When a company decides to expand internationally, not only must it take with it resources such as materials, capital and personnel, but also the trade secrets which it hopes will give it a competitive advantage in its new market. Protecting those trade secrets from disclosure to and use by competitors is an important challenge made more complicated by the lack of uniform laws in the international realm. For SMEs trading abroad it can be particularly challenging, as they are less likely to have the resources to prevent, pursue and stop former employees from trading on those secrets.
Unlike patents and trademarks, trade secrets encompass a more vague class of intellectual property which cannot be registered, including a company’s particular know-how, client lists, marketing strategies and even market data compiled in a unique format. Generally, in order for information to constitute a trade secret, it must be established that:
the information is confidential;
the information has commercial value because of that confidentiality; and
the owner has made reasonable efforts to keep it confidential.
Protecting these involves a two-step process – the first practical; the second legal.
Regardless of the country in which you operate, it is usually best to organise, file and maintain trade secrets in a manner commensurate with their purpose and value. They should be segregated from ordinary files, clearly marked and with access permitted only to those who need it. The legal side of this protection, however, gets a bit more complicated.
There is a great disharmony in the international protection of trade secrets, with different countries offering different methods of protection and others offering none at all. Even within Europe the variation is great:
in France, only “manufacturing secrets” are protected by specific legislation;
the confidentiality law of England protects all confidential information but is based on the concept of there being a relationship of confidentiality between the “owner”(confidential information is not property under the Common Law) and the user or discloser;
some countries permit actions against third parties who acquire the information while other do not(this hangs largely on whether it is treated as “property”);
some countries allow for injunctive relief preventing trade secret disclosure, while others do not;
in Belgium, an owner of trade secrets seeking to assert his rights in court must describe those secrets in official court pleadings, which themselves are public information!
The US, on the other hand, has a great deal of protection on both federal and state levels. The federal Economic Espionage Act carries criminal penalties which can include both prison time and fines. At the state level, the Uniform Trade Secrets Act, or laws very similar to it, have been enacted by virtually all the states, making the US one of the safest jurisdictions for those who might need to enforce confidentiality. Despite its Common Law roots US laws tend to treat confidential information as property.
However, regardless of the level and consistency of legal protection offered, a well-drafted confidentiality agreement effective in the local laws of the appropriate jurisdiction, should always be considered as part of a company’s overall strategy to protect this valuable asset. Having such protection can save great expense, not to mention a company’s competitive advantage, when trading overseas.
Warner Goodman’s International Commercial team can help with this protection. To contact the team, simply call 02380 717717 or email firstname.lastname@example.org.