Changing perspective: why you should never underestimate trade secrets’ power

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If you heard about a threat that had already caused a loss of EUR60 billion in economic growth and almost 289000 jobs in Europe alone, that could lead to the loss of one million jobs by 2025, you’d try to do something about it, wouldn’t you?

Those are the estimated losses caused by the theft of trade secrets due to cyber-espionage only. From states to single companies, no one is doing enough to stop this problem.

It is important to change our perspective, to understand what trade secrets are and why they are so relevant, so you and your company can put adequate protection in place, especially when doing business outside Europe.

Starting with the basics: a trade secret is a piece of confidential business information that can be of considerable commercial value and can provide an enterprise with a competitive edge.

In other words, a trade secret can be anything from manufacturing processes or sales or distribution methods to consumer profiles, from advertising strategies to lists of suppliers and clients — as long as it is relevant for your business and you are keeping it secret.

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Most of the legislation used to protect information as a trade secret (and to prosecute infringers) requires companies to put some form of defence in place to protect the confidentiality of the information.

Trade secrets do not need to be registered to be protected and, as long as they are kept as secrets, the legal safeguards last forever.

A recent study commissioned by the European Commission (complete text here, executive summary here) shows that companies, especially SMEs, underestimate both the value of their trade secrets and the chances that they might get stolen due to cybercrime.

Consequentially, companies, especially SMEs, tend to underestimate the impact of a breach in their security. A stolen trade secret can lead to at least four kinds of economic damage.

  • Opportunity costs: the loss of business opportunities and market shares.
  • Negative impacts on innovation: companies lose their investments in R&D when their knowledge is stolen and given to the public.
  • Increase in the cost of cybersecurity: if the company has been attacked the costs of cleaning up the system can be very high, as can increases in cybersecurity insurance.
  • Reputational damage: if the fact that a company has been hacked becomes public knowledge, this will reduce the trust of investors, business partners and even consumers.

The report highlighted the importance of awareness among companies in terms of preventing the loss of trade secrets. A solid legal framework is not enough, you have to do your part, and put necessary protections in place.

SMEs are the main target of cyber thieves and make up the majority of cyber-espionage victims because their cybersecurity protocols are weaker than those of big companies.

Cyber-espionage mostly involves external perpetrators. This is a large part of the problem, but it’s not the only issue. Especially when you are doing business in South-East Asia.

Other kinds of barriers must be taken into consideration. The most basic protection is probably afforded by physical barriersstore the secret information in an undisclosed physical location that only some employees have access to.

Physical barriers can seem outdated now, and they probably are when it comes to documents (who doesn’t store them on a computer nowadays?). However, they are still relevant when you admit potential partners, or indeed visitors in general, to your premises. Make sure that they cannot take pictures of your innovative products and have them sign non-disclosure agreements (NDAs).

Technical barriers are the most relevant against cybercrime in general and cyber theft in particular. They consist of various information technology (IT) systems that safely store your secrets. They can be expensive, but, as the experts stress, the lack of adequate protection is exactly what makes SMEs the perfect prey for cyber-attacks. There are some basic steps you can implement yourself, from a good password system to basic encryption. However, it’s even more important to develop an IT strategy (for example, you should make it impossible for documents to be shared via the internet or saved on physical devices like USB sticks), possibly with the help of a specialist, and prepare a written technology policy agreement. Make sure that all your employees have read and signed NDAs.

gold-padlock-locking-door-164425Written agreements are among your best weapons when it comes to protecting your trade secrets. Having people sign an NDA will make them conscious of their actions and ensure they think twice before betraying your trust. Having an NDA in place will also make them legally liable for sharing a secret.

When you’re doing business in South-East Asia, it’s of great importance to have your agreements in the local language. This prevents the other party from claiming that they did not understand their confidentiality obligation.

Having a solid NDA in place is not only important for your relationship with your employees and partners (or potential partners), but also for your relationship with your suppliers and subcontractors.

NDAs are essential in a well-drafted trade secret strategy, but they are not the only element of it. Alongside the technology policy agreements already mentioned, a role can be played by non-competition and non-solicitation clauses in employment contracts. These kind of clauses prevent your former employees from using your list of clients in their new position. Singapore and Malaysia are the most favourable countries for these kind of agreements.

You can also upgrade your NDAs, following the Chinese practice you can draft a non-disclosure, non-use, non-circumvention (NNN) agreement. The idea is to bind your counterpart to strict confidentiality. They are not allowed to disseminate the information (as in an NDA), and nor can they use it for their advantage or circumvent the agreement with anticompetitive practices. The idea is to combine secrecy and non-competition elements.

Even in Europe, trade secret thieves can be hard to prosecute due to the difficulty involved with supplying adequate proof. It’s better to put prevention safeguards in place. After all, prevention is better than medicine.

An even higher level of caution needs to be in place when doing business in South-East Asia. Keep in mind that most ASEAN courts tend to favour a local labour force using knowledge acquired in their previous jobs to make a living, without paying too much attention to the fact that the information might be a valuable trade secret belonging to a former employer.

