Gordon Harris: Okay, we are on the hour so I think we will get going. I am going to make a few introductory comments so people are joining while I say that, then they will be ready and hopefully here by the time we get into the full content.
First of all then, good day to you, wherever you may be in the world. My name is Gordon Harris from the Gowling WLG International IP Leadership Team and welcome to the second in our webinar series, the Lifecycle of a Smart Idea.
Taking a fresh look at the field of intellectual property by tracing the choices, options and steps which can occur during the lifetime of a smart idea, from the moment of inspiration to the fulfilment of the business ambition.
In our first webinar, we handled the question 'to patent or not to patent'. Our international panel of speakers provided some insightful thought and guidance looking at a range of the options available to an inventor or their company. If you missed the first one and would like to catch-up, please go to goxl.gowlingwlg.com where you can watch the full recording.
This time, we are going to take a deeper dive into one of those options, the protection of an invention as a trade secret. In the first seminar, we identified some of the advanced years of the trade secret route. No opening up of the invention to the whole world in a published document. Lower cost, potentially than a global patented programme. Greater flexibility and access to criminal sanctions has improved trade secret protection measures are being enacted around the world.
We are going to go a little further into some of the issues, which have to be addressed if a trade secret's approach is going to be successful, and to guide you along the way we have a multi-talented, international panel of experts from a wide range of jurisdictions.
So, let me just take a moment to introduce our experienced and truly global panel.
First up, from Canada Chris Van Barr is a trial and appellate lawyer with over two decades of experience, litigating complex IP cases. He was named Canadian IP Litigator of the Year in 2017 by MIP, previously he was Gowling's National Head of IP Litigation for Canada and was also an adjunct professor of IP Law at the University of Ottawa, where he taught patents and trade secrets law.
Also in Canada, we have Anita Nador, a partner in our Toronto office. She is a lawyer and patent and trademark agent, servicing clients from research institutions and start-ups, to large multi-nationals. She is recognised as the leader in her field by the world's top legal and IP rankings organisations including IAM, Strategy 300 – the world's leading IP strategists. Anita's practice is focussed on ensuring her client's commercial interests and IP strategies are strongly aligned.
In Paris, we have Céline Bey. Céline heads the international property practice of Gowling WLG in Paris. She is a litigator and has been involved in huge cases across the full range of IP rights in Paris acting for some of the world's best known companies and brands, including the world's major tech companies. Céline is also well practised in negotiating international technological partnership agreements.
In London we have Jon Ball, an experienced IP litigation partner. As well as handling a full range of contentious patent and trademark matters, Jon has been involved in a wide range of trade secrets cases, in various sectors from banking and finance through to oil and gas, including a number of cyber-theft matters. Jon routinely provides clients with ongoing cyber and trade secrets risk management advice.
In China we have Ivy Liang. Ivy is one of the newest members of our team, having joined in April this year. Before joining us, she was a Judge in the Grandon Provincial Courts and she served as Deputy Director of the IP Division, so she is fully up to date with all the recent developments in Chinese IP law, including trade secrets protection.
And finally, from Moscow, Yulia Yarnykh is a partner in the office there. Her practice focusses on intellectual property and commercial law matters. Yulia has broad experience in advertising and marketing, media, ecommerce and data protection matters. She assists clients in development of their trade secrets strategy and drafting commercial secrets in regulations and NDAs. She was recognised as a next generation partner by Legal 500 in 2020.
So today, I am going to pose a series of questions to this great panel. Sometimes to all of them and sometimes individually and through that, we hope to give you a deeper understanding of the world of trade secrets and the early steps you need to take to establish a successful approach to trade secrets protection.
We are looking to provide a global picture, backed up by individual insights with some key jurisdictions. We start from the premise that the inventor or their company has made a conscious decision to adopt the approach of using trade secrets protection as the best means to ring-fence their invention and to give them a market advantage as it develops.
On that basis, the first issue we want to consider is the adoption of a trade secrets policy so that the whole business can be aligned behind the agreed strategy. So, question one is going to be initially asked to John Ball in London and then out to the other panellists: How should a company go about creating a trade secret strategy and what should it entail? Jon over to you.
Jon Ball: Thank you very much Gordon. So, if we are talking about selling a trade secret strategy and how we approach creating a trade secret strategy the first step is to understand some basics and in particular the importance of trade secrets and their protection to the particular organisation that we are dealing with, including how that may fit with the wider intellectual property protection strategy, notwithstanding that the company has identified that trade secrets may be key for it.
That can vary quite dramatically between organisations and from sector to sector. Obviously in some sectors like finance trade secrets may be really all you have, whereas in others patenting policy and patenting strategy is very, very important. And when you start setting what an appropriate strategy might be you start with some of the bigger picture issues with questions like where is the real value in our information, how much of it is likely to be published in any event by a patenting or for regulatory reasons. Can confidentiality really work to protect the information in our business. Can we lock it down, is it too easy to reverse engineer, for example, and also very importantly given the nature of the organisation and its workforce what is really achievable by way of keeping things confidential and secret.
