Protection of trade secrets and confidential business information
Not all innovative techniques and accompanying know-how can always be protected by patent law. Broadly speaking, any confidential business information which provides an enterprise a competitive edge and is kept secret may be protected as a trade secret. The unauthorized acquisition, use or disclosure of such secret information in a manner contrary to honest commercial practices by others is regarded as an unfair practice and a violation of the trade secret protection.
As one particular aspect of protection of undisclosed information, protection of test data and, in particular, protection of confidential test data on clinical trials, has attracted growing attentions. Protection of trade secrets and confidential business information order to obtain marketing authorization of any new pharmaceutical or agricultural chemical product, in general, test data have to be submitted to regulatory agencies, which require an independent evaluation of the quality, safety and efficiency of those medicines or other substances.
The confidentiality of such data is protection of trade secrets and confidential business information particular rules on trade secrecy. In general, to qualify as a trade secret, the information must be commercially valuable because it is secret, be known only to a limited group of personsand be subject to reasonable steps taken by the rightful holder of the information to keep it secret, including the use of confidentiality agreements for business partners and employees.
Trade secrets are IP rights on confidential knowledge which might also be sold or licensed. In general, any confidential business information which provides an enterprise a competitive edge and is unknown to others may be protected as a trade secret.
Trade secrets encompass both technical informationsuch as information concerning manufacturing processes, pharmaceutical test data, designs and drawings of computer programs, and commercial informationsuch as distribution methods, list of suppliers and clients, and advertising strategies.
A trade secret may be also made up of a combination of elementseach of which by itself is in the public domain, but where the combination, which is kept secret, provides a competitive advantage. Other examples of information that may be protected by trade secrets include financial information, formulas and recipes and source codes.
Depending on the legal system, the legal protection of trade secrets forms part of the general concept of protection against unfair competition or is based on specific provisions or case law on the protection of confidential information.
While a final determination of whether trade secret protection is violated or not depends on the circumstances of each individual case, in general, unfair practices in respect of secret information include industrial or commercial espionagebreach of contract and breach of confidence. In other words, in general, if certain technical information, for example, a specific process of producing Compound X, protection of trade secrets and confidential business information been protected by a trade secret, someone else can obtain a patent or a utility model on the same invention, if he arrived at that invention independently.
Contrary to patents, trade secrets are protected without registrationthat is, trade secrets require no procedural formalities for their protection.
A trade secret can be protected for an unlimited period of time, unless it is discovered or legally acquired by others and disclosed to the public. For these reasons, the protection of trade secrets may appear to be particularly attractive for certain companies. There are, however, some conditions for the information to be considered a trade secret. Compliance with such conditions may turn out to be more difficult and costly than it would appear at a first glance.
In order for information to be protected as trade secret, it shall meet the following criteria. The information must be secret i. Absolute secrecy is not required. For example, trade secrets can be kept by several parties, as long as it is not known to other persons working in the field. It must have actual protection of trade secrets and confidential business information potential commercial value because it is secret.
It must have been subject to reasonable steps by the rightful holder of the information to keep it secret e. A company develops a process for the manufacturing of its products that allows it to produce its goods in a more cost-effective manner. Such a process provides the enterprise a competitive edge over its competitors. The enterprise in question may therefore value its know-how as a protection of trade secrets and confidential business information secret and would not want competitors to learn about it.
It makes sure that only a limited number of people know the secret, and those who know it are made well aware that it is confidential. When dealing with third parties or licensing its know-how, the enterprise signs confidentiality agreements to ensure that protection of trade secrets and confidential business information parties know that the secret information must not be disclosed. In such circumstances, the misappropriation of the information by a competitor or by any third party would be considered a violation of the enterprise's trade secrets.
In general, trade secret protection confers owners the right to prevent the information lawfully within their control from being disclosedacquired or used by others without their consent in a manner contrary to honest commercial practice.
While the determination of such practices depends ultimately on the circumstances of each individual case, in general, unfair practices in respect of secret information include industrial or commercial espionagebreach of contractbreach of confidence and protection of trade secrets and confidential business information to breach.
It further includes the use or disclosure protection of trade secrets and confidential business information a trade secret by a third party who knew, or was grossly negligent in failing to know, that such practices were involved in the acquisition of the confidential information. In consequence, the use of a trade secret by a person who acquired that information in a legitimate business transaction without negligence is not deemed illegal.
Trade secrets are property rights and can be assigned or licensed to other persons. The holder of trade secret has the right to authorize a third party to access and use the trade secret information. However, due to the secret nature of trade secret information, it is not always easy for others to determine whether the information concerned meets the conditions for trade secret protection.
Therefore, compared with a patent, it is more difficult to transfer and license confidential information and to resolve disputes which may arise. Since a potential licensee needs to access the trade secret information in order to assess its protection of trade secrets and confidential business information or utility, a non-disclosure or confidentiality agreement needs to be signed between the potential licensor and licensee.
Further, in order to maintain the secrecy of trade secret information, a trade secret licensor should require a licensee to take reasonable steps protection of trade secrets and confidential business information keep that information secret. In general, a trade secret owner can collect damages from the person who violated the trade secret for the economic injury suffered.
The trade secret laws of some countries might also permit the use of injunctionswhich requires the cessation of the use of any products that have been created through the use of trade secret information contrary to honest commercial practices.
In some countries, for particular cases of trade secret violation, criminal penalties are available. According to Article 10 bis of the Convention for the Protection of Industrial Property Paris Conventionmember States have to provide effective protection against unfair competition. However, the Paris Convention does not mention or define trade secrets beyond the general protection against any act contrary to honest commercial practices.
