In the definition given by the World Intellectual Property Organization (WIPO), trade secrets, simply stated, are any “confidential business information which provides an enterprise a competitive edge.” These secrets embrace areas commercial/industrial activities, and the illegal use or distribution of the information conducted by parties other than the owner of such information is deemed as a breach of the law as an “unfair trade practice.” Depending on the legal jurisprudence operating in the state, the safeguarding of these secrets is an integral component of how the practice of suppressing illegal trade practices is understood; it can also be interpreted based on the tenets of specific case laws and policies designed to protect trade secrets in a specific jurisdiction.
Protecting Trade Secrets
1. Safeguarding company’s trade secrets has become a significant policy objective among private business concerns as well as in the public sector. “Intellectual property” and trade secrets form a large portion of the value of companies, regardless of the jurisdiction where the company is located. With the extensive use of IT and global supply chains combined with the unyielding and rapid transmission of data in every facet of business, guarding trade secrets from illegal access has assumed a critical role not only in the future profitability, reputation protection, maintenance of their competitive advantage, but also to the survivability of the company in the future (Center for Responsible Enterprise and Trade 1).
Compared to patents, “trade secrets” are safeguarded without the requirement of accomplishing any official processes. Hence, trade secrets can be protected without time constraints. However, there are requirements for the consideration of such information as a trade secret. Conformity to these conditions may prove to be more tedious and expensive compared to its comprehension at first glance. Though these conditions vary between jurisdictions, there are common holdings as listed in Article 39 of the Agreement on Trade-Related Aspects of Intellectual Property Rights, or TRIPS. Among these general provisions are one, the information is not generally accessible; two, as it is a secret, it must be of commercial value and lastly the holder of the information must have taken judicious steps to maintain the secrecy of the information (WIPO).
For example, multinational beverage giant Coca Cola, in protecting what is arguably one of the best held trade secrets in the world, is stored in a secure vault in a location that is only known to a few critical personnel and can only be opened by a resolution of the company’s board of directors. Two employees of the company are given the information at any given time, and the identities of the two company workers are never disclosed to anyone; the two are not even allowed to travel together on the same public transport system. However, extreme security measures in the industry are rarely needed to keep trade secrets safe from unscrupulous elements. Labeling documents as sensitive and implementing “non-disclosure agreements” are immediate and legal ways to implement trade secret safety policies (NOLO).
Rewards and responsibilities
2. Strengthening communication strategies between employees and employers is an integral strategy in conveying management’s commitment to their welfare by buttressing the loyalty of the employees to protect the company’s trade secrets. In this light, the management must create the appropriate environment for the employees to protect and safeguard the company’s trade secrets and insulate them at the same time from rival companies’ initiatives to pirate them for their own gain. In this light, the company must inculcate the mindset of the employees that these have a collective interest, maybe even larger, to protect trade secrets. Hence, it is incumbent upon both parties to make clear the benefits to be gained from this activity.
One, the salaries of the employees must be adjusted accordingly to the level that their position is related to the protection and the securing of these secrets from being divulged to rival industry players. One avenue to ‘flesh out’ this action policy is to align the interests of the business with that of its employees; this can be accomplished by crafting and faithfully implementing profit sharing schemes. These strategies operate by way of allocating a certain portion of the company’s profits to the pay scheme of the employees. In this light, it is important to emphasize the role/s of the employees to the continuance of the company with the protection of its critical information.
In this light, there is an incentive for both the employer and the employee to work for the common growth and profit of the company. For example, multinational giant Procter and Gamble gives its workers highly profitable “profit-sharing” schemes. In addition, a number of workers hold significant amounts of company shares as part of their compensation packages. These compensation strategies allow the workers to perceive a greater sense of collective ownership and responsibility over the future and profitability of the company. In addition, non-financial rewards can also be considered by company management for its workers. Among the non-monetary rewards that companies can consider include company wide recognition, paid leaves and vacations, “employee of the month” programs and policies, equipping programs, and others. For example, SAS Institute, one of the largest software businesses in the world, has an extremely low 4.4 percent worker turnover rate owing to its non-financial rewards and compensation system that includes day acre services for its workers, leisure and recreation programs, comprehensive health insurance schemes as well as reduced work hours per week (World Intellectual).
3. Trade Secrets: cases
Cases of misappropriating trade secrets are not new. In Tucson Embedded Sys. Inc. v. Turbine Powered Tech LLC, CV-14-01868-TUC-BGM, the United States District Court for the District of Arizona applied the state’s “Trade Secrets Act” on the case to grant Tucson (TES) move for “summary judgment.” In the case, TES took Turbine Powered Technology (TPT) for failing to compensate the former for parts that were ordered to change the engine product of TPT into a generator capable of churning out one megawatt of power. TPT launched a counter motion, stating that TES stole TPT”s trade secrets, inclusive of the “parameters and the settings” as well as other data such as the timing and flow rates of TPT’s modified engine design.
The District Court ruled in TES’ favor and gave its summary judgment stating that the definition given by TPT of its holding of “trade secrets” was not legally sound. The holding of the Court states that in establishing trade secrets, “catchall phrases” do not attain the level that is sought and mandated “specificity” needed to identify a “legally protectable secret” and thus successfully overcome a challenge or summary motion. This ruling is in consonance with the 9th Circuit appellate court’s ruling in Imax Corp. v. Cinema Techs, Inc., 152 F. 3d 1611 (9th Cir. 1998) that held the terms such as “dimensions and tolerances” were “too vague” to be regarded as legally established trade secrets (Trade Secrets Institute).
Reflection and Summary
2. Trade secrets can be summarized as critical information significant to the continued viability and profitability of the company. In this light, it is important to craft and implement effective policies to safeguard these trade secrets from falling into the hands of rival companies. A combination of proscriptive as well as positive policies can be considered in this light; punitive measures to those who would deliberately hand over these secrets for gain, but also beneficial plans and schemes to ward off initiatives from other companies. 4. In this light, there seems to be digressing views on the value and the extreme measures that need to be accomplished to safeguard these secrets from rival industry members. Hence, there is a need to collate more data and screen out digressing views to come with a general holding on trade secrets and their attendant value on the industry.
Center for Responsible Enterprise and Trade, “Reasonable steps to protect trade secrets: leading practices in an evolving legal landscape” <http://www.tradesecretsinsider.com/wp-content/uploads/sites/323/2015/07/Reasonable-Steps.pdf
Digital Media Law Project “PhoneDog, LLC v. Kravitz” <http://www.dmlp.org/threats/phonedog-llc-v-kravitz
NOLO, “Trade secrets basics FAQ’s” < http://www.nolo.com/legal-encyclopedia/trade-secret-basics-faq-29099-4.html
Trade Secrets Institute, “Case report: PhoneDog v. Kravitz” <http://tsi.brooklaw.edu/cases/%5Bfield_case_reference-title-raw%5D/reports/case-report-phonedog-v-kravitz
Trade Secrets Institute, “Tucson Embedded Sys. Inc. v. Turbine Powered Tech. LLC “<http://tsi.brooklaw.edu/cases/recent_decisions
World Intellectual Property Organization, “How are trade secrets protected?” <http://www.wipo.int/sme/en/ip_business/trade_secrets/protection.htm
World Intellectual Property Organization, “Trade Secrets of employee loyalty” <http://www.wipo.int/sme/en/documents/trade_secrets_employee_loyalty.html#promote
World Intellectual Property Organization, “What is a trade secret?” <http://www.wipo.int/sme/en/ip_business/trade_secrets/trade_secrets.htm