When you embark on looking into those issues you can reach some pretty interesting findings with the organisation around where that value truly is, where does it sit, and also of course how much of it is ours and how much of it do we get from third parties. Based on that understanding of what the wider strategy should be it is then about implementing that and I think there are two key aspects of delivering on a strategy of that nature.
One is what procedures, i.e. what practical steps are you going to implement to protect that information. For example, what technical security measures are you going to implement, what types of encryption are you going to mandate, what are you going to do by way of bringing personal devices into the work place, restricting private email and other physical controls.
And dovetailing with that- and very much part of the overall strategy- is what are the policies that the business is going to adopt and sign up to? Particularly, what are its employees signing up to by way of codes of conduct, compliance and training in order to implement those practical measures and of course what are the consequences of breaching those policies.
So, I think those would be the two key practical measures to implement a strategy once you develop it.
Gordon: Thanks very much Jon. Chris, over to you in Canada.
Chris Van Barr: Thanks Gordon. What I would do is focus on the foundation of the trade secret policy and I think that companies should at the get go sit down with their technical leads and identify their trade secrets. I think you need to spend a good deal of time thinking about your manufacturing processes and your methods, people often overlook those as part of the trade secret, they often think of things and items but processes and methods are important. They should then catalogue what they have found and catalogue it in a way that it can be used late in litigation as evidence that the company has identified the trade secret, determined that it is very valuable and can show that they have taken careful measures to protect its secrecy.
Gordon: Thanks very much Chris. Let's cross the Atlantic then, to Paris, Céline.
Céline Bey: Thank you Gordon. I think that what Chris just said is really important and I wanted to emphasise a little bit because it applies to all jurisdictions I guess and there are so many cases of fraudulent use of trade secrets before the French courts that cannot proceed just because of a failure to prove such fraud. So really the key words when we start talking about trade secrets are identification and evidence.
Apart from that I think that a trade secret strategy in a company implies the same globally. What I mean by that, I mean that once you have identified the trade secret as we have discussed, you need to protect it properly, you need to protect it globally, meaning not only from outside from competitors but also from inside as Jon says from your own employees to avoid uncontrolled disclosure but also misappropriation once the employees leave the company. To avoid misappropriation, Jon talked about the procedures that can be implemented. To avoid uncontrolled disclosure, I think that the best thing in the company is really to raise awareness of the employees of the importance of secrecy in the company. The most effective way to do that, I think, there are two aspects.
The first one is internal communication. Jon talked about it but I would like to emphasise on this and also employment contracts. Internal communication, I mean really companies should do presentations, trainings to their employees in order to explain what is secrecy, what is trade secrets and the consequences of a disclosure really to raise awareness. For example, of course, an invention that would not be protectable any more if it has been disclosed, the loss of value of the assets of the company, the loss of value of the company itself and also criminal prosecution which is a good way also to draw attention.
Then the second aspect is the employment contract. I always recommend it to include a provision on trade secrets. That is a good way to draw attention of the employees to the really importance of this matter.
Gordon: Thanks very much Céline we will be coming back to some of those points later on criminal prosecution and also on the NDA aspect of employment contracts. So there we go, right, so we are heading way out to the east now and it is quite late evening in Guangzhou so we are delighted that Ivy could join us from there. Ivy, what are your comments on this question?
Ivy Liang: Thanks Gordon. Céline has given us the points of the attitude of the French courts towards trade secrets. I would then introduce from the expert of possible litigation in China. Well we say that, of course, prevention is the best protection. Multi-dimensional strategy will give companies the blue sky to protect their trade secrets. However, first things first, as Jon and Chris already mentioned about, the very start before creating a strategy is to sort out and anchor what kind of information, for example, technical information or the client look in the company shall be protected as trade secrets. In the judicial practice of China the trade secrets bare the name of the most difficult IP rights. With our well prepared strategy it is even difficult to prove the existence of the trade secrets in courts. The searching of, it is a lot quicker, it does not apply here first it says the bare existence of the set information itself would not grant you with protection as trade secrets.
There are three major components we need to prove to the court for trade secrets. Mainly the non‑participate commercial value as well as the adoption of confidentiality measures. Among them the commercial value is often self-evident and we as the plaintiffs do not need to prove their publicity. Therefore, the issue about proving of what kind and to which extent the confidentiality measures have been taken by plaintiffs always stand out.
