Thailand: Trade Secrets In Thailand: New Developments On The Horizon

Article by Mrs Parichart Jaravigit and Mr Edward J. Kelly IV

Thailand, as a member of the World Trade Organization (WTO), is obligated to enact laws to protect "undisclosed information," or trade secrets, in order to be in compliance with Article 39 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPs Agreement). Article 39 states that the member states must ensure effective protection of trade secrets against unfair competition, as provided in Article 10 bis of the Paris Convention (1967). Furthermore, the Trade Secret Act (TSA) has been drafted in order to support the operation of free trade and to protect against unfair business practices.

The draft TSA has been proposed by Thailand’s Ministry of Commerce and is now being considered by the members of the House of Representatives and the Senate. The consideration is presently very fluid, with the Senate having made some amendments to the draft, and the House of Representatives having disagreed with the Senate amendments. Therefore, at this time, the draft Trade Secret Act is being considered by a cooperative committee of Parliament to develop a compromise draft of the act that will be submitted to the Parliament for approval in the next 6 to 10 months.

Currently the Thai Penal Code provides protection for trade secrets, under Title XI "Offences Against Liberty and Reputation" Chapter 2, "Offences of Disclosure of Private Secrets" Sections 323 and 324. Section 323 provides protection for all secrets, regardless of their nature. However, the provisions limit liability only to competent officials, medical practitioners, pharmacists, druggists, midwives, nursing attendants, priests, advocates, lawyers, or auditors, or assistants of such professions, who acquire the secret by reason of their professional function.

On the other hand, Section 324 of the Penal Code provides punishment for those persons whom, by reason of their function, profession, or calling of trust, disclose a secret. However, in this section, protection is expressly provided only for secrets concerning industry, discovery, or scientific invention.

Clearly, the Penal Code limits the scope of both the type of offender and the type of the secret that is encompassed. Moreover, the penalty stipulated under these sections is quite minimal by comparison with penalties proposed in the draft TSA. Offenders under both Sections 323 and 324 of the Penal Code will only be subject to imprisonment not exceeding six months or a fine not exceeding one thousand baht, or both.

The new draft TSA provides far boarder protection and more severe penalties for trade secret infringement than the current Penal Code provides, as outlined more fully below. The expansion of such protection should be viewed as a benefit for a trade secret owner in seeking remedial action for unauthorized disclosure of secrets.

The present draft TSA contains provisions to protect against unauthorized disclosure of trade secrets, including a framework that enables the Court to issue injunctive relief against trade secrets disclosure. In addition, the Act provides for compensation for the victims of such infringement.

A trade secret, as protected under the TSA, consists of the following:

1. Trade information that is not generally known or readily accessible to groups of persons within the circles that normally deal with information of the said kind;

TSA defines "trade information" as material that conveys terms, matters, facts or other things, communicated in whatever way and arranged in whatever form, including formulas, forms, collected or assembled works, programs, methods, techniques or processes.

Trade Secrets can be categorized into two types, as follows:

1.1 Industrial Secrets, which consist of trade information that is related to technical matters, such as a manufacturing process or chemical formula.

1.2 Commercial Secrets, which consist of trade information that is related to sales methods, contract forms, customer lists, advertisement techniques, etc.

2. Trade information that has commercial value due to its secrecy; and
3. Trade information that has been subject to reasonable measures taken by its lawful controller to keep it secret.

Furthermore, the protection of trade secrets under the draft TSA is extended to undisclosed test results or any data made, discovered, or created with considerable effort. This provision would apply to a scenario where the applicant has requested the applicable state agency to keep the data secret in case the applicant is required by law to submit information supporting an application for approval by the state agency for the manufacture, importation, exportation, or sale of medicine or agricultural chemical products utilizing new chemical entities.

Who Is Protected?

1. Trade Secret Owner: a person who has discovered, invented, collected, or created trade information which is a trade secret without infringing another person’s trade secret, or a person who has a legitimate right to test results or data considered to be a trade secret. Under TSA, it also includes an assignee.
2. Trade Secret Controller: the owner of a trade secret, a person who has a trade secret in his possession, and/or a person who controls or cares for a trade secret.

No registration is required to obtain trade secret protection. Trade secrets shall have protection as long as they are deemed secret.

The owner of a trade secret has the right to disclose, take, or use his trade secret, or permit others to use his right, with any necessary condition to maintain its secrecy.

In addition, a trade secret is transferable by juristic act or by inheritance.

