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

 

IP exploitation strategy in South-East Asia

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Written by Marta Bettinazzi

In these changing times, we all need to find the time to prepare for the future and draft our strategy for success. This should also mean reevaluating our resources to see if we can make better use of them.

A good shift of perspective is to stop considering your intellectual property (IP) only as a cost (registration, maintenance). IP is an asset and you should learn how to make the best out of it. We will briefly look at the options that exist for exploiting intellectual property rights (IPR), then examine both the risks and the best practices to put into place in South-East Asia (SEA).

The best way to exploit your IPR depends on the kind of IP you own, but it can be summarised in two big categories: licensing and selling.man-sitting-near-fruits-723991

Selling means that you permanently transfer your IP (or better, the economic rights connected to it) to someone else. For example, you sell your patent to a bigger company that can mass-produce the invention you have patented or, more commonly, your IP is purchased as part of a merger-and-acquisition operation. In this case one company would acquire all the IPR that were part of your assets (trade marks, copyrights, patents, etc.). A famous example is the acquisition of WhatsApp by Facebook for the unimaginable price of USD 21 billion (more info here).

Licensing means that you, as an IPR owner (licensor), authorise someone to use your rights (licensee) in exchange for an agreed payment (fee or royalty).

This can allow you to expand your global presence and also ensure a source of revenue. On the other hand, the licensee can manufacture, sell, import, export, distribute and market various goods or services that they may otherwise not have had the rights to.

We can group the license agreements in three categories: Technology License Agreement; Trademark Licensing (and Franchising) Agreement; Copyright License Agreement.

Often these kinds of agreements are combined with and/or included in broader contractual settings, for example distribution contracts.

Therefore, the first step in an effective IP strategy is to review the agreements you already have in place with your partners and distributors to be sure that they include clear rules regarding the use of your IP.

In SEA it’s not uncommon for local distributors to register the IP (usually the trade marks) of their international partners under their own name. This way the local company acquires de facto an exclusive license on the product(s) of the SMEs. In fact, if the local company is the owner of the trade mark, it can prevent others from using it, including other companies authorised by the SME (the original owner of the trade mark). It might be said that you are in a marriage with your partner, and you might need an expensive and lengthy divorce (judiciary decision) to be able to leave it.

Before entering any kind of distribution agreement, give special attention to the difference between the registration of the trade mark (and IP in general) and the registration of the product itself. The latter is an administrative step needed to import a ‘new’ product into a country, but it does not ensure any protection for your IPR.

In other words, if your distributor is offering to do the product registration to allow you to import goods into the country, this does not imply that he/she is also going to help you with the registration of the trade mark or patent (or any other IP).

Keep in mind that a formal licensing agreement is possible only if the IPR you wish to license is also protected in the country or countries of interest to you. Without registering your IP in the country, you are not only unable to properly license it, but you also have no legal right to put any restriction on its use by anyone else.

Despite provisions in international treaties, courts and administrative bodies in SEA seldom extend protection to well know trade marks (see, as a reference, the famous IKEA case in Indonesia). Only Malaysia and Singapore ensure some level of protection for de facto trade marks and take into account the use of a non-registered trade mark.

On a side note, do not forget to consider registering your trade mark in local scripts as well, for example in Thailand, Malaysia, and Myanmar. This ensures complete protection for your trade mark, limiting the possibility of cheaper copycats riding on your reputation by using a transliteration of your trade mark. pink-and-white-weighing-scale-3964619

Also, note that many countries in SEA require license agreements to be registered if they are to be enforced. Some countries, like Thailand, also require the registration of trade mark licenses, others, like Vietnam, only require the registration of technology transfers.

To recap, be sure to register your IP before entering into any agreements with local partners. If this is not possible in the immediate future at least include a clause in your agreements to prevent the local company from registering your IP ‘for you’.

Technology transfer agreements can be very remunerative, but can also put your business at risk — you could be creating your own, stronger competitor. Therefore, it is advisable to either license a technology you have patented in the country where your counterpart will operate or you license something (an idea, a technology, some know-how, a recipe, etc.) that is secret. In this case, you have to be sure that your partner is bound by the same level of secrecy.