I want to talk a little bit about my personal experience. When I was a judge I ruled on a case which was the best demonstration on this point. In the case, the plaintiff claimed that one of the defendants, namely his former employee, copied his client list and competed for customers with his trade secrets. However, the plaintiff failed to provide any evidence to support that it had taken any measures to protect this client list as his trade secret. So much so that even the former employee did admit that he had actually made use of the client list. I had to dismiss the claim for the reason that there was no solid legal basis for the plaintiff.
Let us see another situation. In the case of the pharmaceutical company, Eli Lilly v Its Employees. The court concluded that Eli Lilly had taken reasonable measures to protect its documents of trade secrets and therefore ordered the employees to give it all 48 documents be downloaded from the server and prohibited them from disclosing and using any of the information in the documents, so the measures are so important in China too.
Gordon: Thanks ever so much Ivy, that is really comprehensive and really useful to get your personal experience from your judicial career. Right, finally then to Moscow and Yulia.
Yulia Yarnykh: Thank you Gordon. To protect trade secrets, Russian law requires that a regime of commercial secrecy is established and that is both externally and internally. The owner of the trade secrets should take the following measures which are considered reasonable and necessary:
- First, define a list of information which constitutes a trade secret;
- second, limit access to and keep a record of persons who have access to such information;
- third, regulate how the information can be used by employees and contractors, even the employment contracts or the service agreements and have a detailed NDA with your business partners; and
- fourth, marked ventilation with a notice of confidentiality and identify its owner.
It should always be remembered that the burden of proof would be on the owner of the trade secrets who would be required to show that the reasonable and necessary measures were taken.
Gordon: Thanks very much Yulia and I think some of those practical points that are specific to Russia are actually of a much more general application as well from what we are hearing and also personal experience. So, finally back to Canada and to round up with some general points, Anita, welcome.
Anita Nador: Gordon, yes just to build on the points raised. When I think about developing a trade secret policy I would emphasise three points.
The first is: do not forget about third party confidential information that you may have. It is very important not only to protect your own information but also that of the third party. Also, you do not want to inadvertently incorporate that third part information as your own IP because it can get quite nasty.
The second is practicality as Jon has mentioned. You want a policy that flows with your business- that does not hinder it. So as lawyers we like to document everything but sometimes there are situations where you may not need full PPE where a simple face mask may do. For instance, if you are meeting with an arranger of office supplies that is not really core to your business, setting up a clean room where you meet with outside vendors where there is no company information may be a good first start. Whereas if you are meeting with a collaborator or something of more importance, then obviously you would get other procedures in place.
But last but not least is IP. I think of trade secrets as the rock of any IP policy because if you think about it most IP starts as confidential information. So as Céline has mentioned, in fact confidentiality or novelty is a prerequisite for patent ability. So, when you think about it in this sense, what Chris has said with regard to documenting and making sure the company is aware of their information as it is developed in invention disclosures or other means, really is important.
I would say that you would also, which is very important, is to keep track of meetings and disclosures. I was recently involved in a case when in the middle of discoveries it turned out that our client had a meeting with a third party prior to the relevant patent date. You can just see that the other lawyer was sort of thinking: Oh you know those got you moments, but luckily we were able to readily produce emails that showed (i) not only was him mentioning not disclosed at that meeting but (ii) that all discussions were in confidence. So we were able to easily shut that down just because we had the proper documentation and were able to move on.
Gordon: Thanks very much Anita, do not go away because we are going to be back with you in just a moment. So, thank you to the panel overall. We now know that we need an established trade secrets policy to be able to use this method of protection effectively. Now one aspect of that which has already been touched on by a couple of people is a crucial issue if the policy is to be effective and viable is the smart use of well drafted and legally effective confidentiality or non-disclosure agreements.
Of course this is an area where national laws can be inconsistent and we will come to that with the panel. But first, I want to address the questions globally to Anita who is an expert in transactional IP and contract drafting. So, Anita there are a few parts to this question. Let me just run through them first. What are your most important tips for creating a truly effective NDA, one which stands a good chance of being enforced and helping to provide a strong wall around a valuable set of trade secrets.
And then for the rest of the panel, how might those tips differ in your jurisdiction and are there any absolutely vital issues which have to be addressed to meet local laws. So we are kicking off again with Anita, away you go.
Anita: So thanks again Gordon. Obviously enforceability is a heightened concern when it comes to trade secrets because once confidentiality is breached it is hard to get that information back. So, I see the purpose of an NDA as being twofold. One is to clearly and reasonably define obligations so that each of the parties can take that agreement and know what they need to do operationally. So, it goes back to Jon's point of practicality. But the second part of that is to assist the party claiming breach to establish the requirements for enforcement in the applicable jurisdiction. So, in Canada our Supreme Court has laid out a three part test which is fairly universal. The first part of the test is that the information conveyed was confidential. The second part is that it was communicated in confidence. And the third part is that it was misused by the party that it was communicated to. So, in applying the above test, who the parties are is important. I think it was mentioned previously that about employees and them being perhaps a source of inadvertent disclosures. So, that is something to be cognisant and that the courts will tend to treat contracts with employees differently than as between commercial parties so it is important to know that difference.
