Trade secrets: Coming of age on a global stage
Trade secrets are taking centre stage as a means for global companies to protect their intangible assets and as an increasingly expensive jeopardy for unwary companies.
A slew of billion-dollar trade secrets cases, many with geopolitical implications and record damages awards in the US and China herald this new reality. Trade secrets lawyers across the globe say many of their most prestigious clients are yet to be up to speed with these increasing opportunities, and potential liabilities.
The game changer was the near simultaneous transatlantic enactment of the May 11, 2016, Defense Against Trade Secrets Act (DTSA) in the US and the June 8, 2016, EU Trade Secrets Directive. The DTSA brought a single federal trade secret legislation to what had been separate state-by-state laws. Similarly, the EU Directive, later enacted into member states’ laws including the Brexiting United Kingdom, has harmonised member states’ approach to trade secrets regulation.
Read WIPR's industry-first Trade Secrets Rankings.
Other major countries have also tightened their laws related to trade secrets. In 2016 Japan amended its Unfair Competition Prevention Act (UCPA) to expand liability “to (include) bad actors beyond immediate misappropriators and to countries beyond Japan’s borders”.
China revised its Anti-Unfair C ompetition Law in 2019, alongside changes to civil code, labour law, and criminal code regulations affecting trade secrets. Trade secrets are included in pending multilateral trade agreement negotiations. The 2018 United States-Mexico-Canada Agreement (USMCA) revision of the North Atlantic Free Trade Agreement (NAFTA) includes provisions for the expansion of trade secrets protection and the criminalisation of trade secrets misappropriation.
Taking reasonable steps to keep secrets, secret
The January 1, 1995 TRIPS Agreement was the first international convention with express provisions relating to the protection of trade secrets. To ensure effective protection against unfair competition, as provided in Article 10bis of the 1883 Paris Convention for the Protection of Intellectual Property, “persons shall be able to prevent trade secrets (undisclosed information), from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices (Article 39(2)).”
The protection of trade secrets does not entail protection in the form of rights, as with patents and copyright, but protection against unfair competitive practices, consisting of specific acts such as unlawful acquisition and unlawful use.
For this reason, a significant number of countries protect trade secrets through laws prohibiting unfair competition. As set out in TRIPS—common to DTSA, the EU Directive and most related anti-competition, labour and other laws—to benefit from protection a trade secret must be information that:
