IP Rights SIG/Trade Secrets
International Game Developers Association
Table of contents |
[edit] Trade Secrets
A savvy business can employ the legal doctrine of Trade Secrets as a cost effective measure to protect its valuable Intellectual Property (IP). Using trade secrets to buttress copyrights, trademarks and patents is a powerful mechanism to protect any company's or individual's IP.
Although American and International laws recognise the importance and value of IP, trade secrets are the only form of legal protection that allows a company's IP (often research) to remain secret. The concept of trade secrets protects not only positive research (research that leads to a productive result), but also negative research (research that does not lead to a productive result). Negative research is extremely valuable: if a competitor could ascertain the results of a company's research and identify which procedures, processes, etc. do not lead to a productive result, then that business does not have to commit the capital to conducting that research and can reallocate those monies to other R&D, or advertising, or marketing.
[edit] What does a Trade Secret Protect?
The legal definition of a trade secret varies from country to country and, where applicable, from state to state.
Today in the US, the Uniform Trade Secrets Act (UTSA) provides a widely accepted definition of a trade secret:
"information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy."
In addition to the UTSA, whose adoption is voluntary with each of the states, the US Congress has enacted a national act criminalising certain forms of trade secret theft. The Economic Espionage Act of 1996 makes illegal the misappropriation, copying or unauthorised possession of trade secrets. The Act does not contain a definition of trade secret, relying on case law interpretation which includes the UTSA. Fines are established of up to $5 million for a private violation and $10 million if a foreign government, instrumentality or agent is involved. The Act also provides for substantial imprisonment. The Economic Espionage Act is in addition to, and does not supersede, the UTSA or other comparable state laws.
In the UK, a trade secret is any information known to only a few people, the disclosure of which to others would constitute a breach of confidence. The laws that protect other kinds of confidential information from disclosure (Law of Confidentiality) also protect trade secrets in the UK.
Unlike patent protection, trade secret status does not provide any right or authority to prevent another company independently developing the same or similar technology, from marketing or otherwise using their technology.
Notwithstanding trade secret status, business information not covered by client-attorney privilege or similar exemptions is subject to government subpoena (and therefore, limited disclosure) when so ordered by the courts.
[edit] How to establish a trade secret
Regardless of the legal jurisdiction in which a company resides, the company benefits from understanding the factors that will confer trade secret status, and developing a proactive plan to avoid misappropriation of the company's trade secrets.
It is paramount that a trade secret is a legitimate secret. Knowledge common throughout the industry cannot be appropriated as one's own trade secret. Nor can information, which would qualify for trade secret status had proper means been employed to protect the information, qualify if the proper means were not utilised. Once a trade secret has been disclosed to the public by proper means, it can no longer receive trade secret protection. Conversely, if a trade secret has been discovered, disclosed or disseminated through any improper means, such as theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means, the trade secret protection remains intact.
Therefore it is paramount for businesses to create and successfully implement "proper means" (procedures and protocols to ensure that their trade secrets are protected). A company can utilise the following tactics to protect its trade secrets:
- Employee Handbook and Agreements: Adopting an employee handbook that informs an employee that he or she will be entering into a confidential relationship with the employer. Additionally, the handbook should include all relevant policies with signature blocks located next to the pertinent information. This can also be covered in employment agreements.
- Non-Disclosure Agreements (NDA) / Confidentiality Agreements: NDAs and other forms should be signed by all employees of a company and also by any potential partner or third party to which trade secrets could be disclosed. The existence of an NDA still requires that all trade secrets be clearly indicated as such, so that those involved have been notified which information the NDA pertains to.
- Segregating Trade Secrets: Trade secrets should be stored in locked file cabinets or secure computers, and / or contained in areas with restricted access to ensure that only people who need to view the information are granted access.
- Document Marking and Formal Conveyance: Documents divulging trade secrets should be marked clearly (generally on the cover, and also on each page) as proprietary and confidential; the company may additionally endeavour: to maintain a signature and date register of employees and others who have received copies of such documents; to establish prohibitions on copying of such documents by other than a central administrative department; to prohibit disposal of the documents in unsecured dustbins; to require destruction of such documents by shredding or incineration; to require formal reporting of all destruction and copying.
Trade secret protection last for as long as the secret remains so.
[edit] How Much Is It Going To Cost?
Security and administrative costs make up the bulk of costs associated with establishing and protecting a trade secret. Trade secrets are not registered with any government, or published in any catalogue, nor do they have a finite legal lifetime - they are, after all, secrets.
To establish trade secret rights in court, it is not necessary to protect the secret using the strongest available security measures. Rather, one must establish that reasonable measures were in place at the time of disclosure, so as to preclude or marginalise the risk of accidental disclosure.
Nonetheless, disclosure of a trade secret can cause a business irreparable harm. By definition, this means that no amount of monetary compensation or goodwill can mitigate the negative effect of disclosure on the business. Most NDAs and Confidentiality Agreements contain a clause to this effect; to the extent that such a clause is accurate, a company should commensurately protect its trade secrets (and those conveyed to it by others) from willful as well as accidental disclosure.
Some security-conscious (not necessarily games-related) companies inspect employee personal effects at entry on to and exit from the premises, prohibit the use of cameras on-site, require employees to close the blinds on their windows, filter all public internet file transfers, and allow only specific employees to carry mass storage devices, blueprints, or other media in which trade secrets could be smuggled all in the name of protecting trade secrets.
[edit] What qualifications and experience should I look for?
One does not typically employ counsel or an agent until such time as a trade secret is disclosed; at such time one should select a firm employing staff with a thorough understanding of contract, confidentiality and trade secret law in the pertinent jurisdiction.
Companies employing dedicated security staff should establish and communicate security enforcement policies related to protection of trade secrets, and consult with qualified staff or agencies to assure that these policies are simultaneously respectful of employee's human rights.
[edit] International Differences In Trade Secret Protection
European Community law does not specifically protect trade secrets or undisclosed information, although the UK, France, and Germany (among others) do have such laws.
The UK protects trade secrets using the Law of Confidentiality; consequently, a company must explicitly contractually bind in confidence anyone to whom trade secrets might be disclosed.
State Law, rather than Federal Law, protects trade secrets in the US. Forty-four US States use the definition of trade secret found in UTSA; six others use their own definitions. When trade secrets are transmitted over a telecommunications system such as the Internet, it might not be obvious to either the sending or receiving party which state or national jurisdiction has legal authority.