However, if I am asked what the one thing is that has greatly enhanced the enforceability of any NDA, and we review a lot and it is that oftentimes it is not necessarily readily appearing and we have to put it in is context. So, and this is especially so when people are working with template NDAs, they forget to put that in. And of course you look at other parts of the contract such as ownership of the information, the length of the duty and things like that. But adding context can in my opinion go a long way in drafting a contract that would be enforceable. It does not need to be a lot, one sentence can make a world of difference. Not only can it set out the consideration or quid pro quo necessary to enforce those contracts, it also provides clarity and specificity which also enhances enforceability.
So, what I mean by contexting is defining why the parties are entering into the NDA and it could be as easy as to assess whether or not to enter into a collaboration agreement for the development of drug acts or insulin or whatever. And the more specific the context the easier it is to enforce. So, once I set out the context then I can easily define the purpose of the information disclosures and then the purpose in turn can help define what information is confidential and that the information is being communicated in confidence and if anything is used outside that purpose it is misuse. So, just by adding context can facilitate the enforcement of the agreement.
And of course, last but not least, I look at the jurisdiction that is governing the contract because as we will see by my colleagues things can differ from jurisdiction to jurisdiction and we are quite fortunate that I easily rely on my colleagues and our associates around the world to ensure that we get a better NDA that is enforceable more universally.
Gordon: Thanks very much Anita, that is a really comprehensive and helpful answer. That is great. So, let us fly straight off to one of those jurisdictions where things may be a little different. China, Ivy, what do you have to say?
Ivy: Yes, thanks Gordon. Well, all of Anita's tips are so concrete already I will not go any further with those. However, I would like to raise your attention to the application of laws here in China. There is no independence trade secret legislation in China. The rules relating to trade secrets are regulated mainly in anti-unfair competition law and also separately in the civil law, criminal law, labour law, company law etc. So, as to the NDA agreement, different laws may be applicable to different types of NDAs. For example, if the company signs the NDA with employees we may need to look at the labour law instead of anti-unfair competition law. It is worth mentioning that we need to pay special attention for the first NDA for the reason that in China the labour law policy assumes that employees are in a weaker position when signing the agreements with their employers. So the court may set aside some of the clauses in the NDA when it refers that these clauses are not reasonable.
However, I will talk about the exception for this exception is that when employees are from senior executive levels the labour law may not be applicable to the NDA and then the anti-unfair competition law as well as the company law shall start in.
So the point to take away here is that the concept of NDA is quite spread out here in China. We need to evaluate the validity of the NDAs on a case by case basis and decide which law should be applicable to the present situation.
Gordon: Thanks Ivy, and I am pleased the converse of that is obviously [unclear 27:22.3] in the NDA you are going to have to be thinking quite hard about the level of employee particularly you are dealing with because it may need to be drafted differently and from case to case as you say. Ok, Yulia in Moscow over to you.
Yulia: Yes thanks Gordon. So, what Anita has said is indeed universal and applies to Russia to the most extent. I would also echo Ivy's comment regarding the cases when the courts take the side of the employees and dismiss the employer's claim on the trade secrets disclosure.
In one of such disputes the judge in Russia held that sending information by an employee to an external email which was a personal email was not a disclosure of the trade secret as the information was not marked as confidential by the employer. So, that means that even in the existence of a solid NDA or a NDA clause in the employment contract, its enforcement may be difficult if at all possible absent the employmentation of the trade secrets regime by its owner.
Gordon: Thanks very much, that's great. Now Paris, Celine.
Céline: I can give three tips to draft a proper NDA and differential- there are others but my three recommended tips are these ones. First of all, there is no discovery proceedings under French law so the proof must be given by the claimants at the very beginning of the case, you cannot start litigation without having all the evidence so when I draft a NDA the first thing I ask my client is to provide me with an exhaustive list of documents, elements really precisely of what is the trade secret, what is the NDA about. It's a heavy work sometimes, sometimes the clients are reluctant to do so but in the end, at the end of the day they can see the benefits, it's almost certain that you will be able to prove what you [unclear 29:37.7] before judge if you do that from the very beginning and of course the list will be annexed to the NDA to the contract and it can evolve, it can be updated during the existence of the NDA. So, this is the first thing. The second tip would be to draft a proper ownership clause especially if the NDA is part of a joint venture or of partnership agreements where you might have some joint developments from confidential information that you gave as a company or your client gave so on differential we have standard provision regarding co-ownership that would apply if your NDA is silent and that you wouldn't want sometimes that they apply so it's really recommended to draft a proper clause and to exclude joint ownership as far as possible. The third tip I would give is think about a clause of intuit personae that is to say in a determination of the NDA in the case of a change of control to avoid simply the acquisition of your trade secret by a competitor, that's really recommended under French law.
