Trade Secrets and Technology Licensing

1. Trade Secrets &
Technology Licensing
ALJANI | CALABIA | RANCE | SUGALA
22 OCTOBER 2020
TM255
UP TECHNOLOGY MANAGEMENT CENTER | LEGAL ASPECTS OF TECHNOLOGY MANAGEMENT (TM255)

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PRESENTATION FLOW
UP TECHNOLOGY MANAGEMENT CENTER | LEGAL ASPECTS OF TECHNOLOGY MANAGEMENT 2
TRADE SECRETS TECHNOLOGY
LICENSING
April I. Calabia
Mario L. Rance
Nuhman M. Aljani
Kashmar Yves A. Sugala

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TRADE
SECRETS
3
Image by Free-Photos from Pixabay

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I. The Basics of Trade Secrets
II. Development of Trade Secret Management Program
III. Misappropriation of trade Secrets
IV. Trade Secret Violation
V. Trade Secret Audit
UP TECHNOLOGY MANAGEMENT CENTER | LEGAL ASPECTS OF TECHNOLOGY MANAGEMENT 4
TRADE SECRET

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Unknown to relevant
business circles or the
public
5
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TRADE SECRETS

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Gives its owner any
economic gain.
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TRADE SECRETS

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The subject to protect its
secrecy
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TRADE SECRETS

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Merchandise 7X
One of the best-kept trade secrets in the world
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10 Best Kept Business
Secrets In The World
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https://www.youtube.com/watch?v=XTWxGxmd1j8

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Reason for Protecting Trade Secrets
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Maintains and supports business ethics
practices and fair trading
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Reason for Protecting Trade Secrets
12
Provide an incentive for businesses to
innovate
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Reason for Protecting Trade Secrets
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Competitor's avoidance of the burden of
costs or risks during its development
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Type of Information
that could be a Trade Secret
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• Formula, pattern, device or other compilation of information
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• technical
• scientific or financial information
• business plans
• business processes
• list of key customers
TRADE SECRET
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• list of reliable or special suppliers
• product specifications
• product characteristics
• purchase prices of key raw materials
• test data
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• technical drawing or sketches
• engineering specifications
• proprietary recipes
• formulas
• content of laboratory note books
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• salary structure of a company
• product pricing and advertising rates
• source code
• object code
• databases and electronic data compilations
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• agreements containing details of marketing tie‐ups
• promotional or marketing material under development
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Challenges
and
Limitations of
Trade Secret
Protection
Image by Free-Photos from Pixabay
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Advantages of Trade Secret
Protection
• No registration costs
• No disclosure or registration requirement
• Not limited in time
• Immediate effect
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Disadvantages of Trade Secret
Protection
• Discovery through “reverse engineering”
• Only protects you against improper acquisition
• Difficult to enforce, weaker than for patents
• Patent somebody's trade secret if he made the same technology
legitimately
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24. 10 Steps to Build Up
a Trade Secret Management
Program

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• Establish a system to identify trade secrets
• Create an ISP that has a trade secret protection policy
• Educate all employees on information security issues
• Importance in employing a competitor's employee/departing
employees
• Have reasonable restrictions in all contracts
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• Restrict access to paper records
• Mark documents
• Office management and keeping confidentiality
• Maintain computer secrecy
• Guarding secrets that are shared in partnerships
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Misappropriation
of
trade secrets
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Violation
of trade
secrets
Trade
secret
audit

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Source: The Global Innovation Policy Center U.S.
37th
50
16.20
45.0
0.5
3.0
Overall
ranking
Trade
secret
Overall
score
2019 International IP Index

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Source: Geneva Network
While the Philippines IP law include
‘protection of undisclosed information’ as one
of the intellectual property rights, it does not
define it, leaving great uncertainty around
the protection of trade secrets.

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RA 8293 – IP Code of the Philippines
Trade secret in RA 8293

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Misappropriation of
trade secrets
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Misappropriation of Trade Secret
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Unfair acquisition
Knowledge of its prior unlawful acquisition
…Using/disclosing even after knowing of its unfair
acquisition by another person
Using/disclosing in breach of contractual obligation
Misappropriation

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How trade secrets get stolen?
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External
threats
Internal
theft
Industrial
espionage

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Protection of trade secrets
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National
Laws
Unfair
competition law/
principles of tort
Contract law
Criminal law

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Violation of trade
secrets
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How to establish violation?
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Infringement…
Reasonable steps to kept it
secret…
Misuse… violation of the honest
commercial practices
Owner must
be able to
show…

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The Remedy
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Court
order
To restrain
Monetary
compensation
Seizure
Precautionary
impoundment
of articles
Destruction of
the products
Imposition of
punitive
damages

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Philippines Case
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vs.
PENNSWELL,
INC.
G.R. No. 172835

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United States Case
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vs.

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United States Case
Group 4. Aljani, Calabia, Rance, Sugala 40
vs.

