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TRANSCRIPT
How To Protect Your Trade Secrets While Doing Business
in Southeast Asia
18 June 2014 ASEAN IPR SME Helpdesk
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Today’s Speaker James Evans
Firm: Tilleke & Gibbins Location: Bangkok Email: [email protected]
James Evans, a qualified solicitor of England & Wales, is a consultant at Tilleke & Gibbins who advises on IP matters across Southeast Asia. In 2010, James was recognized as one of the top 250 life sciences patent litigators worldwide. He handles infringement matters in relation to all types of IP, with particular expertise in patent litigation, trademark and copyright infringement, and alternative dispute resolution. He has handled IP matters in Thailand, Vietnam, Indonesia, Malaysia, Cambodia, and Myanmar.
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Agenda
• An introduction to trade secrets and general IP management strategies • Trade secrets in practice - how to use contracts to protect your valuable
asset • A closer look at your trade secret policy • Case studies • Intellectual property, trade secrets and the ASEAN Economic Community • Take away messages • Q&A
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Know before you go
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Question: Do you have your own internal written policy on management of trade secrets or intellectual property?
A. Yes, I do
B. Yes, but I’m not sure how effective it is
C. No, but I am thinking about it
D. No, I don’t think it is necessary
Poll 1
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Introduction to trade secrets and general IP management strategies • Not known to the public
• Confers on its holder some form of economic benefit or advantage over competitors within the same industry or profession
• Owner of such information must have taken reasonable efforts to maintain its secrecy
Examples: • production processes, chemical processes and formulas • blueprints for machines • employee handbooks • various forms of marketing data, such as customer lists
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Patents versus Trade Secrets
Pros • Patent – public but guaranteed
20 year monopoly if granted • Patent – possible to reverse
engineer? Patent it! • Patent – specific laws to protect
right (more common than trade secret)
Cons • Patent – may not be patentable
or granted and could be challenged
• Patent – limited to 20 years (e.g. of Coca-Cola)
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Patents versus trade secrets
Pros • Trade secret – may last indefinitely • Trade secret – does not disclose
invention to competitors • Trade secret – does not have to
meet patentability criteria
Cons • Trade secret – can be leaked and
lost • Trade secret – others may
independently discover it • Trade secret – not all confidential
info is a trade secret
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An introduction to trade secrets and general IP management strategies
Effect on general management strategy? Use of non-disclosure agreements and confidentiality clauses in employment contracts and other agreements is generally the level of caution at which the company must operate.
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An introduction to trade secrets and general IP management strategies
Infringement of trade secret: • Any act of disclosure, deprivation or usage without consent of the owner
in a manner contrary to fair commercial practice • Such as breach of contract, infringement or inducement to infringe
confidentiality, bribery, coercion, fraud, theft, etc.
• The infringer knows or has reason to know that his/her action is contrary to fair commercial practice
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An introduction to trade secrets and general IP management strategies
Legal remedies: • Petition the court for a preliminary
injunction to stop the infringement of the trade secret temporarily, or proceed to file a lawsuit in court for a permanent injunction
• Claim compensation in the form of damages from the alleged infringer
• Criminal penalties are also available e.g. under the Thai Trade Secrets Act
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An introduction to trade secrets and general IP management strategies
Legal remedies: • Contractual claim: whereby the infringer has contractual obligations to
keep the information confidential and/or refrain from using the information to compete with the trade secret owner
• Ensure that the contract allows for local enforcement to stop the source of the IP violation (e.g. Singapore transhipment point)
• Consider arbitration (e.g. in Singapore) for a secondary means of resolving issues.
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Question: Do you always ensure that your business partners, employees etc., sign up to a Confidentiality or Non-Disclosure Agreement?