Gordon: Thanks very much indeed. Jon in London – over to you.
Jon: So I don't think there's a huge amount I would add particularly from the common law prospective to what's been said before particularly by Anita. Just a couple of points probably worth adding though is from English law prospective certainty of contractual terms is very important when it comes to enforcement so as well as things like some of the formalities under our law having given consideration for the undertakings you're getting from the other party, we should try and avoid perhaps open ended or overly broad or uncertain NDA undertakings. For example, those that seek to capture all information even though it's clearly not confidential is one example of uncertainty, our courts don't like uncertainty in contractual terms and it doesn't make enforcement any easier. Over and above that, obviously one of the things that we mustn't forget is building in contractual clauses around what happens at the end particularly around the steps for return or destruction of information and that sort of thing.
Gordon: Thanks very much Jon and finally on this one to Chris.
Chris: On focussing on enforcement a breach of a non-disclosure agreement is often part of a suite of actions, causes of action that go into a breach of confidence case. You'll have contractual breach of NDA, common law breach of confidence, breach of fiduciary duty if it's a departing senior employee perhaps statutory copyright, all those are part of this larger action but the NDA is a really unique opportunity and I would pick up on context which Anita and others mentioned because the NDA gives you the opportunity contractually with agreement from both parties to set out how they understood this information was to be treated at the time, it's the best contemporaneous evidence that you have cos you're not trying to cobble it up afterwards to demonstrate how important it was and how you were keeping it secret, it's all there so a good NDAs very useful, very important tool in a breach of confidence case. In that context it also reveals itself in another way which is that the judicial context is important, breaches of confidence, breaches of NDA are all addressed locally these are provincial court cases not federal court cases and so you know I have to reach out to my colleagues in Calgary and Vancouver, other cities and in particular Montreal because the Québec courts under the civil code treat breaches of confidence quite differently. And so that context, that judicial context is important and then finally, just briefly skipping over the borders it's a good reminder to note that the US treats it very differently as well or at least specifically in their own context, I can think of a couple of fairly recent district court cases where the NDA that the plaintiff was relying on was actually used to defeat the plaintiff's case because the NDA was time limited, the Judge said well if you put such a short temporal limitation on the NDA the information can't be very secret can it? And so that was a critical factor in that case and a good reminder to seek good US advice of the cases there.
Gordon: Thanks very much Chris and overall I think the advice clearly there is that you need to talk to people in the relevant countries because there are nuances, there are little differences pretty much wherever you go in this field. Anyway, thanks to you all for that and it's good to see that the language of Latin is not dead at least in France and China. So, our trade secrets policy is in place and we have strong NDAs to back it up. Of course the evolution of a smart idea to exploitation will almost always involve outside assistance that might come from say a university department or a joint venture partner or a potential manufacturer. This might involve sharing the trade secrets in written form, drawings or whatever, or in a much more material way in terms of models, parts or samples. A good NDA structure can go at least some of the way to protecting the trade secrets in these circumstances but it may not do the whole job so what other really practical steps can you take to protect valuable secrets when information has to be shared for the development evolution and ultimately manufacture of the protected item. So, I'm going to start here in Russia with Yulia but what practical steps would you take to protect the secrecy of your invention when you have to share material, software drawings etc, whether it's with a business partner, a development lab in an University, JV partner for development of the concept or a potential external manufacturer. Starting with you Yulia.
Yulia: Thanks Gordon. So, I would say that no matter who your business partner is the types of measures which the owner of a trade secret should take are more or less the same and sit under three levels, physical, IT and contractual. On a physical level, it is important to restrict physical access to the trade secret information, make sure that the documents and devices are properly marked as confidential and safely stored, I would also recommend avoiding intermediaries if possible when transferring the information comprising the trade secret. On the IT level, the measures include setting passwords on computers, devices and documents, locking USB plugs, using encryption for the information transfers. Interestingly with the pandemic end all of us working remotely the IT measures are becoming more and more important when we share the information from different parts of the world so the IT measures need to be taken very seriously. And of course on a contractual level we cannot reiterate enough that a solid NDA should be in place and in Russia the organisation should have a code of conduct and internal regulations and also agreements with the employees and contractors, a detailed list of information which is considered confidential and a record of people who have access to such information. So these three types of measures should be taken seriously.
Gordon: Thanks very much indeed. Jon, what do you have to say on this?
Jon: I would add one key aspect Gordon, I think you want to have a very, very tightly defined purpose within whatever agreement is governing the disclosure about information to the JV partner or collaborator, as such that they really can only use the information strictly in pursuance of that purpose and then to echo what Yulia said, you need to limit the actual information you give just to that which is required to deliver on that purpose and nothing else.
Gordon: Thanks very much. Chris?
Chris: I would add that you should assume that they will disclose the information and you should add like it, whether they do it unintentionally or otherwise so when you're dealing with others you should only disclose what is absolutely necessary and then when you do it, do it with a view that you are creating an evidentiary record so briefly three things – you encrypt it, you stamp it confidential and then you paper it with a NDA.
Gordon: Thanks Chris, good solid and pithy advice. Céline?
Céline: Yes, I agree that with some partners you need to take extra precaution and it was my experience with Universities or public research laboratories or departments so I always recommend to clients to make a list again of concrete measures of what should be done to protect the information but above all what should not be done during meetings for example, so these are the don'ts and actually they can be very basic, sometimes you forget about it but the they can be basic measures such as no open space meetings for example, or no sheets left in the meeting room on the tables or even erase whiteboards after leaving the room so it's very basic but it's very practical.
Gordon: Thanks very much Céline. Ivy?
Ivy: Yes, I told Yulia, Anita, Céline and Chris that it is significant you take concrete measures to protect that information. As my many friends already have so much input for this question the only point I would like to brink to your attention is that don't forget about applying confidentiality measures to our joint venture partners and affiliated companies. It's so common for the parent company and its affiliates to pass on trade secrets to each other however just don't neglect the fact that even joint venture or affiliated companies that recognise this independence and separate entities in law. Therefore we still need to sign NDAs with affiliates and instruct our employees to take confidentiality measures when sharing or transferring information between them.
Gordon: Thanks Ivy. Anita?
Anita: Like all my colleagues I think limiting disclosures even in light of a solid NDA is extremely important. But having said that you can add certain provisions in your NDA such as auto provisions or significant remedy clause that may be helpful to discourage bad behaviour and misuse of the information. However, what I would like to focus on is the special situation of research institutions such as hospitals or universities where the concept of a trade secret often conflicts with their academic obligations and public disclosure. So, it's not the best place to keep a trade secret so I think of university as sort of the gossipy good friend where they are more amenable to patenting, they're more used to it their systems are probably more in tuned to and aligned with that where they all generally agree to basic confidentiality provisions but eventually the information will become public. So, if the technology is really primarily best kept as a trade secret then one solution I've seen is to have the information reside in a spin‑off company which has its own distinct space, servers and policies and a successful example of this was a 2018 transaction I was involved with where the technology was a radiation therapy management software protected solely by trade secrets and no patents and our client elector was a major funder and collaborator. In that situation, the university or the hospital set up a separate spin‑off company acumen to house the technology and development of the software and eventually our client bought the company in a multi-million dollar deal so it's definitely possible to make it work in the academic setting but it does take some planning.
Gordon: Thanks very much Anita. I think we're getting a bit of reverb on my voice, I'm not quite sure, I think it goes away after a while but I hope that's ok. Another obvious hazard of the modern world is cloud based storage of data. Now this is the norm for major banks of data and information now so just a very quick run from a couple of the panellists from Chris and Jon, what particular steps might be needed in order to ensure proper protection when you put data in the cloud. Chris?
Chris: The fact is that you can't guarantee that data in the cloud will remain confidential and so if you have trade secrets of fundamental value, we have clients for example that has source code that is of almost infinite value, you simply don't store it in the cloud. You don't transfer it via the cloud, what you do if you must transfer it, you take other means, you might transfer it by secure file transfer protocols in some circumstances, but the fact is we all live in a world where we have to transfer confidential information that may need that very high threshold but it's still confidential and typically we're going to use cloud based services to do that. My team uses Titanfile all the time which is a cloud based transfer protocol transfer software that uses its own security protocol to encrypt the data so we all do it but as a practical measure one thing I can suggest is encrypt the data before you send it via whatever cloud based service you're using. A cloud based service will also encrypt it but you should encrypt it first.
Gordon: Thanks very much. Jon?
Jon: Chris has dealt with some of the practical technical measures to keep that information confidential if you are storing it in the cloud. The point I would make is that in order to establish the basis for asserting rights in trade secrets you do have to set up the basic legal building blocks, the third element of which is being able to show that reasonable measures have been taken to maintain secrecy over that information. You know lots of organisations will store in the cloud although as Chris said some may keep their crown jewels somewhat closer but the storage solution you choose must be objectively secure by industry standards and you must be able to evidence it. You know, what security standards does the vendor adhere to? What due diligence have you done on the vendo?, What contractual measures and levers are in place for you to establish and maintain that information is secure as you can and as long as reasonable steps and care are taken and you can evidence that, that as I say legal building block to establish trade secrets protections should be there for you.