Many countries (such as Brunei and Cambodia) do not have proper protections for trade secrets in place, and in others (like Myanmar), trade secrets are only protected under contract law, so there is no protection without a contractual relationship.

In Indonesia, trade secrets are protected only when an unlawful appropriation can be proven. To prove an unlawful appropriation you have show that there was an NDA in place and that it was breached, or that your IT or physical protections were abused.

At the moment, the law in Thailand imposing registration on trade secrets is suspended. However, if you are doing business in the country, it’s better to keep a very close eye on this.

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Even in countries like Malaysia, Singapore, the Philippines and Vietnam, where relatively sound protections for trade secrets are in place, it can be difficult to protect yourself in the absence of a contract.

To sum up: trade secrets are valuable intangible assets that do not need any registration and potentially last forever. However, you have to learn how to protect your valuable information from cyber thieves, unfaithful partners or greedy former employees.

The first step is to recognise what your secrets are, and then draft your strategy accordingly.

If you have any doubts or questions do not hesitate to reach out to us. The South-East Asia IPR SME HD offers free support to all EU SMEs.

 

Marta Bettinazzi

IP Business Advisor

South-East Asia IPR SME Helpdesk

E: marta.bettinazzi@southeastasia-iprhelpdesk.eu

W: www.southeastasia-iprhelpdesk.eu

 

Using the Madrid System to register your trade mark in Malaysia

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WRITTEN BY XUAN NGUYEN

 

On 27 September 2019, Malaysia became the 106th member of the Madrid system upon depositing its instrument of accession to the Madrid Protocol with the World Intellectual Property Organization (WIPO). The protocol will enter into force in Malaysia on 27 December 2019, extending the Madrid System to cover 122 countries. With the addition of Malaysia, all the countries in the South-East Asian region, except Myanmar, are now members of the Madrid System.

After the protocol comes into force, foreign companies will have two options for registering their trade marks in Malaysia, i.e. filing a trade mark application directly with Malaysia’s IP office, or filing an international trade mark application with the IP office of their home country and selecting Malaysia as one of the designated countries. Before you decide which option is more convenient for you, we would like to provide an overview of the advantages and disadvantages of the Madrid System.

What is the Madrid System?

The Madrid System, administered by WIPO, is a convenient and cost-effective solution for registering and managing trade marks worldwide. The system allows brand owners to protect their trade marks in up to 122 countries by filing one application, using one language (English, French or Spanish) and paying one set of fees.

Under the Madrid System, you need to submit an international trade mark application with the office of the home country in which refers to the national application or registration in respect of the same trade mark and select the countries where you want to register your trade mark as designated countries. After receiving the international trade mark application, your office of origin will check, certify, and then submit it to WIPO. WIPO will examine your international application in term of formalities (e.g. the applicant’s name and address, the quality of the image of mark, the classification of goods/services according to the Nice Agreement, application fees, etc.). If your application meets all the formal requirements, WIPO will record the mark in the International Register, publish it in the WIPO Gazette of International Marks and notify all the IP offices in the designated countries so that these offices can begin the substantive examination of the application at a national level in their jurisdictions. A result concerning the protection or refusal of the trade mark will be made within the time limit of 12 months or 18 months (for certain countries).

Advantages

  • Centralised and simplified registration and management system

To have your trade mark protected in multiple countries, instead of going to each country to file your trade mark application, when using the Madrid System the applicant just needs to file one international trade mark application to the office of origin, using one language and paying a single set of fees. Any amendment, such as changes (name, address, ownership, etc.), cancellation or licenses can be recorded in the International Register by simply submitting one request. Likewise, when the trade mark registration is due for renewal, the trade mark holder can renew it with WIPO in respect of all the designated countries or only some of them.

Overall, the Madrid System enables the brand owners to register and manage their trade mark portfolio in multiple countries via a simplified and convenient system.

  • Cost-effective and time-saving

By filing only one application rather than various applications in various countries, the applicant can save time and money. For example, it is not necessary to pay for translations of the documents or local agent fees which are normally incurred if an application is filed directly with the IP offices of the target countries. In many countries, the examination of trade mark applications at the national level can take up to 4 years due to backlogs. Under the Madrid system, however, the designated offices have to decide within 12 months or 18 months.

  • Subsequent designation

The Madrid System allows trade mark holders to designate additional countries alongside their existing trade mark registration. This subsequent designation procedure is very beneficial to brand owners who want to expand their business scope to new markets as they do not need to file separate applications in the new target countries.

  • Global system

With the Madrid System, you can register and manage your trade marks in up to 122 countries, representing over 80% of world trade.

Disadvantages

  • Central attack

Under the Madrid System, international registration remains dependent on the  basic application/registration in the country of origin for a period of 5 years from the date of its registration. Therefore, if the national application is rejected or withdrawn, or if the the national registration is canceled during this period, the international registration will no longer be protected unless within 3 months of the cancellation, the holder files trade mark applications for registration with the offices in each of the designated countries.

