'The conduct of a rival trader who obtains and, well knowing the position, uses the information to advance his own business interests and activities, amounts to a deliberate misappropriation and filching of the products of another's skill and labour. Such conduct must, in my view, be regarded as dishonest and as constituting a fraud upon the compiler of the information.' These were the words of Judge Corbett, in the well-known South African case of Dun and Bradstreet (Pty) Ltd v SA Merchants Combined Credit Bureau (Cape)). The judgment was handed down many years ago, in an age when people still used expressions like 'well-knowing', and words like 'misappropriation' and 'filching'.
Trade secrets – a guide and a posting
Trade secrets fall within the scope of intellectual property ("IP") law. Trod Lehong, a South African patent attorney who is the Head of the Legislative, Policy and Technology Advice Section at the World Intellectual Property Organisation ("WIPO"), announced in a recent LinkedIn posting the launch of the. In his posting, Lehong referred to another useful document entitled Oversight of national and regional trade secret systems.
Lehong says this: 'Trade secrets, often the silent partner to the patent system are frequently overlooked as crucial contributors to economic, social and technological development. However, when effectively leveraged, they can unlock significant barriers and become powerful enablers.'
Lehong's posting and referral provide us with the perfect opportunity to refresh ourselves on this important, yet oft-overlooked, aspect of IP law. Let's consider the following:
When information can enjoy protection as a trade secret
Information can enjoy protection as a trade secret if it:
- can be applied in trade or industry;
- enjoys secrecy or confidence;
- is known to a limited number of people;
- has economic value to the owner.
It is also necessary that the holder of the trade secret has taken reasonable steps to identify, protect and maintain confidentiality.
What sort of information can enjoy protection?
The scope is vast and could include:
Systems, processes, technical information and specifications; inventions, manufacturing techniques, designs, source code, unregistered trademarks; database information; product formulae, marketing and business information generally, customer lists, credit records, price lists, tender prices and business discussions.
The scope of trade secret protection
The protection provided could cover, inter alia:
- unlawful competition;
- breach of confidence;
- use of confidential information;
- misuse and misappropriation of confidential information; and
- springboarding – seemingly a new term, but self-explanatory!
The 'Oversight' document says that 'South African courts have relied on principles such as public interest, as well as reasonableness, public policy, legally recognizable interest, and/or proprietary interest worthy of protection as core factors in reaching their decisions when asked to adjudicate and enforce the protection of trade secrets and know-how.'
Legal proceedings and Remedies
The options are as follows:
Civil proceedings
In South Africa, the aggrieved owner of the trade secret could apply for:
- an interdict (injunction) to prevent the unauthorised use of the trade secret - in cases of urgency, an interim injunction might be granted;
- delivery-up or destruction of goods;
- damages for losses suffered; and
- unjustified enrichment (this may be possible).
Criminal proceedings
It has been suggested that criminal penalties could possibly apply in cases where trade secrets have been released – there is mention of two South African statutes, the Cybercrimes Act 19 of 2020 and the Medical Schemes Act 131 of 1998.
In camera proceedings
It is suggested that in judicial proceedings involving trade secrets, in-camera proceedings may be an option. It's further suggested that a court could prevent disclosure of a trade secret by an expert witness, by requiring that witness to maintain secrecy, or by issuing a protective order stating that the trade secret may not be disclosed (or only disclosed under certain conditions and circumstances).
What must be proved and who bears the burden of proof?
A plaintiff/ applicant in a trade secrets claim bears the burden of proving:
- its interest in, or ownership of, the information;
- the confidential nature of the information;
- an obligation to maintain the secrecy of the information;
- unlawful acquisition and use of the information; and
- for a damages claim, a causal damage as the result of the breach.
Interim relief
In order to obtain a preliminary injunction, it would be necessary to establish a well-grounded apprehension of irreparable injury and an absence of any ordinary remedy.
Final relief
For a final interdict, a clear right (as opposed to a prima facie right) needs to be established - the plaintiff must prove a continuing act of infringement and the absence of any other satisfactory remedy. The procedure is generally by way of action proceedings with oral evidence.
Trade secrets are clearly an important aspect of IP law and a very valuable asset in most businesses. It's clear that the law is designed to protect trade secrets as a valuable and proprietary form of information, however, of greater importance is the ability to maintain the confidentiality and/ or secrecy of the information in order to retain and enhance its value. Trade secrets, like any other form of intellectual property, are capable of exploitation and commercialisation to create value for a business. Unlike patents, trade secrets don't have a limited term of monopoly and can be an extremely useful tool in protecting commercially sensitive information over longer periods of time. It is, therefore, critical for businesses to start considering strategies for the protection and enforcement of trade secrets and tools such as the WIPO Guide to Trade Secrets and Innovation will be useful to guide such strategies.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.