Gordon: Thanks very much indeed. Well, of course, no system is watertight. There are always those with the ingenuity and the bad motive to steal data. Sometimes it may be a departing and malcontent employee or it could be a hacker from far away. Now in a future webinar we are going to demonstrate the pursuit of a criminal data thief around the world in a scenario based look at the options for criminal enforcement and practical steps to pursue and stop a data thief. So for today I just want to offer us a short teaser for that session by getting a brief global look at the criminal options available. So one at a time panel and keep it fairly brief if you can, what are the options in your country for criminal enforcement of trade secrets in the event of theft? Is this easy a criminal offence and how well does the system work? Let's start in China, Ivy.
Ivy: Thanks Gordon. I'm going to set out briefly in four points. First, in China acquiring trade secrets in the event of thefts inducement thefts or other improper means shall constitute a criminal offence and second: both of the natural persons and legal entities can be the subject of constituting the crime, it is worth mentioning that legal owner representatives are main persons in charge of these entities are capable of being indicted for criminal offences. Third: a criminal action shall be applied when the amount of loss is more than half a million RMB, the infringer then might be imposed with imprisonment for up to seven years as well as the fine. Last but not least, a special injunction called employment prohibition might be applied too. The employment prohibition is not the kind of criminal penalty, it is a prohibitive measure to prevent the employee from committing the crime again. When a cop makes such an order with a criminal sentence, the employee will be prohibited from engaging in a relevant occupation from the date of completion of the sentence for a period of three to five years. While I have to say it is quite ground breaking and this was carried out by the company I used to work for so in this actual case the offendent was found guilty of infringing the trade secrets of his former employee and was then sentenced to three years imprisonment with four years' probation and he was then prohibited from engaging in the same occupation for four years.
Gordon: Wow. Indeed, now that is interesting. Yulia, what's the position in Moscow?
Yulia: Theft and misuse of trade secrets is a criminal offence in Russia. A person who obtains a trade secret illegally by way of theft or bribery or other means or who illegally disclose or uses a trade secret acquired in the line of work may be prosecuted under the criminal code. There are fines and lengths of imprisonment provided for depending upon the proof of the theft or misuse. The most serious cases expose an accused to up to seven years of imprisonment and fines of up to 20,0000 US dollars or the salary of the offender for a period of up to three years. However, if the owner of the trade secret is not able to prove that the commercial secrecy regime was established or the accused person proves that he got the information by mistake, he did know or could not have known that the disclosed information constituted a trade secret the court will dismiss the claim in the absence of corpus delicti and this is for you Gordon to know that the language is not dead in Russia either!
Gordon: OK. Excellent, thanks very much, that's very encouraging to know, thank you very much indeed. Céline there have been European developments on this so let's hear from you.
Céline: Yes, as you may know we had the European Directive of Trade Secrets in 2016 and this directive provides for the possibility for member states to enforce criminal sanctions for the violation of trade secrets so I guess that most of the member states have imposed criminal sanction. It was not the case in France when we implemented the directive because we already had some criminal sanction of theft of paper and theft of digital data so we did not need a new provision on that so we used those to sanction violation of trade secret. It is really disruptive under French law because you can go up to three years' imprisonment and 200,000 Euros as penalty. It's not that used usually when you have an NDA you go for contractual breach but when you do not have any NDA then of course you go for criminal sanction. What I would like to add just briefly is watch out the statutes of limitation under French law of course but I think it applies to all jurisdictions for criminal offences under French law it is six years from the commission of the facts so it's not that much and you often realise misappropriation of trade secret several years after it was committed and sometimes it's too late and it happened to one of my clients. They realised that employees left the company with entire folders containing trade secret but the employee filed the patent and then several years after the employees opposed the patent to the client and unfortunately it was too late for the client to ask to get the trade secret back because it was more than six years so really be aware of that when an employee leaves, control everything, check everything and protect your systems as Jon and Chris just mentioned..
Gordon: Thanks very much Céline. Jon, UK.
Jon: Well, in the UK trade secrets are information theft is not a criminal offence unless we are dealing with the theft of hard copy physical information i.e. tangible property in which case it may be covered by our criminal laws of theft. But that doesn't help us, I mean we do in the UK have a fairly broadly framed criminal statute with regards to unauthorised access to computer systems which is our computer and misuse act though that actually has proved pretty useful as a criminal statute to deal with criminal hacking and theft. And it does have some teeth, I was involved in a case a couple of years ago, civil proceedings but there was an individual who was prosecuted under that act and he was jailed for 32 months so we do have some criminal theft.
Gordon: Thanks very much Jon and finally to Chris and think things are about to change in Canada?