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United States Stat (1990-2017)
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Trends in Trade Secret
Litigation Report 2020

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Trade secret audit
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How to conduct a trade secret audit ?
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Steps
Identify significant trade secrets
Verify the company’s title to trade secrets..
Verify that confidentiality procedures are followed
Verify that employees, consultants, vendors, etc. do not
disclose the trade secrets of a third party

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How to conduct a trade secret audit ?
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Activities
Initial Consultation
Detailed Meeting or Field Visit
Analysis and Report
Strategy Meeting
Follow-up
Source: AltusIP

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“Raise awareness of the importance
of trade secret protection amongst
the business community”
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Source: Geneva Network
Principles for reform

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kahoot.com
Game Pin:
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GAME

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Technology
Licensing
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COMPANY A
48
COMPANY B
TRADE SECRET TRADE SECRET

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COMPANY A
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COMPANY B
TRADE SECRET TRADE SECRET

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COMPANY A
50
COMPANY B
TRADE SECRET
REVERSE
ENGINEERING
TECHNOLOGY
LICENSING

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COMPANY A
51
COMPANY B
Licensor
(Owner)
TECHNOLOGY
LICENSING
Licensee

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● Written
Contract
LICENSE
AGREEMENT
● Purpose,
● Territory,
● Period of time

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TYPES OF LICENSE
1.Licensing-in
2.Licensing-out
3.Cross Licensing

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LICENSE VS. ASSIGNMENT

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Why license?

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Why license?
Essential Components
of certain business
relationships
Non-core IP for
adding a revenue
stream
Core IP for adding a
revenue stream

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Why license?
Core business is
licensing Forcing an infringer to
become a licensee Cross licensing

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Why license?
Patent pools Complying with
standards

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Preparing to
License

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Preparing
to License
1. Due diligence
2. Valuation of
technology

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Due
diligence
Due diligence is an
investigation, audit, or
review performed to
confirm the facts of a matter under
consideration.
(investopedia.com)

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Information needed for
Due diligence
OWNERSHIP OF PATENT
inventorship vs.
ownership
RIGHT TO USE THE
PATENT
EXPECTATIONS ON
THE PATENTED
TECHNOLOGY

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Information needed for
Due diligence
ECONOMIC AND
STRATEGIC VALUE
FREEDOM TO OPERATE
(FTO)
SEEK ALTERNATIVES

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Freedom To Operate
(FTO)
● The step on determining whether the subject patent
has blocking patents (does your patent may be
considered to infringe any patents?) in a particular
jurisdiction.
● If the technology to be licensed can be seen from
similar products in the market, the greater the risk of
commercializing the technology, thus the lesser its
value.

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Valuation of
technology
1. Cost Approach
2. Income Approach
3. Market Approach

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WHAT’S NEXT?
NEGOTIATING
A LICENSE
AGREEMENT
OVERVIEW
OF A LICENSE
AGREEMENT
MANAGING
OF A LICENSE
AGREEMENT

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NEGOTIATION
PROCESS
Preparation Phase
(Initiation)
Discussion Phase Proposing Phase Bargaining Phase
(Resolution)

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GUIDELINES OF NEGOTIATING
Golden guidelines of negotiations:
• “win-win” outcome
• If - then guidelines
• Everything is negotiable
• Best Alternative To a Negotiated Agreement
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GUIDELINES OF NEGOTIATING
Avoided
• Lack of preparation
• Surprises
• Arguing or Threatening
Encouraged
• Rationality
• Reliability
• Non-coercive modes of
influence
• Acceptance
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You don't get the deal you deserve, you get the
deal you negotiate.

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OVERVIEW OF A LICENSE AGREEMENT
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License agreement
● is a result of business
strategy and is a business
relationship
● is a contract
● subject matter is intellectual
property

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I. Subject matter - What is
Licensed?
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II. Extent of rights
• Exclusive, Sole, Non-exclusive
• Most favored licensee
• Territory
• Sub-license
• Improvements
• Technical assistance
• Term
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III. Commercial and Financial
Considerations
• Royalties - based on market size, patent strength,
Exclusive or non-exclusive rights, Geographic
locations.
• Inflation
• Financial administration
• Infringement
• Product liability
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IV. General considerations
• Representations and warranties
• Licensor and licensee obligations
• Force Majeure
• Anti-competitive Practices
• Government Regulations
• Disputes
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IMPLEMENTING & MANAGING
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• Technical assistance
• Tangible assets
• Reporting and Auditing

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Termination of agreements
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Term limit of the
agreement
Terminated by one
party before the
term expires.

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Post termination of agreements
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• Know-how or confidential
information
• Sub-licenses

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License Agreement in the
Philippines:
Section 88 of the Intellectual Property Code of the Philippines provides Mandatory provisions included in the
voluntary licenses.
Section 87 of the Intellectual Property Code of the Philippines provides Prohibited clauses included in the
voluntary licenses.
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Conformance of License
agreements to the provisions
in Section 87 and 88 of the IP
Code of the Philippines
Approved and registered with
the Documentation,
Information and Technology
Transfer Bureau of IPOPHIL.

