WIPO/NIFT National Seminar on the Importance of IP for the Handicrafts Sector Hyderabad, India, April 5-7, 2005

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WIPO/NIFTNational Seminar on the Importance of
IP for the Handicrafts SectorHyderabad, India,
April 5-7, 2005

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Keeping Confidence The Role of Trade Secret
Protection in Business Success Lien
VerbauwhedeConsultant, SMEs DivisionWorld
Intellectual Property Organization (WIPO)

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This Presentation

• PART 1 - Outline
• Definition
• Legal requirements
• Rights
• Enforcement
• PART 2 - Protection Strategies

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PART 1WHAT ARE TRADE SECRETS ?
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What are trade secrets?

• Broadly speaking
• any confidential information
• which provides an enterprise with a competitive
  edge
• can qualify as a trade secret
• ? entitled to legal protection

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Metal Mirrors of Aranmula

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Metal Mirrors of Aranmula

• Some undisclosed metals are alloyed with copper
  and tin to cast the Aranmula kannadi in typical
  clay moulds.
• The exact proportions of the two metals and the
  techniques of crafting it into an excellent
  reflecting surface is always kept as a trade
  secret.
• The method is the age-old lost-wax process in
  traditional style after melting the metals in a
  furnace fitted with a manual blower.
• Today, only five artisan families know the the
  metallurgical secret of the Aranmula kannadi, the
  world-famous metal mirrors.

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Cotton Dyeing Technique

• 5th century BC the Greek historian Herodotus,
  marveled at the quality of Indian cotton.
• Textile trade cotton, silk, woven textiles. The
  beauty, brilliance, color range and fastness of
  Indian fabrics was held in high esteem.
• India managed to keep the technique of cotton
  dyeing a secret from the world until the 17th
  century.

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What are trade secrets?

• A trade secret can relate to different types of
  information
• technical and scientific
• commercial
• financial
• negative information

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Examples (1)

• Technical and scientific information
• technical composition of a product
• paint
• manufacturing methods
• weaving technique, baking clay, metal casting,
  embroidery
• know-how necessary to perform a particular
  operation
• how to dye with natural Dyes?
• designs, drawings, patterns, motifs

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Examples (2)

• Commercial information
• list of clients
• customer buying preferences
• supplier arrangements
• business plan
• marketing strategy

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Examples (3)

• Financial information
• internal cost structure
• price lists
• Negative information
• details of failed efforts to remedy problems in
  the manufacture of certain products
• unsuccessful attempts to interest customers in
  purchasing a product

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What qualifies as a trade secret?

• Three essential legal requirements
• 1. The information must be secret
• wheel technique for pottery is no trade secret
• 2. It must have commercial value because its
  secret
• 3. You must have taken reasonable steps to keep
  it secret
• not generally known among or readily
  accessible to persons within the circles that
  normally deal with this kind of information

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• Only protection against improperly acquiring,
  disclosing or using
• people who are automatically bound by duty of
  confidentiality (incl. employees)
• people who have signed non-disclosure agreement
• people who acquire a trade secret through
  improper means
• theft, industrial espionage, bribery

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• Some people cannot be stopped from using
  information under trade secret law
• people who discover the secret independently,
  without using illegal means or violating
  agreements or state law
• people who discover through reverse engineering

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• Independent discovery and reverse engineering
  no trade secret protection
• - bamboo blinds -

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• Reverse engineering
• - van Eycks visual effects -

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• Reverse engineering - van Eyck
• van Eyck's methods for achieving his breathtaking
  visual effects
• Washington National Gallery of Art - technical
  study
• microscopic examination of the surface
• technical analysis of the painting
• infrared reflectography ? underdrawing is visible

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• Procedure - Altarpiece of the Holy Lamb in Ghent
  a first layer in grayish blues establishing light
  and shade a second solid blue layer to soften
  the contrast of the first a final, rich blue
  glaze of ultramarine in a water-based protein
  medium such as glue
• Composition of paint linseed oil, no water-based
  protein admixtures to the oil
• Technique preliminary layer of vermilion,
  different layers of glaze

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• TRADE SECRET PROTECTION PROVIDES
• NO
• EXCLUSIVITY

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What can you do if someone steals or
improperly discloses your trade secret? ?
Enforcement
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Enforcement

• Remedies
• 1. Order to stop the misusing
• 2. Compensation for damages caused as a result
  of the misuse
• 3. Recover profits (unjust enrichment)
• 4. In India seizure order can be obtained to
  search the violator's premises in order to
  obtain the evidence to establish the theft of
  trade secrets at trial

