Trade secrets - An industrial property object is less interested in business

In history of the mankind, secrecy has been a part of trade for thousands years which allowed Chinese people to gain profit for centuries from method for harvesting of the silkworm’s thread.

Now a day, when referring to the intellectual property objects, most people would think to the popular areas of IP: copyrights, patents, industrial design and trademarks other than the object that it is frequently implemented as a matter of practice by each business. That is the term of “trade secret”.

What is a trade secret?

Trade secret means information obtained from activities of financial or intellectual investment, which has not yet been disclosed and which is able to be used in business.

Trade secret is an IP object which is being protected by Vietnamese Laws. The IP right to a trade secret shall be conferred on the basis of legitimate acquirement of the trade secret and maintaining confidentiality thereof.

Why do trade secrets receive less attention than other the IP objects?

First, the right of trade secret does not establish on the basic of registration process with the governing body.

Second, there are few enforcement regulations relating to trade secret.

Third, trade secret disputes are usually are secret, so the parties involved do not want to disclose to the public debate.

Why need to use trade secret in the business

This is a cheapest tool than other IP objects that require registration with the governing body, especially it is the main way applied for small and medium-sized enterprises (SMEs) protect their business advantage. i.e. SMEs would keep their secure by getting the term of “nondisclosure agreement” when signing a labor contract with their employees or a commercial contract with their vendors.

Legal protection

The international standards for protecting secrets (called ‘disclosed information’) were established as part of the TRIPS agreement in 1995 (“TRIPS”). Article 39 of the agreement provides that member states shall protect “undisclosed information” against unauthorized use “in a manner contrary to honest commercial practices” (this includes breach of contract, breach of confidence and unfair competition). The information must not be generally known or readily accessible, must have value because it is secret and must be the subject of reasonable steps to keep it secret.

Similarly to TRIPS agreement, Article 84 of Vietnam Intellectual Property Law provides that a trade secret shall be eligible for protection when it satisfies the following conditions:

1. It is neither common knowledge nor easily obtainable.

2. Where using in business activities, the trade secret will create for its holder advantages over those who do not hold or use it.

3. The trade secret holder maintains its secrecy by necessary means to keep it not be disclosed nor be easily accessible.

Articles 42 to 49 of the TRIPS agreement cover enforcement requiring that civil judicial proceedings be available to enforce all IP rights and that “confidential information” be protected from disclosure. Nevertheless, national judicial systems including the methods for granting access to evidence vary greatly, and the measure for enforcement of trade secret around the world is generally viewed as uneven.

Besides instituting a civil claim, the Vietnamese Laws provide an administrative sanction for the following acts of infringing trade secret rights from 5 to 15 million VND (Article 14.15 of Decree no. 99/2013/ND-CP).

1. Approaching for collecting confidential information by manners unlocking security measures of legitimate controllers (*) of the trade secrets;

2. Disclosing or using confidential information without permission of the owner of trade secret;

3. Breaching confidential agreements or deception, inducement, bribery, coercion, seduction, taking advantage of the trust of people who keeping secrecy to access, collect or disclose their trade secrets;

4. Approaching for collecting confidential information of an applicant being applied for a business license or distribution of its products by the manners unlocking security measures of the competent authority;

5. Using, disclosing of trade secrets that who knew or should have known the trade secrets obtained by the others relating to one of the above acts;

6. Breaching obligation to keep secret test data.

(*) Legitimate controllers include the trade secret owners, the legitimate licensees and the person in charges of management of trade secrets.

Trade secret – the advantages for SMEs

We should compare patents and trade secrets that we can most easily see the importance of trade secrets for SMEs. Patents have been key to success of many businesses, particularly as they approach into global market where a period of exclusivity is needed to recoup the costs and risks of innovation. However, patent protection needs to register with the Intellectual Property Office and can take a time and money while trade secret protection does not need to register. It is most important to SMEs that patents are not only a tool for protecting technological advantage but trade secrets can do this as well.

For more information, please contact Pham & Associates at hanoi@pham.com.vn

Pham & Associates