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Compulsory License Agreements
• National emergency or other circumstances of extreme urgency;
• Where the public interest, in particular, national security, nutrition, health or the
development of other vital sectors of the national economy as determined by the
appropriate agency of the Government, so requires; or
• Where a judicial or administrative body has determined that the manner of exploitation
by the owner of the patent or his licensee is anti-competitive; or
• In case of public non-commercial use of the patent by the patentee, without satisfactory
reason;
• If the patented invention is not being worked in the Philippines on a commercial scale,
although capable of being worked, without satisfactory reason: Provided, That the
importation of the patented article shall constitute working or using the patent. (Secs. 34,
34-A, 34-B, R.A. No. 165a) and
• Where the demand for patented drugs and medicines is not being met to an adequate
extent and on reasonable terms, as determined by the Secretary of the Department of
Health.
84

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Case 1
85
BUREAU OF
PATENTS,
TRADEMARKS AND
TECHNOLOGY
TRANSFER and
DOCTORS
PHARMACEUTICAL
S, INC
vs.

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Case 2
86
vs.

87. THANK YOU!

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References
• IP Panorama Modules 4 and 7
• Stout. Trends in Trade Secret Litigation 2020
• Arellano University School of Law. Cases in Copyright - Compilation of
Cases in IPL – Copyright
• Ganguli, P. Leveraging Business / Trade Secrets for Competitive
Advantage: Examples and Case Studies. Indian Institute of Technology
• https://www.theglobalipcenter.com/ipindex2019/
• https://ndvlaw.com/licensing-agreements-in-the-philippines/
• https://www.officialgazette.gov.ph/1997/06/06/republic-act-no-8293/
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Mandatory clauses in licensing
agreements
1. That the laws of the Philippines shall govern the interpretation of the agreement
and in the event of litigation, the venue shall be the proper court in the place
where the licensee has its principal office;
2. Continued access to improvements in techniques and processes related to the
technology shall be made available during the period of the technology transfer
arrangement;
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90. OS 212
Mandatory clauses in licensing
agreements
3. In the event the technology transfer arrangement shall provide for arbitration,
the Procedure of Arbitration of the Arbitration Law of the Philippines or the
Arbitration Law of the United Nations Commission on International Trade Law
(UNCITRAL) or the Rules of Conciliation and Arbitration of the International Chamber
of Commerce shall apply and the venue of arbitration shall be the Philippines or any
neutral country; and
4. The Philippine taxes on all payments relating to the technology transfer
arrangement shall be borne by the licensor.
90

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Prohibited clauses in Licensing
Agreements
“Section 87. Prohibited Clauses. – Except in cases under Section 91, the following provisions shall be
deemed prima facie to have an adverse effect on competition and trade:
87.1. Those which impose upon the licensee the obligation to acquire from a specific source capital
goods, intermediate products, raw materials, and other technologies, or of permanently employing
personnel indicated by the licensor;
87.2. Those pursuant to which the licensor reserves the right to fix the sale or resale prices of the products
manufactured on the basis of the license;
87.3. Those that contain restrictions regarding the volume and structure of production;
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Prohibited clauses in Licensing
Agreements
87.4. Those that prohibit the use of competitive technologies in a non-exclusive technology transfer
agreement;
87.5. Those that establish a full or partial purchase option in favor of the licensor;
87.6. Those that obligate the licensee to transfer for free to the licensor the inventions or improvements
that may be obtained through the use of the licensed technology;
87.7. Those that require payment of royalties to the owners of patents for patents which are not used;
87.8. Those that prohibit the licensee to export the licensed product unless justified for the protection of
the legitimate interest of the licensor such as exports to countries where exclusive licenses to
manufacture and/or distribute the licensed product(s) have already been granted;
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Prohibited clauses in Licensing
Agreements
87.9. Those which restrict the use of the technology supplied after the expiration of the technology
transfer arrangement, except in cases of early termination of the technology transfer arrangement due
to reason(s) attributable to the licensee;
87.10. Those which require payments for patents and other industrial property rights after their expiration,
termination arrangement;
87.11. Those which require that the technology recipient shall not contest the validity of any of the
patents of the technology supplier;
87.12. Those which restrict the research and development activities of the licensee designed to absorb
and adapt the transferred technology to local conditions or to initiate research and development
programs in connection with new products, processes or equipment;
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Prohibited clauses in Licensing
Agreements
87.13. Those which prevent the licensee from adapting the imported technology to local conditions, or
introducing innovation to it, as long as it does not impair the quality standards prescribed by the licensor;
87.14. Those which exempt the licensor for liability for non-fulfilment of his responsibilities under the
technology transfer arrangement and/or liability arising from third party suits brought about by the use of
the licensed product or the licensed technology; and
87.15. Other clauses with equivalent effects.”
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