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

 

The role of Intellectual Property in the development of a green future in the ASEAN countries

The COVID-19 pandemic hitting the entire world has provided big challenges for 2020. But this new problem should not make us forget the bigger picture, and the even bigger challenges: Climate change is now a reality, and we are all called to act to prevent the worst scenarios.IPday2020_Profile_picture_Social_Media_2

This is why this year the WIPO has decided to dedicate their World Intellectual Property (IP) Day 2020 to a green future, focusing on innovation — and the IP rights (IPR) that support it.

The IP community should work together to foster green innovation, especially in developing countries.

In this examination, we are going to try to understand the current role of green technologies in the ASEAN countries, and at the same time, see how IP can fit into the picture.

It’s no secret that in recent years, Asia has based its economic growth on a ‘grow now, clean up later’ model. Economic success has come at a high environmental cost. Taking Indonesia as the main example, we can see that deforestation and peatland burning are major sources of greenhouse gas emissions and drivers of biodiversity loss. While an increasing number of countries have committed to phasing out unabated coal use, Indonesia’s 2014 National Energy Policy envisages nearly doubling it by 2025 (compared to 2015 levels) to achieve an affordable electricity supply for all.

Pollution is not just putting pressure on the natural capital of the country, but could ultimately put the economic development and the wellbeing of its citizens at risk.

This is not just unacceptable from a moral standpoint, it’s also highly inconvenient from an economic point of view.

This is why we are starting to see a slight change in attitude towards green technologies from the peoples and the governments of the ASEAN nations.

According to a report by Clean Energy Pipeline (quoted by Intern Asia), investments in solar projects in Southeast Asia increased at an annual growth rate of 8 % between 2010 and 2014.

Since there are still 70 million ASEAN citizens without access to reliable electricity, the potential for renewable energy is huge — and solar energy is one of the best solutions.

Energy production is one of the main focuses of green development, but it’s not the only one. Waste management, water purifying, clean building and smart cities are among the top priorities. There is also an increase in demand for ‘green’ products from consumers that are developing an environmental consciousness.

This huge demand for new technologies and innovative solutions also provides an opportunity for SMEs to contribute to a greener future.

As the WIPO suggested, ‘Transitioning to a low-carbon future is undoubtedly a complex and multi-faceted endeavour. But we have the collective wisdom, ingenuity and creativity to come up with new, more effective ways to shape a green future and the IP system has a pivotal and enabling role in supporting us on this journey.’

IP alone cannot ‘make the innovation happen’, however, without IP an innovation framework would be doomed to collapse.

It cannot be doubted that fostering and protecting innovation is one of the main functions of IPR. Without IP protection, investments in intangible assets would be less secure; these assets could not be claimed, protected or traded. In other words, if any competitor can use intangible assets without an investment, no investor will be willing to risk their capital.

This is especially true for patents. Patents ensure inventors have the exclusive right to exploit an invention; this form of commercial reward can potentially encourage companies to invest in new, clean and efficient technologies. On the other hand, patented technologies are disclosed to the public, this ensures that the technical knowledge surrounding invention research is publicly accessible and can inspire further innovation. The WIPO and many IP offices around the world, including the European Patent Office (EPO), have implemented better databases to promote the dissemination of information regarding green tech and, in the end, the development of new inventions.

Patents are also pivotal in the business strategy of many green companies; they do not just attract and secure funding, they are also a source of revenue (through patent licensing and technology transfer agreements, non-commercial licenses and other arrangements).

Collaboration between government and startups has been seen to help meet climate challenges while growing small businesses. It’s not a huge surprise, but it’s still worth noting, that US-based startup patents in green-tech development tend to rise by 73 % when there is a collaboration with government behind them.

However, when it comes to the international exploitation of patents, some caution is needed.

IP protection is territorial, this means that your patented invention is not automatically protected in the world, while it’s disclosed worldwide. Therefore, preparing a good international patenting strategy and/or putting in place additional protections, for example wrapping your technology in Non-Disclosure Agreements, is of paramount importance.

Also keep in mind that free technology transfers are not always encouraged by ASEAN governments that prefer to keep some form of control over them, for example by imposing registration obligations on contracts.