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Enforcement

• To establish violation, the owner must be able to
  show
• infringement provides competitive advantage
• reasonable steps to maintain secret
• information obtained, used or disclosed in
  violation of the honest commercial practices
  (misuse)

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PART 2BUSINESS STRATEGIES TO HANDLE PROTECT
TRADE SECRETS
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Loss of trade secrets - a growing problem (1)

• Why is this occurring?
• way we do business today (increased use of
  contractors, temporary workers, out-sourcing)
• declining employee loyalty, more job changes
• organized crime discovered the money to be made
  in stealing high tech IP
• storage facilities (CD-ROM, floppies, etc)
• expanding use of wireless technology

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Loss of trade secrets - a growing problem (2)

• Examples of outside threats
• burglaries by professional criminals targeting
  specific technology
• attempted network attacks (hacks)
• laptop computer theft source code, product
  designs, marketing plans, customer lists
• calls headhunters, presenting themselves as
  employee
• corporate spies

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Loss of trade secrets - a growing problem (3)

• Examples of inside threats
• 80 of information crimes lt employees,
  contractors, trusted insiders!
• malicious destruction/erasure of RD data by
  avenging employee
• theft by former employee of business plans
• ignorance

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What can be done? ? 9 basic protection
strategies
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1. Identify trade secrets

• Considerations in determining whether
  information is a trade secret
• Is it known outside your enterprise?
• Is it widely known by employees and others
  involved within your enterprise?
• Have measures been taken to guard its secrecy?

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• What is the value of the information for your
  business?
• What is the potential value for your competitors?
  
• How much effort/money spent in collecting or
  developing it?
• How difficult would it be for others to acquire,
  collect of duplicate it?

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2. Develop a protection policy

• Advantages of a written policy
• Clarity (how to identify and protect)
• How to reveal (in-house or to outsiders)
• Demonstrates commitment to protection ? important
  in litigation

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3. Educate employees

• Prevent inadvertent disclosure (ignorance)
• Employment contract
• Brief on protection expectations early
• NDA/CA/NCA
• obligations towards former employer!
• Departing employees
• exit interview, letter to new employer, treat
  fairly compensate reasonably for patent work,
  further limit access to data

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• Educate and train
• Copy of policy, periodic training audit, etc.
  Make known that disclosure of a trade secret may
  result in termination and/or legal action
• Clear communication and repetition
• TS protection must be part of the enterprise
  culture
• Every employee must contribute to maintain the
  security environment
• Monitor compliance, prosecute violators

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4. Restrict access

• to only those persons having a
• need to know
• the information
• ?

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5. Mark documents

• Help employees recognize trade secrets ? prevents
  inadvertent disclosure
• Uniform system of marking documents
• paper based
• electronic (e.g. confidential button on
  standard email screen)

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6. Physically isolate and protect

• Separate locked depository
• Authorization
• Access control
• log of access person, document reviewed
• Surveillance of premises
• guards, surveillance cameras
• Shredding

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7. Maintain computer secrecy

• Secure online transactions, intranet, website
• Access control (authorization, password)
• Mark confidential or secret (legend pop, or
  before and after sensitive information)
• Physically isolate and lock computer tapes,
  discs, other storage media
• Monitor remote access to servers
• Firewalls anti-virus software encryption

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8. Restrict public access to facilities

• Log and visitors pass
• Accompany visitor
• Sometimes NDA/CA
• Visible to anyone walking through a companys
  premises
• type of machinery, layout, physical handling of
  work in progress, etc
• Overheard conversations
• Documents left in plain view
• Unattended waste baskets

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9. Third parties

• Sharing for exploitation
• Consultants, financial advisors, computer
  programmers, website host, designers,
  subcontractors, joint ventures, etc.
• Confidentiality agreement, non-disclosure
  agreement
• Limit access on need-to-know basis

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Remember

• No registration, but 3 requirements for legal
  protection
• No need for absolute secrecy, but reasonable
  measures
• Developing and maintaining TS program
• lt good business practice to prevent
• lt legal requirement to enforce TS protection

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• Only legal protection against dishonest
  acquisition/disclosure/use
• Consider alternative protection

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• TRADE SECRET PROTECTION
• IS LIKE
• AN INSURANCE

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• Thank You!
• WIPOs website for SMEs
• http//www.wipo.int/sme