A. Yes, I do
B. Most of the times I do
C. No, but I am thinking about it
D. No, because I do not know how to draft one
Poll 2
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How to use contracts to protect your valuable asset • Non-Disclosure Agreements (NDA) and Confidentiality Agreements • Memorandum of Understanding (MOU) • Employment agreements • Agency agreements • Trademark/patent license and technology transfer • Franchise agreements • Distribution agreements, Manufacturing agreements • Joint Venture agreements • IT-related agreements • Selling/assigning your IP
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Trade secrets in practice - How to use contracts to protect your valuable asset The IP “License” – Clarifying the Terminology • A license is simply a contract that allows another person to perform a
specific act. • Licenses are often issued by governments to allow qualifying persons to
carry out certain things, such as drive vehicles, sell alcohol on premises etc. • An IP license simply allows a third party to do certain things with your IP.
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Contracts - NDA’s and Confidentiality Agreements • Pre-emptive in nature – this
means you have to deal with it early on
• Relevant to trade secret matters—business strategies, new product ideas and financial and accounting information
• Mutual v. single party confidentiality.
• With whom? Employees or other third parties connected to the target or to the target IP
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Contracts - Employment and Agency Agreements • Employees and agents use the company IP and contribute to and create the
company IP • It is vital to have IP covered in all such agreements • Copyright exception • Involved in creative sector or R&D? Then it may also be worth
differentiating between “old” IP and “new” IP • Obligation on your partner’s employees to sign up to such terms • Separate confidentiality agreement for particularly sensitive information
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Contracts – Trade mark/Patent License and Technology Transfer • Exclusive versus non-exclusive and reservations to allow the Licensor to use • Transferable and Non-Transferable Licenses • Non-Competition Covenants • The franchise business model is widespread in Singapore, Thailand,
Malaysia and Indonesia. • It is less common in Vietnam, Laos and Cambodia, but in the next few years,
this will change..... • Similar to a simple license, but will have clauses on how to run the business
which will usually involve trade secrets
Contracts – Franchise Agreement
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Contracts – Distribution and/or Manufacturing Agreement • Consider and carefully cover
distributors’ activities such as marketing and promotions in the agreement
• ASEAN countries are a popular venue for companies to have goods manufactured due to skilled labour force and competitive labour costs
• Clear termination and phase-out clauses needed regarding license agreements
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Contracts – Joint Venture (JV) Agreement
• When sharing IP or researching and developing existing IP to create new IP a JV may also be appropriate where one party is bringing all the IP to the table
• Vital that the agreement covers what IP each party is bringing to the JV and who owns the new IP. Due diligence and identification of the IP is therefore an important step prior to entering into a JV arrangement
• Specifically deal with improvements on each parties’ IP, who owns it
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A closer look at your trade secret policy
Overview • A policy, not matter how long or short, helps protect your trade secrets • Who and when: new or promoted employees. Provide a copy, get them
to sign • Make available on intranet or as print out in office • Define (non-exhaustively) your trade secrets and provide a list of
examples • Access and storage requirements. Levels of privilege. • Time periods – during and after employment?
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A closer look at your trade secret policy
Keep records • Adopt physical security measures and label documents • Maintain an email monitoring system for employee emails • Require sign-in for any visitor; record the reason for the visit; limit visitor
movement in BST’s areas; always have a company official accompany the visitor.
• Secure hardcopies of trade secrets under lock and key • Label all possible trade secret information as “CONFIDENTIAL” • Use of acknowledgement forms upon start, training, promotion, ending
of employment
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A closer look at your trade secret policy
Trade secret audits • Create an internal committee of high-level managers to carry out the
audits proactively and routinely • Such regular monitoring is especially important in protecting new trade
secrets that result from the gradual evolution of information, as opposed to those trade secrets that result from some revolutionary change.
• Without constant inventory, these small changes may be overlooked. This may result in inadvertent exposure of trade secrets.