Moreover, according to the TRIPS Agreement (here), national laws can provide exceptions to the exclusive rights conferred by a patent, as long as they are not unreasonable and properly balance the expectations of the patent owner and those of third parties. Some countries, including Indonesia, have taken advantage of this provision to impose some form of compulsory licenses.

As mentioned, instead of patents you can rely on trade secrets to protect your new technologies. This is particularly useful for SMEs as trade secrets don’t need to be registered, so they don’t have cost implications or time limitations. However, trade secrets provide weaker protection, and the best strategy is probably to combine patents with trade secrets.

As a general rule, a good IP strategy is not limited to patent protection — and the green sector is no exception.

Design protection can, for example, play a very important role in providing protection from copycats and cheap reproductions. A small change in the design of a product can significantly change its performance in terms of energy use (for example in vehicles or aircraft). In ASEAN countries, protection for industrial designs is quite sophisticated and is usually less constrained and easier to obtain than patent protection.

Software and, in particular, Artificial Intelligence have, and will have, an important role in the development of new solutions for a green world (for example, helping to measure and regulate demand, and offering energy-optimizing resource use).

From the traditional viewpoint of IP law, software is protected as a literary or artistic work under copyright. This is not the time nor place to discuss if copyright is the best way to protect software and the problematic topic of the patentability of computer-based inventions. Let’s work with what we have.

The good news is that thanks to the Berne Convention copyright does not entail any formal registration process and arises automatically upon the completion of the work. This protection should be ensured in every country that is a member of the convention (including ASEAN ones). However, registration is advisable as it provides proof of ownership in potential conflicts.

As mentioned, the green economy also means that greener options are available to consumers. In ASEAN countries, the middle class is developing an interest in healthier foods. This includes many European Geographical Indications (GIs), as they are perceived to be natural and good. GIs, as well as attracting consumers, also provide a good way to uphold sustainable production standards.

Finally, do not forget the power of branding! Your trade mark is your value and your reputation, if you manage to build a strong bond with your consumers and market yourself as a legitimate ‘green brand’ you will acquire more and more customers that share your values.

However, do not forget that the best trade marks are the distinctive ones. Simply adding ‘green’ to your name might convey a good message, but it can be deemed to be a descriptive element and hinder your trade mark protection. It’s always better to choose trade marks that, as well as being connected to green topics, have a more distinctive flavour. Think about plants, animals or even rocks … be creative!

It’s worth noting, that if you claim to be green and clean you should be. Otherwise, you will not just be betraying the consumers’ faith, but also breaking consumer protection laws.

Protecting your brand and registering your trade marks is even more important when doing business in areas like SEA where counterfeiting is rampant. Registering a trade mark early is the first, and sometimes also the most effective, step towards protecting yourself.

To sum up, a good IP strategy can foster growth in every sector, in particular in fast-developing industries like green tech. Be ready and do your bit.

Happy IP Day!

 

South-East Asia IPR SME HD: https://www.southeastasia-iprhelpdesk.eu/

 

WIPO World Intellectual Property Day 2020 – Innovation for a Green Future: https://www.wipo.int/ip-outreach/en/ipday/2020/green_future.html

 

AIPPI Report on Intellectual Property and Green Technology, 2014: https://aippi.org/enews/2014/edition38/images/reports.pdf

 

OECD Green Growth Policy Review, Indonesia 2019: https://www.oecd-ilibrary.org/sites/1eee39bc-en/index.html?itemId=/content/publication/1eee39bc-en

 

ASEAN fast becoming a renewable energy hub: https://theaseanpost.com/article/asean-fast-becoming-renewable-energy-hub

 

Eurocham Vietnam Greenbook: https://www.eurochamvn.org/node/16988

 

The Role of IP Rights in Green Technologies Innovation: http://metispartners.com/2019/11/22/the-role-of-ip-rights-in-green-technologies-innovation/

 

Green technology in Asia: https://www.internasia.com/Green-technology-Asia

 

Environmental issues are top priority for Asia’s youth: https://www.eco-business.com/news/environmental-issues-are-top-priority-for-asias-youth/

 

Compulsory Licensing Procedures in Indonesia Revised: https://www.rouse.com/magazine/news/compulsory-licensing-procedures-in-indonesia-revised-again/

IP Protection in the Philippines for the Environmental Technologies Industry

MC900437625In today’s blog post we take a closer look at how European SMEs can protect the IP rights of their environmental technologies in the Philippines. This sector has recently started to boom and offers many promising business opportunities to European SMEs. You will hear more about patent protection and trade mark protection. We will also offer some tips on how to enforce your rights. 

European SMEs that are working on high-tech sustainable solutions for environmental problems find the Philippines quite a promising market. The country that is highly vulnerable to climate change faces many environmental challenges including deforestation, costal degradation, air and water pollution as well as issues arising from waste disposal, just to mention the few most pressing issues. At the same time, the government of the Philippines is committed to looking for solutions, including sustainable high-tech solutions to the most pressing environmental issues, as it is annually allocating over 16 million EUR for climate change adaptation and mitigation funding[1].

European SMEs offering technological solutions to energy efficiency issues, environmentally sustainable transportation, sustainable infrastructure or waste management sectors, are expected to find many promising business opportunities in the Philippines, as these are the sectors that the government of the Philippines is highlighting as the priority sectors in its National Framework Strategy on Climate Change 2010-2022.[2]

European environmental technology providers wishing to enter the Philippines’ market need to keep in mind that despite the recent improvements in the Philippines’ IP laws and regulations, counterfeiting and other IP infringements are still commonplace in the country and thus a robust IP strategy is needed to grow their business in the Philippines. Continue reading “IP Protection in the Philippines for the Environmental Technologies Industry” »

Protecting R&D Innovations in the Philippines

Mech Eng 2In today’s blog post we are discussing how to protect your IP in the Philippines while conducting R&D activities. You’ll learn more about Non-Disclosure contracts and patents and how to protect your new IP that is being created in the Philippines. 

Many European SMEs may not consider that they conduct any research and development (R&D) in the Philippines because they do not have a laboratory or research facility there, but in reality, a high proportion of these companies engage in activities which fall under at least one of the terms: research or development.

Some examples of R&D might include an SME that enters into a contract with a local company to use their engineers to develop a prototype into a commercial product or application; or an SME that works with local researchers in a Philippine university to design a digital database that is to be accessible via the Internet to users in Europe.

Even though the Philippines has its problems with R&D, as according to the Global Competitiveness Report 2016-2017, published by the World Economic Forum, it ranked 83rd out of 138 countries in terms of technological readiness[1], the Philippines’ government is committed to making the country an ‘active player’ in the global knowledge economy[2]. This means that European SMEs can have promising business opportunities in the Philippines’ R&D sector as their know-how will be highly sought after.

IP is a critical consideration for European SMEs that come to the Philippines wishing to tap into this increasingly high-tech production network, or the talent pool for technology development. When engaging in R&D in the Philippines, new intellectual property is being created, the rights to which need to be clearly defined from the outset to avoid disagreements later. Continue reading “Protecting R&D Innovations in the Philippines” »

The Philippines: Application of The Doctrine of Equivalents

patent-without backgroundToday’s blog post on the application of the doctrine of equivalents in the Philippines has been kindly drafted for us by our external expert Ms. Editha Hechanova from Hechanova & Co., Inc. In her article, Ms. Hechanova discusses a patent infringement case in the Philippines to demonstrate the applicability of the doctrine of equivalents in the Philippines IP system, which is essentially meant to help fighting patent fraud. The article first appeared in the Managing Intellectual Property

The doctrine of equivalents is provided under Section 75.2 of the IP Code of the Philippines (Republic Act 8293). However, in deciding actions for patent cancellation and infringement, the Intellectual Property Office (IPOPHL) as well as the Supreme Court rely for the most part on American case law. The recent patent infringement case of Eddie T Dionisio v Visita International Phils, Inc and Lal K Tulsiani (IPV No 10- 2013-00034, July 28 2016) citing a cancellation case also between the parties shows this.

Dionisio was the registered owner of utility model number 2-2011-000646 for a multi-purpose articulated ladder issued by the IPOPHL on June 6 2012. On December 20 2013, Dionisio filed an administrative complaint for patent infringement against Visita claiming that the latter sold ladders with specifications similar to Dionisio’s patented ladders. Visita countered that there was no infringement since it had its own earlier filed utility model registration 2-2009-000166 issued on December 28 2010. Continue reading “The Philippines: Application of The Doctrine of Equivalents” »