  • Refusal by national office

Laws and practices differ from country to country. It is still possible that you receive a refusal decision from some of the designated countries. In this case, the holder cannot communicate through the International Bureau but has to directly respond to and work with the national offices where the protection is rejected. In some countries, it is mandatory to use a representative agency to respond to the national office. Refusals may be avoided if, before filing, the trade mark holder identifies the countries in which rejection is likely and consults a local lawyer with expertise on the topic in order to develop a registration strategy.

Summary

Thanks to its centralised and simplified registration and management procedures, the Madrid System is a convenient solution for brand owners to protect their trade marks when doing business internationally. Nevertheless, brand owners should consult with local lawyers to develop trade mark registration strategies in certain countries where there is a high possibility of refusal by the national office.

How to Remove Counterfeit Goods from E-Commerce Sites in South-East Asia

2. Credit CardE-commerce has also been growing in South-East Asia and it’s attracting many European Companies. Together with the growth of e-commerce, the presence of counterfeit goods on these e-commerce sites has also been growing. In today’s blog post we are discussing how to remove counterfeits from the major e-commerce sites like Lazada in South-East Asia. 

A growing middle class coupled with increasing internet access has led to fast-paced e-commerce growth in South-East Asia in the past decades. The middle-class population of ASEAN, according to expert estimates, may grow from 190 million in 2012 to 400 million in 2020[1] . Additionally, there are approximately 200 million people in South-East Asia with access to the internet and this number is expected to grow three-fold by 2025. E-commerce in South-East Asia can thus offer many promising business opportunities for the European SMEs.

Besides being a forum for legitimate vendors and original products, the internet is also used by unscrupulous businesses as a platform for the distribution of counterfeit goods which infringe intellectual property rights of others. The explosive growth in access to the internet has resulted in counterfeiters to move their illegal activities online. Online e-commerce websites might become easy and anonymous options for counterfeiters to reach out to potential customers as well as popular social media platforms. A recent study reported that 20% of 750,000 posts on the popular social media platform Instagram alone in relation to well-known fashion brands involved the offer of counterfeit products for sales, with many of the vendors identified to be based in China, Malaysia and Indonesia among others[2]. Continue reading “How to Remove Counterfeit Goods from E-Commerce Sites in South-East Asia” »

How to Remove Counterfeit Goods from Major E-Commerce Sites in China

2. Credit CardDespite the fact that Chinese IP laws have improved a lot in the past years, counterfeiting still exists in China. In today’s blog post we are taking a closer look at how European SMEs can fight against counterfeits on China’s major e-commerce sites like Taobao and Jingdong. This blog post offers some advice on how to find counterfeits of your product online and explains the mechanisms that exist for removing counterfeits from major e-commerce websites.

China: Counterfeit goods and the internet

The internet has become a popular and easy channel for product distribution around the world. It has created a marketplace of more than half a billion users in China, more than a third of the world’s total online population, and is still expanding. Apart from being a forum for legitimate vendors and original products, the internet is also used by illegal and unscrupulous businesses as a platform for the distribution of counterfeit goods which infringe intellectual property rights.

As the internet provides a convenient platform for counterfeits, we recommend that every European SME (especially those with successful products) should monitor Chinese e-commerce sites for infringing products. By moving quickly you will be able to have infringing products removed from sale and preserve your market share. Although some companies find that internet monitoring is time consuming but you may find yourself at high risk if you sell your product on the Chinese market, manufacture your product in China or even if you have a popular product on sale in Europe.

This guide provides you with information on the regulations governing e-commerce and a practical introduction on how to have infringing products removed from two popular Chinese e-commerce sites: Alibaba and Taobao.

Continue reading “How to Remove Counterfeit Goods from Major E-Commerce Sites in China” »

How to use the Patent Cooperation Treaty: Focusing on South-East Asia

patent-without backgroundIn today’s blog post we are taking a closer look at how to use the Patent Cooperation Treaty (PCT) when applying for patents in multiple South-East Asian Countries. You will learn what are the benefits of the PCT and what is requested in the international as well as national phases of application. 

What is the PCT?

The Patent Cooperation Treaty (PCT) is a multilateral treaty that was established in Washington in 1970 and is administered by the World Intellectual Property Organisation (WIPO). The treaty makes it possible to obtain simultaneous patent protection for an invention in each PCT Contracting State by filing an international patent application. An application may be filed by a national citizen or a resident of a PCT Contracting State. All European countries, as well as China, are contracting parties to the PCT and in South-East Asia, all nations except for Cambodia and Myanmar are contracting parties.

Filing an international PCT application automatically includes all countries bound by the PCT. The application has the same effect in each country as if a national patent application had been filed with the national patent office. Therefore if an SME wishes to enter into several different South-East Asian markets, it would be time –efficient to file an international PCT application rather than preparing several different applications for individual countries. Continue reading “How to use the Patent Cooperation Treaty: Focusing on South-East Asia” »