Keeping trade secrets secret is no secret!

(Written by: Rachel Woo)

Trade secrets can be the most important form of intellectual property rights to their owners. This is why The Coca-Cola Company staunchly guards access to the secret recipe for making its iconic Coca-Cola brand of soft drinks; by doing so, it can preserve an exclusive monopoly over the distinctive flavour of its drinks, which nobody else can exactly replicate in trade.

Broadly speaking, a trade secret is confidential information which is commercially valuable to a business, and which provides it with a competitive edge. More specifically, under The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), a multilateral agreement among member nations of the World Trade Organisation (WTO) including Singapore, a trade secret is information that is generally not known to the public, confers some sort of economic benefit on its holder and is the subject of reasonable efforts by the rightful holder of the information to maintain its secrecy.

Trade secrets can encompass manufacturing and industrial secrets, as well as other commercial secrets which may include technical know-how, new products or business models, business operation manuals and other kinds of information closely guarded by companies.

There is no legislation governing the protection of trade secrets in Singapore, and protection is instead based on the common law doctrine of breach of confidence as well as intellectual property and/or contract law. In this regard, consideration first has to be given to determining whether the subject matter concerned qualifies as a trade secret. Some determining factors would include: (1) whether there exists a quality of confidentiality; (2) whether the information was given under circumstances that would import an obligation of confidentiality on the receiving party; and (3) whether the party communicating the trade secret is authorised to do so or knows that the information is of a confidential nature.

There a few ways in which companies can protect their trade secrets and ensure that they have a remedy or recourse against unauthorised disclosure, such as:

1. Incorporation of confidentiality clauses into contracts

In doing so, a disclosure of any confidential information as defined under a contract would result in a breach of the contract, and parties would be entitled to the remedies and/or damages as set out in the contract itself.

2. Labelling of confidential documents

By labelling documents as “Confidential”, it would be clear to the receiving party that they are under an obligation of confidentiality and should not disclose the information on the documents without authorisation of the disclosing party. Additionally, should the receiving party had received the document by mistake or accident, the label would import an obligation of confidentiality onto the receiving party even though they are not the intended recipient of the document. In the event that there has been unauthorised disclosure of the confidential information in the document, the common law doctrine of breach of confidence would apply.

3. Implementation of a data protection policy

When put into motion, a robust data protection policy helps a business promote a corporate culture of ensuring that the secrecy of any trade secrets is secured, thereby reducing the risk of unauthorised disclosure that could adversely impact on the commercial viability of the business. The policy would also include disciplinary procedures which are to be instituted against staff of the business who have been found to have breached the policy’s provisions.

At the end of the day, companies should look towards developing effective strategies and implementing appropriate measures that are a best-fit for their circumstances to optimise the protection of their valuable trade secrets.