Today, continuing with our Southeast Asia IPR Series, we’re going to take a look at Singapore’s stance on trade secret protection.

Trade secrets are essential for the protection of confidential information which does not fall under the umbrella of other IP rights and can make or break a business moving into a new territory.

Below are a few tips we at the Helpdesk believe that SMEs will find useful when setting up shop in Singapore.

What are trade secrets?

Trade secrets are defined in Singaporean law as:

“Confidential business information by which an enterprise can obtain an economic advantage over its competitors”

This can include a secret process of manufacturing, customer information, trade volume, a secret recipe, etc. Perhaps the most famous example of a trade secret is the world renowned Coca Cola recipe, which has remained a closely guarded secret held by the company for over a hundred years.

In practice, any information valuable to your company, which would cause a loss or disadvantage if it were disclosed to a competitor or released into the public domain would constitute a valid trade secret, enforceable in Singapore.

Trade secrets in Singapore

In order to qualify for trade secret protection in Singapore, SMEs must be able to show that the trade secret was ‘confidential’ and that the party receiving the confidential information is under an obligation of confidentiality for example through use of a Non-Disclosure Agreement (NDA). Confidential information means that the information must have been kept secret and has not already been released into public demand.

In any third party dealings, it must also be proved that there was an imposed obligation of confidence, in the form of Non-Disclosure Agreements (NDAs) or confidentiality clauses. Caution should be exercised in such situations, if possible it is advisable to run background checks on potential trading, manufacturing and distribution partners and no information should be released until the NDA has been signed.

Employee contracts are also subject to scrutiny, and failure to include sufficient data protection and confidentiality clauses may preclude actions against past employees who have taken sensitive information to competitors. Furthermore, any sensitive internal documents should be clearly marked as ‘confidential’ or ‘trade secret’ in order to make clear to all parties that this information falls within the bounds of their confidentiality agreements. As an extra precaution, it is advisable to place physical barriers against document circulation, i.e. locking up documents when not in use as well as technical barriers such as computer data control and activity monitoring software.

Trade secrets are protected for as long as they remain secret. As soon as a trade secret becomes common knowledge or generally available to the public it will be outside the scope of protection.

Avenues of enforcement

Civil litigation procedures may be initiated for breach of contracts involving trade secrets and confidential information. However, it is usually difficult to establish theft of trade secrets as the court requires the plaintiff to identify the trade secret that a departing employee has stolen, and prove that he or she has misused the information, thereby causing damage. Given the difficulty in proving trade secrets theft, some companies require their employees (usually those in senior positions) to sign a non-compete agreement for a limited period of one to twelve months following departure from the company. The non-compete agreement has to be reasonable in protecting the legitimate interests of the company in order to be enforceable.

As an added measure of protection, companies should have strong IT policies to monitor for unauthorised access or release of information to unauthorised destinations such as personal email accounts. This is because it is possible to file a complaint in respect of such misuse under the Computer Misuse Act.

Where the release has already occurred the court cannot of course enforce any return of the secrets, they already having been released to the public. They can however grant damages or accounts of profits in favour of the defendant. This is of limited use in cases involving employees however as comparatively limited compensation can be sought from individuals in most cases due to lack of requisite funds.

Enforcement options are therefore limited in their effectiveness, especially once information has been released. As such, it is advisable for SMEs to take the greatest of care when handling and sharing confidential information, if possible following Coca Cola’s fine example and avoiding having to resort to enforcement procedures at all.