensee will not want to ‘buy a pig in a poke’.
• A non-disclosure agreement (NDA) is the most commonly used to safeguard against such
potential loss.
• NDA is typically presented as a stand-alone legal tool that precedes licensing
negotiations. It helps to reinforce the idea that the disclosed confidential information is con
tinuously covered by the duty to maintain confidentiality under the NDA, even if licensing n
egotiations fail.

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Drafting Trade Secret License Agreement 1
• Subject matter
• Exceptions
– Some information provided may not be secret and some information may also be
acquired by the licensee using appropriate legal means.
• License grant, prohibitions, improvements
– Define what licensee is and is not authorized to do with the subject
– Matter of the trade secret licensing agreement – the right to access, the right to use,
and the right to disclose proprietary information
– Who owns the trade information developed from such license trade secret?

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Drafting Trade Secret License Agreement 2
• Protective safeguards and confidentiality policy
– The licensor should demand reasonable protective measures, preferably equal or
exceeding the measures used by the licensor at the time of the license.
• Royalties
– In trade secret licensing a royalty payment obligation may or may not stop when
confidential information becomes publicly known.
• Remedies
– A clause that automatically terminates the agreement and revokes licensed rights
upon material breach should be included in the agreement.

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Trade Secret as Collateral 1
• Using IP as business collateral is allowed under the Business Collateral Act B.E.
2558 (A.D. 2015) (“BCA”), effective on and from 2nd
July 2016.
• A collateral provider
– an individual
– a juristic person
• A collateral receiver
– a financial institution
– a person prescribed in a ministerial regulation
• e.g. trustees, securities companies, mutual funds, or factoring businesses

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Trade Secret as Collateral 2
Caution: A lender / collateral receiver will want to know whether or not the company has
sufficient protections in place to ensure the trade secret remains a trade secret.
• No Requirement to Deliver a Collateral Property
– A collateral provider can retain the physical possession of the collateral property and
he can put the collateral property to commercial use during the collateral period.
• A collateral agreement must be made in writing as a contract and registered online with
the Business Collateral Registration Office (“BCRO”), Department of Business Developm
ent, the Ministry of Commerce.

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Famous Trade Secrets
• COCA-COLA RECIPES
• KENTUCKY FRIED CHICKEN
• LISTERINE
• WD-40
• KRISPY KREME DOUGHNUTS
• MCDONALD’S BIG MAC SPECIAL SAUCE
• THE GOOGLE SEARCH ALGORITHM

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Trade Secret Disputes in Thailand
• A dispute over a trade secret usually arises when a trade secret owner makes a
claim against its employee, ex-employee, or business partner for trade secrets
infringement.
• An absence of appropriate measures to maintain trade secrets is one of the
main reasons for the court to dismiss a plaintiff’s claim.

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Trade Secret Disputes in Thailand
• Supreme Court Judgment 10217/2553 (A.D. 2010)
– The plaintiff claimed that there was a nondisclosure clause in the employment
agreement, but it was unable to demonstrate that the documents with the list of
customers, the information containing the origin of goods and the quotati
ons were protected by the appropriate measures to prevent access by an employee
who is not normally connected to this information.
– The Court determined that a general non-disclosure and non-compettion
clause inserted in an employment agreement was not an appropriate meas
ure to maintain the secrecy of the trade information, and it consequently dis
missed the plaintiff’s claim.

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Conclusion
• Trade secret = DO-IT-YOURSELF form of IP
• Prioritize trade secret protection.
• Identify your trade secret.
• Take appropriate measures to maintain the secrecy.
• Stick to a “Need-to-Know” system.
• Improve employee awareness.
• Use and commercialize your trade secret in a prudent way.
• Be prepared if your trade secret is misappropriated.

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Unit 1401, 14th
Floor
990 Abdulrahim Place
Rama IV Road, Bangkok 10500
Tel. +66 (0)2 636 0662
Fax+66 (0)2 636 0663
Room 517, Yangon International Hotel
No. 330 Corner of Ahlone and Pyay Roads
Dagon Township, Yangon, Myanmar
Tel. +95 9 505 6667
Tel. +95 92 6111 7006
Kowit Somwaiya
Managing Partner
kowit.somwaiya@lawplusltd.com
www.lawplusltd.com

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The information provided in this Document is general in nature and may not
apply to any specific situation. Specific advice should be sought before taking
any action based on the information provided. Under no circumstances shall L
awPlus Ltd. and LawPlus Myanmar Ltd. be liable for any direct or indirect, incid
ental or consequential loss or damage that results from the use of or the relianc
e upon the information contained in this Document. Copyright © 2017 LawPlus
Ltd. and LawPlus Myanmar Ltd. www.lawplusltd.com
Contact: Kowit Somwaiya, Email: kowit.somwaiya@lawplusltd.com
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