Introduction
The Association of Southeast Asian Nations (ASEAN) is a diverse region comprising 10 countries, each with its own national laws and legal systems that govern intellectual property (IP), including trade secrets. The World Trade Organization's (WTO) TRIPS agreement provides a foundational basis for the protection of trade secrets, under the "Undisclosed information" provisions. The TRIPS rules are relatively limited, so many national laws go further.
Understanding Trade Secrets
A trade secret is defined as business information that offers a competitive edge and is kept confidential. It has three key elements:
- Not Publicly Known: The information must not be generally known or easily accessible by the public or competitors.
- Economic Value: It must provide an economic benefit, such as a cost advantage, higher product quality, or other competitive benefits.
- Reasonable Efforts to Maintain Secrecy: The business must take active steps to keep the information confidential, including using non-disclosure agreements (NDAs) and securing the information.
Trade secrets are a form of IP. However, they have different characteristics from other forms of IP. They are not registered, and in some countries their status as IP is not very clear. Trade secrets are often used in technology, but they are very different from patents. While patents are government-granted rights to inventions for a limited period, trade secrets are protected automatically as long as reasonable efforts are made to keep them secret. It is possible to attract investors and build a business entirely based on Trade Secrets. Companies have done IPOs with trade secrets as their core IP.
Trade Secrets in Detail
The World Intellectual Property Organization (WIPO) expands on the definition, with examples including various types of confidential business information that provide a competitive edge, such as sales methods, consumer profiles, advertising plans, supplier lists, manufacturing processes, financial information, and more.
Who Utilizes Trade Secrets
Trade secrets are valuable to a wide range of businesses, from tech companies and manufacturers to sales and distribution firms, franchises, designers, and startups. Startups often overlook their importance – it is vital that entrepreneurs and Venture Capital investors think about them as a free additional IP asset. SMEs can also benefit in the same way. Many of the world's tech companies from TikTok to Facebook use algorithms which are core Trade Secrets, along with user data. This along with the brands themselves comprise most of the IP value for these companies which are worth USD billions.
Legal Systems and Rules
IP rules are territorial, meaning protection is granted on a country-by-country basis. The WTO TRIPS rules and other treaties applying in Southeast Asia such as the Regional Comprehensive Economic Partnership (RCEP) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CTPPP) which both have IP chapters, provide the frameworks for trade secret protection. Legal systems differ between common law, which focuses on 'confidential information', and civil law, which treats trade secrets as a form of IP with more active protection requirements.
Country-Specific Laws
Each ASEAN country has its own rules for trade secrets:
- Indonesia: Trade Secret Law No. 30 of 2000
- Singapore: Common Law Confidentiality (Law of Confidence)
- Malaysia: Common Law tort of breach of confidential information and/or by contract
- Thailand: Trade Secrets Act B.E. 2545
- Vietnam: Vietnam Intellectual Property Law
- Brunei Darussalam: No specific regulation but common law of confidence can apply
- Cambodia: No specific regulation on Trade Secrets
- Laos: Laos Intellectual Property Law No. 38/NA of November 15, 2017
- Myanmar: No specific regulation on Trade Secrets yet
- Philippines: Intellectual Property (IP) Code - Republic Act No. 8293
Not all the countries are WTO members yet, but the RCEP IP rules now apply across the region. It is not yet clear which of the ASEAN Member States intend to amend their laws.
IP and Trade Secrets Hierarchy
In the technical realm, patents, designs, or copyrights can be considered technical IP as they can be used to protect all kinds of technology. Tech companies need to plan for all three. There's a distinction between registrable and non-registrable IP rights. In today's economy much of the value of a business may reside in unregistered rights like Trade Secrets and copyright. Another distinction is between know-how and trade secrets. Both protect information but have different levels of confidentiality. Know-how is not clearly protected in Southeast Asia. Contracts do sometimes refer to it, and copyright can be used to document it. All kinds of intangibles assets are increasingly valuable and growing fast across the region.
In the digital sectors of the 21st century (a stated priority sector for ASEAN), the importance of traditionally registered IP and unregistered IP and intangible assets may become inverted. Data, algorithms and business information are often the most important assets in this sector, especially in Asia where patents do not protect business models.
Data is both positively and negatively protected. Data can be protected as a trade secret and by virtue of data privacy rules be subject to a separate legal regime.
Protecting Trade Secrets
Protection of trade secrets involves three key techniques:
- Physical: Using locks, security guards, NDAs, access rules, and a "Need to Know" approach within the business.
- Technical: Implementing device restrictions, password rules, encryption, and cybersecurity measures.
- Legal: Drafting contracts with NDAs and confidentiality clauses for all business partners.
This process requires internal collaboration amongst lawyers, HR, IT, management, and security, as well as external advisors.
Managing Trade Secrets
The management of trade secrets presents challenges in definition, auditing, and capturing them. Trade secret databases exist, but there are risks in third-party reliance and even capture documenting and adding to a database. The cross-border nature of trade secret management and IT risks, including inadvertent disclosure, employee theft, competitor theft, cyber-attacks, and industrial espionage, must be carefully managed.
Companies need to decide a clear strategy on how to capture, protect and manage trade secrets. There are no easy ways to do this and no best practice exists. This is partly to do with the sheer volume of Trade Secrets in a large modern business, but also the physical challenge of how to document and capture them safely.
Enforcement
The most common scenarios for enforcement include departing employees and directors, who start their own competing businesses, or even join competitors. Cybertheft and industrial espionage are also a concern. Trade Secret theft enforcement is not harmonized in Southeast Asian countries. In civil law countries it can be a criminal offence, although a complaint to the police would usually be needed to initiate it. In common law countries it is usually a civil wrong only, so it requires the Trade Secret owner to file a civil lawsuit. Cases are often complex so even in civil law countries they may be more suitable for the civil courts since the police are often only able to handle (or can only justify public resources for) clear cases of trade secret theft. Many are in fact more complex business disputes.
Case Studies
Several cases illustrate the enforcement and protection of trade secrets in the Southeast Asian region:
- Vietnam: A US company's dismissal of an employee for breaching confidentiality rules was upheld by the People's Court of Ho Chi Minh City.
- Singapore: A payroll and HR services company's lawsuit against former employees for alleged misuse of confidential information was unsuccessful due to lack of evidence.
- Malaysia: A manager was found to have breached his employment terms by misusing company confidential information, with the High Court ruling that the duty of fidelity extends beyond the employment term.
Conclusion and Tips
Trade secret protection is not only a legal issue but also a business one. It requires a commitment from management and integration into business processes. Departments like HR and IT play a crucial role, and legal assistance is vital in setting up processes. Contracts, particularly NDAs and confidentiality clauses, are essential, and prevention is always better than a solution in the context where there is no cure for the loss of a trade secret.
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.