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A closer look at your trade secret policy
Protect electronic data: Impact of IT, emails, databases • Use computer passwords and sign-ins • Monitor employees’ access to such
files. • Limit the employees that may access
electronic trade secret information/data
• Develop corporate policies regarding the use of external storage devices, with laptops, transmission of company data to personal email accounts, and the use of instant messaging software
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A closer look at your trade secret policy
Protect electronic data. Impact of IT, emails, databases • Establish firewalls between confidential and non-
confidential information on BST’s servers • Use stringent security policies, such as data
encryption and multi-factor authentication measures
• Monitor the company network to identify and react quickly to cyber attacks
Case study 1: Franchising in Southeast Asia
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• A well-established European language school wishes to set up its first business in two to three Southeast Asian countries using franchising model
• Thailand as a priority market, and Malaysia and Vietnam as secondary targets, if the Thailand franchising operation does well.
• The Thai business partner requests that the school is opened first and a trial period used to measure the viability of full franchising. Therefore, no written agreement is signed before the school in Thailand is opened. The school is successful by the end of its first year and at that point, the Thai partner stops paying the informal license fees to the European school.
• Six months later, the European language school discovers that the Thai partner has opened a business in Vietnam using the same name and curriculum.
Case study 2: Manufacturing in ASEAN
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• An SME European company (Company A) makes glass substrates for the semi-conductor industry. It makes these parts in Thailand by licensing Thai Company B to manufacture.
• The parts are sold and transported to Company C in Malaysia for semi-conductor assembly where a multinational European company has a joint venture company (Company C) with a local Malaysian SME and a Singaporean SME (Company D).
• The semi-conductors are sold to Company D’s Singapore entity (owned by Europeans based in Singapore) that has an exclusive license with a U.S. computer company.
Case study 2: Manufacturing in ASEAN
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• Company A must ensure that it has tight control over the quality of the glass and all processes. Regular checks of the factory should be provided for in the agreement. There are likely to be transfers of trade secrets and confidential information during the manufacturing process at all different stages.
• The SMEs must ensure that their own IP is not given away. • They may also wish to procure attractive licensing terms of any improvements
come about from the manufacturing. • For example, technicians from Company D improve the final step of assembly
at the premises in Malaysia and the parties agree that Company C, the joint venture company, has a right to patent it. Company D could, as part of the joint venture agreement, seek to obtain a royalty-free license to use this improvement itself.
Intellectual property, trade secrets and the ASEAN Economic Community
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The last 30 to 40 years Taiwan and China received the benefit of innovative investment by way of technology transfer, companies are now looking ASEAN: • Ten countries all moving to operate as one region across all sectors from
2015 onwards; • Diversity in the level of development across the region enabling ASEAN to
attract a range of technologies; • Development of certain specialist skills and industry types such as semi-
conductors in Singapore and auto assembly- and parts- manufacturing in Thailand;
• Relatively low labour costs, but good levels of skill; • Ease of doing business in Southeast Asia is often a deciding factor over other
regional competitors; • A young and rapidly growing Southeast Asian marketplace
Intellectual property, trade secrets and the ASEAN Economic Community
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• The AEC will allow the free movement of goods and services. Therefore, it is advisable to protect rights to the highest degree possible in all ten countries. This means obtaining registrations for trademarks and patents and considering recordal of copyright, where applicable.
• The AEC has no “Community Trade Mark” or regional patent and there are no plans to introduce them. Therefore, a rights holder must register separately. Also, it is wise to consider individual trade secret and copyright laws, as it may be possible to record these at a national level.
• The AEC “Single Window” for Customs similar to the EU - one Customs entry point and then free to circulate around the AEC. The likelihood of your goods being sold in a country you had not previously anticipated, such as via the grey market, will increase significantly.
Intellectual property, trade secrets and the ASEAN Economic Community
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AEC – practical steps to take now: • SME investors in the AEC should note that if they have a local distributor or
licensing deal, this should be reviewed to control—as much as local laws will allow—the distribution of your goods or sublicensing, etc.
• As the regional market expands, local businesses will want to sell to potential customers further afield. Your commercial agreements must anticipate and deal with this.
• Review your overall IP and trade secret position now, before it is too late.
Take Away Messages
• Importance of notification of confidentiality – take seriously
• Practicalities – should be at forefront of peoples’ minds at all times
• Value your IP – it can give you competitive advantage
• Take local legal advice
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