South-East Asia IPR Basics Series: Trade Secrets in Malaysia

IP TheftIn Malaysia, no pure information can be considered property. However, as a party to TRIPS and other agreements, Malaysia does have laws which prevent the unauthorised disclosure of information. This information is commonly referred to as “trade secrets,” although it is called “confidential information” in Malaysian law. This definition means that trade secrets cannot be proactively registered, but can form the basis of action taken against others. Confidential information in Malaysia can also take the form of virtually any other confidential information which was secret and protected by contractual agreements.

Criteria for and Periods of Protection

A trade secret does not have certain prescribed periods during which it is protected. As long as the information meets the criteria for being a trade secret, you can use legal means to punish any party which agrees to not reveal that information and reneges on its agreement. Thus, protection for trade secrets essentially lasts until contracts regarding that information expire or are invalidated, or until the information is no longer a trade secret (assuming that any NDAs you have signed expire when the information ceases to be confidential).

To qualify as a trade secret, there are two criteria which information must meet according to Malaysian law. The information must be:

  1. Confidential; it must not be readily available to individuals engaged in the industry, must not be in the public domain, and must not have been previously disclosed to the public
  2. Reasonably protected; that is, you must ensure that you make it clear that the information you are disclosing is a trade secret. If there are no reasonable markings or other indications that would cause an ordinary, rational person to believe that the information disclosed is a trade secret, then the information is not adequately protected

Protecting and enforcing trade secrets

Trade secrets are best protected by a series of confidentiality clauses, physical barriers, and NDAs. For employees within your company, confidentiality clauses are key to maintaining the integrity of trade secrets. These clauses prevent your employees from revealing key business details to competitors when they leave your firm, ensuring that your secrets remain valid. Even with such clauses, it is always wise to include physical barriers in your trade secret protection scheme. These barriers are meant to protect trade secrets by physically limiting who can gain knowledge of them. Examples of physical barriers include rules which prevent use of phone cameras in areas where specialized parts of the production process take place; carefully storing trade secrets in secure areas; and thoroughly considering which employees should be exposed to the secrets.

When dealing with other firms, you should make full use of non-disclosure agreements. NDAs can be written to suit a variety of needs, including protecting trade secrets, preventing use of information which you have disclosed, etc. Always be sure that your partners sign NDAs before you reveal any trade secrets to them. Otherwise, information that has been disclosed to a partner is no longer a trade secret and can be freely exploited.

At present, Malaysia’s laws governing trade secrets are developing and grounded in case law. However, there are steps you may take to better prepare yourself for a case related to trade secret infringements. As is often the case with IP, the monetary damage caused by divulgement of trade secrets can be difficult to quantify. For this reason, SMEs should note and quantify the value of time and labour which has been invested in creation of any given confidential information and how the information could impact revenue streams or other aspects of business.

Because trade secret laws are enforced through contracts rather than specific legislation, any actions taken to punish trade secret infringers must be taken through the regular Malaysian courts rather than the specialised IP courts. In these courts, firms can pursue the actions which have been included in their contract, including liquidated damages to recoup losses and injunctions to immediately halt someone who is using your trade secrets for their own gain.

Samuel Sabasteanski

Project Executive, South-East Asia IPR SME Helpdesk

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