Trade secrets play an important, yet somewhat surprisingly low key, role in intellectual property (IP) law. In this article, we discuss a recent trade secrets case in China. We will follow that up with a brief overview of the law regarding trade secrets in South Africa.
China
The case we're discussing involved the Chinese company...
Guibao Technology
Guibao Technology is a silicon chemical technology company that is, according to a report, a 'leader in producing silane coupling agents in the fine chemical sector'.
Restless employees and new opportunities
Several Guibao employees who were involved in production, research and development (R&D) and sales decided to leave the company and join a start-up competitor. Things went well for the new company, but the move had a negative impact on Guibao, both in terms of sales and pricing – a news article talks of a 'huge loss in profits'. I think we can safely say that, as a result of the defections, Guibao took a significant hit!
Retribution – trade secret infringement
Guibao did not take the unexpected exodus lying down. The company chose to deal with this matter by suing both its former employees, as well as the competitor. Guibao claimed that both its former employees and the new company had been guilty of trade secret infringement.
The first court
The first instance ruling came from the Anhui Provincial High People's Court in 2022. The court did the following:
- It ordered the competitor to cease all production and sales of any products that utilized Guibao's trade secrets.
- It ordered the competitor to stop 'acquiring, disclosing or using' Guibao's technical information until it became public knowledge.
- It further ordered the competitor to compensate Guibao for 'economic loss and reasonable expenses'.
The Supreme People's Court
The first court did not deal with the issue of punitive damages. But the issue was seemingly taken further and the Intellectual Property Tribunal of the Supreme People's Court subsequently awarded punitive damages to Guibao in the sum of US$3.3 million.
The Guibao case serves as a useful illustration as to what a typical trade secrets case might look like – employees taking their know-how to a competitor tends to be a fairly common feature. I'll now move on to provide a brief overview of the law regarding trade secrets in South Africa.
South Africa
Trade secrets are relatively low-key and oft-overlooked in South Africa, yet they are certainly important. I'll now set out some of the features of a trade secrets case in South Africa – these are discussed in the book Introduction to Intellectual Property Law, authors, Dean and Dyer.
Going by the book
The authors make, inter alia, these points:
- There must be no detriment: The authors say that 'a person who has obtained information in confidence is not permitted to use it in a manner that is detrimental to the person who made the confidential communication.' - Terrapin Ltd v Builders' Supply Co (Hayes) Ltd (1960) RPC 128.
- You cannot take advantage: The authors go on to say that 'a defendant should not be in a better position as a result of his own wrong in appropriating confidential information, and cannot take advantage of his own wrong to the detriment of another - Stellenbosch Wine Trust Ltd and Another v Oude Meester Group Limited 1972 (3) SA 152 C.
- The quality of confidence: In order to be confidential, 'information must have the necessary quality of confidence about it – it must not be something that is public property or public knowledge' - Harvey Tiling CO (Pty) Ltd v Rodomac (Pty) Ltd 1977 (1) SA 316 (T).
- Misappropriation and filching: In what is possibly the best-known South African trade secrets case, Dun and Bradstreet (Pty) Ltd v SA Merchants Combined Credit Bureau (Cape) Ltd 1968(1) SA 209 (C), the court described misappropriation of information as follows:
'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... be regarded as dishonest and as constituting a fraud upon the compiler of the information.'
So, no more filching!
Further observations
The authors go on to say the following:
- No contract is required: there can be a breach of confidence even if there is no contractual relationship between the parties.
- Indirectly obtaining information: There can be a breach of confidence if it can be established that the confidential information was obtained either directly or indirectly.
- Aiding or abetting a 'breach of a contract of confidence' could amount to an infringement of rights - Saltman Engineering Co Ltd v Campbell Engineering C Ltd (1948) 65 RPC 203 (CA).
Trade secrets and confidential information are important weapons for IP owners. But they are often overlooked.
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.