The infringement of a trade secret includes an act of disclosing, taking, or using a trade secret without the lawful consent of the trade secret owner and in a manner that breaches fair commercial practice. In this regard, the infringer must know, or have appropriate reason to know, that his action is contrary to fair commercial practices.

Actions that are contrary to fair commercial practices include breach of contract, breach of confidence or persuasion to breach of confidence, bribery, intimidation, fraud, theft, receipt of stolen property, or espionage by electronic surveillance or any other means.

Exceptions To Infringement Claims

The following actions shall not be considered an infringement of trade secrets:

1. Disclosure or use of a trade secrea person who obtained such a secret through a juristic act, without awareness, or without any reason to be aware, that the other partyred such trade secret by violating another person’s trade secret rights;
2. isclosure or use of a trade secrea government agency in charge of preserving such trade secrets in the circumstances in which:
1. It is necessary to protect tlic health and security; or
2. It is necessary for other publicrests, not for commercial purposes. In this regard, a particular agency that is charged with the keeping and maintaining of the trade secret, or a state agency or any concerned person that obtained such trade secret, shall take regular measures to protect such trade secret from unfair commercial use;
3. Independent discovery as a result of the expertise of the person making the discovery;
4. Reverse engineering.

However, the exception under (4) is not applicable if the person who carries out such reverse engineering has entered into an agreement with the trade secret owner or with the product seller that states otherwise. Therefore, prudence dictates an express prohibition against reverse engineering when contracting for or licensing any technology or product where a trade secret is at risk of exposure.

Injunctive Relief

The controller of the trade secret is entitled to apply to the Intellectual Property and International trade Court ("IP&IT Court") for the following injunctions if there is clear evidence that a person has committed, or is going to commit, any act in violation of a trade secret:

1. A preliminary injunction ordering the violator to temporarily stop or refrain from infringing the trade secret, whether before or after filing a suit with the Court; and
2. A permanent injunction prohibiting the violator from infringing the trade secret.

In addition to taking action to obtain a permanent injunction against an infringer, the TSA allows the trade secret owner to take action against the infringer for compensation. The Court is empowered to determine compensation for the trade secret controller by using the following criteria:

1. In addition to actual damage incurred, the Court may order the infringer to compensate the trade secret owner for other benefits obtained from or arising out of the infringement.
2. In case the Court is unable to fix the amount of compensation under (1), the Court may allocate compensation that it believes is reasonable for the trade secret owner.
3. Where the infringement of a trade secret was carried out intentionally, or with the intention to cause malicious damage, so that such trade secret is no longer secret by its nature, the Court shall have authority to order the infringer to pay punitive damages in addition to the amounts fixed under (1) or (2). However, such additional amount shall not exceed twice the amount of compensation specified in (1) or (2).

In the application for an injunction in accordance with Section 8 (2), a trade secret controller may also request the Court to order the destruction or confiscation of instruments, tools and accessories used in committing the trade secret infringement.

Legal action against trade secret infringement shall not be entered later than three years from the date the infringement and the infringer were known. However, this action shall be entered no later than ten years from the date of infringement.

TSA defines the following trial criteria for proceedings before the IP&IT Court:

1. Where the controller of a trade secret files action with the Court requesting a preliminary injunction or permanent injunction, as described above, and it is the judgment of the Court that trade secret infringement exists but under special circumstances which do not justify the injunction as requested, the Court may consider ordering the trade secret infringer to pay fair compensation and allow continued use of the trade secret within a period that the Court believes reasonable.
2. In a case where the Court has issued an injunction prohibiting the resumption of infringement of a trade secret and it appears that such trade secret has been independently disclosed to the general public and is no longer secret, the person subject to such injunction is entitled to file an application to the Court to revoke such injunction.
3. Products made as a result of the infringement of a trade secret, which are still under the ownership of the infringer, shall be vested with the state or the trade secret controller, as ordered by the Court. Alternatively, the Court may order the destruction of such products if the possession of such products is deemed to be illicit.
4. Furthermore, TSA provides the benefit of presumption for a trade secret. That is, if the controller of a trade secret, which by its nature is a process of manufacturing a product, has taken civil action against an infringer, and the trade secret controller has proven that the infringer’s product is of the same nature as the product manufactured by the process belonging to the controller, it shall be preliminarily assumed that the infringer has used the process belonging to the trade secret controller, unless proven otherwise by the infringer.