According to that Article, trade secret protection is available if the following conditions are met:. In addition, WIPO Lex provides easy access to legislation with respect to trade secrets from a wide range of countries and regions. In countries with market economy systems, both in the developing and developed world, fair competition between enterprises is considered as the essential means for satisfying the protection of trade secrets and confidential business information and demand of the economy, and serving the interests of the consumers and the society as a whole.
Further, competition is one of the main driving forces of innovation. The law of unfair competition, including trade secret law, is considered necessary to ensure the fair functioning of the market and to promote innovation by suppressing anti-competitive business behaviors. There are essentially two kinds of trade secrets. On the one hand, trade secrets may concern valuable information that do not meet the patentability criteria, and therefore can only be protected as trade secrets.
This would be the case for commercial information or manufacturing processes that are not sufficiently inventive to obtain a patent though the latter may qualify utility model protection.
On the other hand, trade secrets may concern inventions that would fulfill the patentability criteria, and therefore, could be protected by patents. In protection of trade secrets and confidential business information case, the company will face a choice: There are, however, some concrete disadvantages of protecting confidential business information as a trade secret, especially when the information meets the criteria for patentability:.
While patents and trade secrets may be perceived as alternative means of protecting inventions, they are often complementary to each other. Patent applicants generally keep inventions secret until the patent application is published by the patent office generally 18 months from the filing date or the priority date. Often trade secret law complements patent law in earlier stages of the innovation process by allowing inventors to work on their ideas until they become a patentable invention.
Moreover, valuable know-how on how to exploit a patented invention in the most commercially successful manner is often kept as a trade secret. It is important to bear in mind, however, that trade secret protection is generally weak in most countries, that the conditions for, and scope of, its protection may vary significantly from country to country and that significant and possibly costly efforts to preserve secrecy may be required. Further, it has to be kept in mind that, once the secret is made public, the protection ends.
WIPO Lex provides easy access to national and regional legislation on patents, utility models, competition and undisclosed information trade secrets. Trade secrets are widely used by business. In fact, many companies rely heavily on trade secrets for the protection of their intellectual property although in many cases, they may not even be aware that trade secrets are legally protected.
Known examples are the Coca Cola formula and sources codes for software. It is important, therefore, to make sure that enterprises take all necessary measures to protect their trade secrets effectively.
The business that holds the trade secret is responsible for making every effort it can to keep it confidential. Employees can be required to sign agreements that protect trade secrets. In particular, when contractors or employees leave, it is important to make sure that they will not compete with the business after they leave, in addition to signing a confidentiality agreement.
Those agreements are known as confidentiality, non-disclosure and non-compete contracts. If those agreements are violated, an employee might face penalties, along with damages to the company.
To qualify for protected test data, it is necessary that 1 the data is undisclosed ; 2 the submission of test data is required by the regulatory authority ; and 3 the products for which marketing approval is sought use new chemical entities; and 4 the generation of the data involves considerable efforts. Test data protection is particularly applied in the area of marketing approval of pharmaceutical and agrochemical products.
The protection of test data is provided in different ways. Some countries provide for a certain period of data exclusivityregularly between five to ten years or 12 years on biosimilarsduring which the regulatory authority is prohibited to rely on information submitted by an originator for any second or subsequent regulatory approval by competitors.
In other countries, no such data exclusivity is granted, and the regulatory authorities could rely on the data submitted by an originator in order to review and approve products of second and subsequent entrants.
Alternative models of test data protection combine data exclusivity with test data compensation systemsunder which reliance on the originator data is permitted against compensation or cost-sharing. Further, exception and limitations to data exclusivity might be applied. Article 10 bis of the Paris Convention requires effective protection against unfair competition, without mentioning trade secret or test data protection, and Article 39 3 of the TRIPS Agreement contains a specific standard on the protection of undisclosed information on pharmaceutical or agrochemical test data.
According to Article 39 3 of the TRIPS Agreement, test data must be protected against 1 unfair commercial useand 2 disclosureexcept when the disclosure is necessary to protect the public, or unless steps are taken to ensure protection of trade secrets and confidential business information the data are protected against unfair commercial use.
There is no agreed definition as to what constitutes unfair commercial use in the context of test data protection. While some include in the interpretation of this term the protection of trade secrets and confidential business information of giving a reasonable period of data exclusivityothers reject such a definition and allow second and subsequent reliance on such originator test data.
Test data protection and patent protection are distinct categories. In general, patent protection is sought as soon as the invention is made, and the confidential test data on clinical trials are only submitted at a later stage. Test data protection could also have different ownership than the patent protection, for example, in the case of patent licensing, or test data protection could be related to a different use than the patented use of a pharmaceutical product, such as clinical trials for pediatric use of a pharmaceutical product.
Test data protection is one category of intellectual property as part of the protection against unfair competition. The generation of test data, for example, on clinical trials, requires a considerable effort by the originator company, in particular, with increasingly stricter regulatory requirements. Conversely, competing companies might seek early access to those data in order to enable early supply of generic medicines.
Protection of undisclosed information Not all innovative techniques and accompanying know-how can always be protected by patent law. Basics What is a trade secret? What kind of information is protected by trade secrets? What kind of protection does a trade secret offer? How are trade secrets protected? What are the requirements for trade secret protection? Example A company develops a protection of trade secrets and confidential business information for the manufacturing of its products that allows protection of trade secrets and confidential business information to produce its goods in a more protection of trade secrets and confidential business information manner.
What are the rights conferred by trade secrets?