Nigeria: The Rhetoric Of Trade Secrets In Nigeria And Other Jurisdictions

Trade secrets are one of the unique categories of intellectual property, as its attributes or features and functions are peculiar and distinctive. It requires specific efforts for its protection different from the kind of efforts required for other forms of intellectual property rights (IPRs) like copyright protection as an example. In comparison to trade-marks, trade secrets are not attributed to words, slogans or unique identifiers. Trade secrets are designed to have a long lifespan and could thrive with industries or companies for decades and even centuries, provided their protective parameters are maintained. Furthermore, their economic or market impact prolongs the business operations of affected companies or industries.

The World Intellectual Property Organization (WIPO) defines trade secrets as, “intellectual property (IP) rights on confidential information which may be sold or licensed”.² Article 39 (2) of the Trade-Related Aspect of Intellectual Property Rights (TRIPS) describes a ‘trade secret' as such information that: (a) is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question; (b) has commercial value because it is secret; and (c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.³

According to Black's Law Dictionary, a trade secret is, “a formula, process, device, or other business information kept confidential to maintain an advantage over competitors; information including a formula, pattern, compilation, program device, method, technique, or process, that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy”.⁴-⁵

The essentials that make a ‘secret' know-how or ‘confidential information' a ‘trade secret' include the following: (i) the secret must be in the lawful control of a natural or legal person, (ii) it is not generally known or made public, (iii) it has economic or commercial value, (iv) and adequate steps have been taken to ensure that it is kept secure.

In May 2022, a former chemical engineer for the Coca-Cola company was sentenced to 14 years imprisonment for stealing a trade secret worth $120 million dollars for the Chinese government. The secret was about the coating used for preventing beverage can contents contacting the metal surface, thereby preventing corrosion or contamination.⁶ Coca-Cola is rated by Forbes as the 6th most valuable brand in the world in 2022, worth $64.4 billion.⁷ As a product of many secrets, like other multinational enterprises, Coca-Cola's main secret formula has been kept for more than a century.⁸

As earlier highlighted, many companies and persons are huge beneficiaries of competitive advantage through trade secrets. Other major enterprises with such valuable trade secrets like WD-40 KFC, Bush's Baked Beans, Google's Algorithm etc., are heavily sought after.⁹ Consequent upon their remarkable economic advantages and reputational value, it is understandable that trade secrets require specific and well-tailored legal protection. This indispensable protection must be geared towards preventing a breach of the secret and allotting appropriate liabilities for infringement.

2.1 United Kingdom

United Kingdom operates a dual system of protecting trade secrets – by Common law and by State. ¹⁰¹¹ The EU Directive 2016/943 was implemented in the UK through the Trade Secrets (Enforcement, etc.) Regulations 2018. These regulations are unaffected by Brexit, but subject to a change in policy.¹²¹³

The regulations provide that any unlawful disposition, use or disclosure of trade secrets can constitute an infringement.¹⁴

Regulation 11 of the Trade Secrets (Enforcement, etc) Regulations 2018 provides for interim measures that may be taken by the court in a case of infringement and these include:

Regulation 14 provides for injunctions or interdicts and corrective measures enforceable by the court.

As final measures, the provision includes:

Notably, there is a limitation period for bringing a claim relating to misappropriation of trade secrets under the regulations. In England, Wales and Northern Ireland, the limitation period is six years. However, Scotland operates a prescriptive period of five years.¹⁵¹⁶

2.2 United States of America

The Federal statute protecting the use of trade secrets in the United States of America is the Defend Trade Secrets Act (DTSA) 2016. DTSA allows an owner to sue in federal court in the event of misappropriation of a trade secret. Significantly, it amended the Economic Espionage Act 1996,¹⁷ extending its protection of trade secrets.¹⁸ As an innovative enforcement measure, the DTSA provides for both criminal penalties and civil liabilities.¹⁹

The DTSA does not prevent the operation of existing state trade secret laws. The Uniform Trade Secret Act (UTSA) is an Act for the protection of trade secrets, adopted by all states in the United States except New York and North Carolina.²⁰ In a claim for injunctive reliefs, courts in the United States can protect trade secrets by ordering a cessation of the misappropriation, ordering that the trade secret be protected from public exposure, and in some cases, ordering that the misappropriated trade secret be seized. At the conclusion of a trade secret proceeding, the court can award damages, costs of proceedings, reasonable attorneys' fees, or a permanent injunction when needed.²¹

The first verdict under the DTSA was handed down by a federal jury on 24th February, 2017, in the case of Dalmatia Import Group, Inc. v. FoodMatch Inc. et al.²² The issues in this case relate to the disclosure of trade secrets to vendors or distributors. The centre of contention revolved around a gourmet fig spread made with a secret recipe and process.²³ On the claims for trade secret misappropriation, trademark infringement and counterfeiting, the jury awarded a total sum of $2.5 million in damages to the plaintiff. Particularly, $500,000 of the total sum was awarded for the misappropriation of the affected trade secret.²⁴

2.3 People's Republic of China

Trade secrets are fairly protected in China. In the absence of a unified law, the protections available to trade secrets spread across the Anti-Unfair Competition Law (AUCL) (revised in 2019),²⁵ Criminal Law (revised in 2015),²⁶ Civil Code (effective in 2021),²⁷ Civil Procedure Law (revised in 2017), Labour Law (revised in 2018), and other applicable regulations.