The State Authority that is in charge of granting permission for the manufacture, importation, exportation, or sale of medicine, or agricultural chemical products utilizing new chemical entities, shall have the duty to keep and maintain the trade secret from being disclosed, taken, or taken for unfair commercial use, according to the regulations prescribed by the Minister, in case:

1. The information, either wholly or partly, is a trade secret whose nature is a result of tests or other data made, discovered, or created with considerable effort and;
2. There is a law that requires an applicant to submit to such state authorities the information supporting his application for approval; and
3. The applicant has also requested the state agency to keep and maintain that trade secret.

This provision is viewed as especially important to the Pharmaceutical Industry because there is often reluctance to submit safety data to the Thai Food and Drug Administration (FDA) before a patent has been issued for fear that manufacturers of generics will rely on the same data to have the generics approved by the FDA. However, the present draft contains an arguably inconsistent provision in Section 7(2)(a), which is still troublesome to the Pharmaceutical Industry. The section allows disclosure or use of a trade secret by the government agency in charge of preserving the secret if it is necessary for the protection of public health and safety.

The TSA provides for an administrative system, the Trade Secret Committee, which has the power and duty to propose its opinions relating to the policy and measures on trade secret protection and the policy on technology transfer connected with trade secrets to the Minister of Commerce in further submitting to the Cabinet and in issuing Ministerial Regulations and Rules in accordance with TSA. To perform its duties, the Committee is empowered to issue written orders requiring any persons concerned to make statements or provide data or deliver documents or any other materials for its consideration, as shall be deemed necessary.

In addition, the Committee is empowered to conciliate or negotiate compromises in matters of trade secret infringement, as requested by the involved parties before exercising the right to take action to the Court.

To assist the infringed party, the TSA provides for competent officials to perform their duties in relation to criminal prosecution, as follows:

1. To enter buildings, offices, production establishments, or storage facilities, or any vehicles, from sunrise to sunset or during working hours, to conduct a search or inspection when there is reasonable cause to suspect that there is an article obtained or manufactured as a result of a violation of the TSA and there is cause to believe that waiting for a search warrant may cause the documents or articles in relation to the offense to be relocated or destroyed;
2. To seize or attach documents or items relating to violations for use in the prosecution of a case in a situation where there is reasonable cause to suspect that there are violations of the TSA;
3. To order individuals concerned to provide appropriate assistance in the performance of the duties of the competent officials.

The penalties under the TSA are primarily criminal penalties consisting of fines, imprisonment, or both, and significantly improve on penal sanctions applicable under the Thai penal Code. The following are the penalties that the Court may impose:

1. For obstructing the competent officials in the performance of their duties while attempting to enter individual places to conduct a search or investigation : imprisonment not exceeding one year or a fine not exceeding twenty thousand baht, or both;
2. For refusing to provide appropriate assistance to competent officials in the performance of their duties: imprisonment not exceeding one month or a fine not exceeding two thousand baht, or both;
3. For disclosing another person’s trade secret intentionally in such a manner as to destroy the confidentiality of the trade secret and thereby cause malicious damage to the business of the trade secret controller, whether by propagation of documents, broadcasting or telecasting, or by any means: imprisonment not exceeding one year or a fine not exceeding two hundred thousand baht, or both;
4. For disclosing or exploiting the trade secret by the person charged with the duty of keeping and maintaining the trade secret, for his own benefit or for the benefit of any other person: imprisonment from five to ten years or a fine from one million to two million baht, or both;
5. For disclosing any facts relating to the business activities of the trade secret controller that should not normally be disclosed, except in the case where such disclosure was performed during the execution of official duties or for the benefit of investigations or proceedings: imprisonment from five to seven years or a fine from one hundred thousand to one million baht, or both;
6. For revealing any fact acquired or known from the person, as in paragraph 5 above, through the execution of official duties, or investigations, or proceedings, shall be subject to a penalty in the same manner as the above paragraph.

In the event of an offense committed by a juristic person resulting from an order, action, or lack of an order or action, which must be performed in the course of duty by the director, manager or any person responsible for the operations of such juristic person, that juristic person shall be subject to punishment pursuant to the relevant provisions pertaining to the offense.

It is expected that the substance of the latest draft of the TSA will remain intact while the Thai legislative committees continue to debate some of the finer points of the legislation. Once passed, Thailand will maintain its momentum toward full compliance with its obligations to enact TRIPs-compliant legislation. The new TSA in Thailand will offer significantly greater protection for trade secrets and will provide an effective mechanism for enforcement of trade secret rights that is in line with legislation in other transitional jurisdictions.