trade secrets and business

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Innovation and Thailand 4.0:

Trade Secrets and BusinessKowit Somwaiya

Managing Partner

14th March 2017

www.lawplusltd.com

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Basic Requirements for Trade Secret Protection• Three requirements for a trade secret to be eligible for legal protection

in Thailand:

– the information must be a secret, i.e. not be publicly known or accessible by persons who are normally connected with the information;

– the information must possess a commercial value derived from its secrecy; and

– the controller of the information must have taken appropriate measures to maintain the secrecy.

• No registration is required in order to gain protection.

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Unknown to the public and not accessible by connected

persons

Basic Requirements for Trade Secret Protection

Provides competitive

advantage and possesses a commercial

value

Kept confidential: “appropriate measures to maintain the

secrecy.”

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Tips for Trade Secret Protection 11. Identify trade secrets: Accurate record keeping is important.2. Develop a protection policy, monitor compliance and prosecute violators3. Restrict access to only those persons having a “need to know” the

information4. Mark documents “confidential”5. Physically isolate and protect6. Restrict public access to facilities7. Maintain computer secrecy8. Have measures for employees, e.g. non-disclosure and non-competition

clauses9. Have measures for third parties, e.g. non-disclosure agreements

Most of trade secret losses are caused by employees, contractors, trusted insiders!

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Tips for Trade Secret Protection 2• Who owns the trade secret in the following situations?

– Trade secret developed by employee

– Trade secret developed by external contractor

• Under the Trade Secret Act, the term “owner of trade secrets” means the person who discovered, invented, compiled or created the trade secret.

• To avoid disputes: WRITTEN AGREEMENT + ASSIGNMENT in advance for all trade secrets developed during employment or commission

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Trade Secret Commercialization

• ASSIGNMENT

– Most trade secret assignments occur as part of the sale of the business.

• LICENSE

– Trade secret license

– In combination with other IPR license

• e.g. patent license (hybrid agreement), franchise agreement

– Advantage: additional revenues

– Disadvantage: risk of disclosure (potential loss)

• TRADE SECRET AS COLLATERAL

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Trade Secret License• In general, a trade secret license is a private agreement whereby the

owner (licensor) grants the recipient (licensee) with permission to use some or all of the secret information.

• The licensor retains full title and all ownership rights associated with the trade secret.

• Exclusive / non-exclusive license

• Most technology transfers require licensing not only of a patent or a patent portfolio, but of an accompanying trade secrets as well – the whole “package” is usually needed to take commercial advantage of the patented technology.

• Black Box dilemma**

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Black Box Dilemma & Non-Disclosure Agreement• Black Box Dilemma: the trade secret owner cannot ‘let the cat out of the bag

’ and the potential licensee will not want to ‘buy a pig in a poke’.

• A non-disclosure agreement (NDA) is the most commonly used to safeguard against such potential loss.

• NDA is typically presented as a stand-alone legal tool that precedes licensing negotiations. It helps to reinforce the idea that the disclosed confidential information is continuously covered by the duty to maintain confidentiality under the NDA, even if licensing negotiations fail.

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Drafting Trade Secret License Agreement 1• Subject matter

• Exceptions

– Some information provided may not be secret and some information may also be acquired by the licensee using appropriate legal means.

• License grant, prohibitions, improvements

– Define what licensee is and is not authorized to do with the subject

– Matter of the trade secret licensing agreement – the right to access, the right to use, and the right to disclose proprietary information

– Who owns the trade information developed from such license trade secret?

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Drafting Trade Secret License Agreement 2• Protective safeguards and confidentiality policy

– The licensor should demand reasonable protective measures, preferably equal or exceeding the measures used by the licensor at the time of the license.

• Royalties

– In trade secret licensing a royalty payment obligation may or may not stop when confidential information becomes publicly known.

• Remedies

– A clause that automatically terminates the agreement and revokes licensed rights upon material breach should be included in the agreement.


Trade Secret as Collateral 1• Using IP as business collateral is allowed under the Business Collateral

Act B.E. 2558 (A.D. 2015) (“BCA”), effective on and from 2nd July 2016.

• A collateral provider

– an individual

– a juristic person

• A collateral receiver

– a financial institution

– a person prescribed in a ministerial regulation

• e.g. trustees, securities companies, mutual funds, or factoring businesses


Trade Secret as Collateral 2

Caution: A lender / collateral receiver will want to know whether or not the company has

sufficient protections in place to ensure the trade secret remains a trade secret.

• No Requirement to Deliver a Collateral Property

– A collateral provider can retain the physical possession of the collateral property and he can put the collateral property to commercial use during the collateral period.

• A collateral agreement must be made in writing as a contract and registered online with the Business Collateral Registration Office (“BCRO”), Department of Business Development, the Ministry of Commerce.


Famous Trade Secrets

• COCA-COLA RECIPES• KENTUCKY FRIED CHICKEN • LISTERINE• WD-40• KRISPY KREME DOUGHNUTS • MCDONALD’S BIG MAC SPECIAL SAUCE• THE GOOGLE SEARCH ALGORITHM


Trade Secret Disputes in Thailand• A dispute over a trade secret usually arises when a trade secret

owner makes a claim against its employee, ex-employee, or business partner for trade secrets infringement.

• An absence of appropriate measures to maintain trade secrets is one of the main reasons for the court to dismiss a plaintiff’s claim.


Trade Secret Disputes in Thailand• Supreme Court Judgment 10217/2553 (A.D. 2010)

– The plaintiff claimed that there was a nondisclosure clause in the employment agreement, but it was unable to demonstrate that the documents with the list of customers, the information containing the origin of goods and the quotations were protected by the appropriate measures to prevent access by an employee who is not normally connected to this information.

– The Court determined that a general non-disclosure and non-compettion clause inserted in an employment agreement was not an appropriate measure to maintain the secrecy of the trade information, and it consequently dismissed the plaintiff’s claim.


Conclusion

• Trade secret = DO-IT-YOURSELF form of IP

• Prioritize trade secret protection.

• Identify your trade secret.

• Take appropriate measures to maintain the secrecy.

• Stick to a “Need-to-Know” system.

• Improve employee awareness.

• Use and commercialize your trade secret in a prudent way.

• Be prepared if your trade secret is misappropriated.


Unit 1401, 14th Floor

990 Abdulrahim Place

Rama IV Road, Bangkok 10500

Tel. +66 (0)2 636 0662

Fax+66 (0)2 636 0663

Room 517, Yangon International Hotel

No. 330 Corner of Ahlone and Pyay Roads

Dagon Township, Yangon, Myanmar

Tel. +95 9 505 6667

Tel. +95 92 6111 7006

Kowit SomwaiyaManaging Partner

[email protected]

http://www.lawplusltd.com/


The information provided in this Document is general in nature and may not apply to any specific situation. Specific advice should be sought before taking any action based on the information provided. Under no circumstances shall LawPlus Ltd. and LawPlus Myanmar Ltd. be liable for any direct or indirect, incidental or consequential loss or damage that results from the use of or the reliance upon the information contained in this Document. Copyright © 2017 LawPlus Ltd. and LawPlus Myanmar Ltd. www.lawplusltd.com Contact: Kowit Somwaiya, Email: [email protected]

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