According to the provisions of the Anti-Unfair Competition Law, “trade secret” means technical, operational or other commercial information unknown to the public and is of commercial value for which the right holder has taken corresponding confidentiality measures. Also, Article 9 of the AUCL provides for acts that will amount to infringement of trade secret, if committed by a business, to include:

As part of remedies provided in case of infringement of trade secret, Article 21 of the AUCL provides that,

2.4 Uganda

In Uganda, trade secrets are protected under the Trade Secret Protection Act, 2009.²⁹ The Act specifies conditions for protection, right of action, right to assign, transfer or license, remedies etc.

According to Section 5 (1) of the Act, “Disclosure, acquisition or use of a trade secret by improper means constitutes an infringement and, subject to the Act, a person entitled to the benefit of the trade secret may bring proceedings in respect of the infringement.”

The Remedies available are provided under sections 12, 13, 14, and 15 of the Act. These include injunctions, damages, account of profits, adjustment order, and order for the defendant to deliver up or destroy anything in which the trade secret to which the improper disclosure, acquisition or use relates, is contained or embodied. The court may also grant auxiliary or incidental relief.³⁰

Nigeria has been ascribed the giant of Africa status especially for its envisaged commercial prospects and fertile ground for unprecedented entrepreneurial advancements. However, unlike industrially developed countries in the world, Nigeria has no existing legislation for the protection of trade secrets. Trade secret protection in Nigeria is mostly derived from the common law. Therefore, persons and enterprises have relied upon contract law, torts, and other basic legal principles to prove a claim for the misappropriation of trade secrets. Enterprises are advised to protect their trade secrets by entering into confidentiality/non-disclosure agreements with employees and any other third party involved in the business.

Another potent strategy is the insertion of non-compete clauses in contracts of such nature. This works to prevent a disclosure of the secret in an event of dismissal or disengagement from service or employment.³¹

In Koumoulis v. Leventis Motors Ltd,³² the Appellant's agreement with the Respondent included the fact that he shall not for, “a period of one year undertake to carry on either alone or in partnership nor be employed or interested directly or indirectly in any capacity whatever in the business of Merchants Engineers or any other business carried on by the Company within a radius of fifty miles from any Trading Station in West Africa.”

However, the Appellant, who was working for the Respondent, resigned and started working for the Respondent's competitor. The Respondent noticed that the trade secret that was in the knowledge of the Appellant has now been divulged and put to use by the Appellant's new employer, leading to loss of business opportunities for the Respondent.

The appellate Court held that the quoted clause above was valid and the Appellant was held liable to pay the damages imposed by the lower court. In deciding this case, the Supreme Court cited the case of Home Counties Dairies Limited v. Skilton,³³ where Sir Nathaniel Lindley had stated that:

In Infinity Tyres Limited v. Kumar Ors, the Nigerian Industrial court held that the non-compete clause that sought to protect trade secrets by preventing the employees from working in any other company in Nigeria for one year after termination of employment with the plaintiff was null and void for being too restrictive.³⁴

In light of the indispensable benefits of protected trade secrets in conferring economic and reputational advantages on persons and enterprises, it is heavily recommended that the Nigerian Legislature enact a comprehensive and properly worded Trade Secrets Act that will provide adequate protection of trade secrets in Nigeria with readily available and clearly defined remedies to curtail infringing activities.

Additionally, employees working from home can pose a new thread of threat to the prevention of trade secret infringements. At least one local author³⁵ has recommended a few prescriptions on protecting trade secrets with a remote workforce, and practical steps for companies to adopt in the protection of their trade secrets. These include the use of adequate non- disclosure and non-complete clauses in employees' contracts, education of employees, updated Cybersecurity policies, suitable destruction of printed secrets when needed, etc.

The commercial value of trade secrets is compelling enough to justify legislative attention regarding their protection. It must be the business of every country mindful of industrial trade and economic development to ensure that it provides a safe environment for enterprises to thrive by ensuring that the intellectual property of its small, medium, as well as large-scale businesses are well protected through all available remedies.