Reality is not that simple. Even if something is patented (and therefore publicly disclosed, for example in Europe) local companies might not be advanced enough to copy it, and may be interested in entering an agreement with you to acquire the know-how surrounding the patent.

This might present itself as an unpredicted and very welcome source of revenue for you, but you are running the risk of your new partner becoming your competitor in the future.

A good way to balance this issue is to bind your partner to secrecy regarding the unpatented part of the technologies.

As mentioned, technology transfers are not always encouraged by legislation in SEA and can often be subject to registration requirements. This means that if the agreement is not registered at the public office it cannot be enforced (in cases of breach or liability). Some countries have also limitations regarding the kind of technologies that can be transferred to and from their territory.

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In short: the best strategy is always to patent all your cutting-edge technologies in as many countries as possible (including new markets like SEA); combine a good patent strategy with a high level of secrecy and be aware of local legislation.

A final thought: do not forget to prepare all your contractual documents in both English and the local language and be sure to agree and sign the local language version. Most of the courts in SEA can only accept (and understand) documents in the local language. A later translation could be not only expensive but also problematic; your counterpart could propose their own translation of the text, which could lead to endless interpretation problems.

For more information you can have a look at our guides on trade marks, patents and technology transfers, or at our country factsheets.

Do not hesitate to reach out to the Helpdesk if you have any questions on IP in SEA.

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/

Thailand: Impact of International Patent Developments

patent-without backgroundToday’s blog post has been kindly shared with us by our external experts Mr. Daniel Greif and Mr. Dhanasun Chumchuay from Spruson & Ferguson. In this article, Mr. Grief and Mr. Chumchuay explain the two announcements made by Thai Department of Intellectual Property and their impact on companies wishing to apply for patents in Thailand. This article first appeared in Managing Intellectual Property Magazine. 

On May 5 2017, the Thai Department of Intellectual Property (DIP) issued two announcements in regard to patent processes in Thailand: (1) Announcement on the Establishment of a List of International Search Authorities and International Preliminary Examining Authorities (No 2); and (2) Announcement on Fees for International Applications, International Searches, Delivery of International Applications and Late Payment of Fees.
The first announcement specifies the Intellectual Property Office of Singapore (IPOS) among the list of International Search Authorities (ISA) and the International Preliminary Examining Authorities (IPEA), while the second announcement establishes new fees for international applications, which have been adjusted to reflect the current fee rates charged by the listed ISAs and the current currency exchange rates.
These two developments reflect the continued positive steps being taken by the DIP to create greater efficiencies and to upgrade patent processes, as well as to clear the patent backlog that poses a constant obstacle to timely patent prosecution in Thailand.

IPOS as ISA and IPEA
The DIP’s Announcement on the Establishment of a List of International Search Authorities and International Preliminary Examining Authorities (No 2) confirms the IPOS as a body qualified as an ISA and an IPEA for international applications filed in Thailand. Continue reading “Thailand: Impact of International Patent Developments” »

Thailand Is Now Clearing Its Backlog of Patent Applications

RegisteredGood news for SMEs wishing to acquire patents in Thailand, as the country is committed to clearing its backlog of patent applications. Today’s blog post has been kindly shared with us by our external IPR experts, Ms. Darani Vachanavuttivong and Ms. Jitluedee Siemanond from Tilleke & Gibbins. In this article, Ms. Vachanavuttivong and Ms. Siemanond further explain the steps undertaken by the Thai Department of Intellectual Property to ensure faster patent application procedures. 

The problem of long periods of pendency for patent registration in Thailand may finally be successfully solved after several past attempts, even though an expected executive order under section 44 of the nation’s interim constitution has not yet been formally announced.

The Thai Department of Intellectual Property (DIP) has put forward great efforts in setting up an effective action plan and has substantially increased its Patent Office manpower in 2016 and 2017, in order to effectively and promptly examine pending patent applications. The number of patent examiners in each examiner group has increased more than 100 percent, with the total number of examiners growing from 39 in 2015 to 143 in August 2017. The approximate headcount of each examiner group at the Patent Office is as follows:
Continue reading “Thailand Is Now Clearing Its Backlog of Patent Applications” »