Chris: Well it was the case that Canada followed the UK in that the theft of confidential information was not theft under the Canadian criminal code period. We've always had a provision under the security of information act which dealt with espionage and state to state theft but that's rarely used but things are changing. In March of this year Canada had implemented at least by a royal assent an implementation of the US/Mexico/Canada free trade agreement which will make it now a criminal offence to knowingly obtain a trade secret by deceit or falsehood and then there is an imprisonment provision for up to 14 years for that theft. I would note by the way that reverse engineering does not fall within the provision but this is quite a change in Canadian law.
Gordon: And 14 years is a long time, that's a pretty heavy penalty and presumably Chris much the same therefore applies in the US and Mexico.
Chris: Again in the US and Mexico it is based on those laws at least in the United States laws I should say that we are amending our laws to effectively conform I would say that much.
Gordon: Right, there we have it. We know how to create a policy for trade secrets protection, how to draft a watertight NDA, what practical steps to secure data shared with a partner in the development of the invention and an introduction to the range of criminal sanctions which we will explore in more detail further ahead in this series. To close today I'd like each of the panellists just to give us one tip from their jurisdiction which could be in any of the areas we've discussed or something we haven't yet covered so what is the message they would like you to take away from this session? Panel can you be pretty brief here? What is your message? Let's start with Jon
Jon: Thanks Gordon. I'd say one thing. If you want to enforce trade secrets certainly in our courts you have to be able to specify with real detail what your trade secret is and you do that by way of a confidential schedule to your pleading, you have to be able to do that to get a case off the ground here so you can't go into court just waving your arms around about trade secrets and expect to get very far, it won't work.
Gordon: Thanks very much, that is very much to the point and very accurate.
Céline: For France I would say that the European directive really changed a lot, it's really important for the protection of trade secrets now and trade secret is even more protected I would say than IPR and I mean by that for example, in the city Saisie-contrefaçon, the very powerful tool that we have, now a claimant cannot have direct access to the document ever during the seizure, the infringement seizure, the documents will be seized and kept by the Bailiff further to a disclosure by the judge himself so it's quite new for us and this is thanks to the directive so much protection for trade secrets and I was told by our partner in Germany,
Manuela Finger that's the same in Germany, the trade secrets directive really changed German law and it's reinforced the protection of trade secret there.
Gordon: Thanks very much and thanks for the German tip off as well. Yulia from Moscow.
Yulia: So, I would say that being specific about what is protected as a trade secret is very important and also being able to show that the reasonable and necessary measures has been taken which is a prerequisite to successful enforcement of the trade secret rights in Russia.
Gordon: Thanks very much indeed. Ivy.
Ivy: In China I just want to assure you that it is definitely actionable to enforce your right of trade secrets here and just don't forget to include the management of trade secrets inside the company and prepare for quick response mechanism in case the trade secrets get out.
Gordon: Thanks very much, Ivy and I can vouch for that being involved in successful actions in China for trade secret enforcement, please don't think you can't do it there. Chris, finally.
Chris: I would say get ready to dig in. The trade secret litigation is antagonistic in its own unique way, these are allegations of theft and that reads to an early positional entrenchment in a way that I find patent litigation does not so if patent litigation, the way I look at it, can be like a fencing duel, you have objective claims that everybody can see and it gives it some element of objectivity. Trade secrets in my experience are hard fought, they're closer to bar room brawls with all the confusion that entails.
Gordon: Thanks very much indeed Chris. So, we now just have time to consider a couple of questions. There have been a lot of questions and for that many, many thanks to the attendees today. What we will do, we won't be able to answer all of those questions now but we are going to follow up with a note which pulls together the key threads and we will attempt to answer of the questions in there but can I just pick out a couple of questions to ask here so for example to Jon, we've heard mentioned quite a bit about the EU trade secrets directive, if we were Brexit does that have any relevance to the UK going forward?
Jon: OK. Well, actually the UK did implement parts of the trade secret directive a couple of years ago. A lot of people didn't think there was any need to because our law is very complete on confidential information but nevertheless certain elements of it were implemented so we do have parts of it in our law, most critically of which I think is that definition of trade secrets that sits within that directive which I think everybody accepts is a very good description of confidential information so yeah.
Gordon: Thanks very much. A question for you Anita, we've talked….there have been a few of the speakers today have talked about the term of an agreement and the fact that it can actually be quite damaging if you've got a very short term in persuading the court that the information is really confidential but is there an upper limit on the term of the duty of confidentiality in an agreement?
Anita: A good question and it's one of the provisions that we often look at. No, I mean in Canada you can actually have it until the confidential information is no longer confidential, that might vary from jurisdiction to jurisdiction but definitely that would be the starting point but many companies and many NDAs, depending on the nature of the information, want to limit that term because of just their own internal processes and systems so, but definitely if it's important information until confidentiality ceases.
Gordon: Thanks very much Anita. Finally last question that we deal with, to Céline under French law you've talked about the impact on the Saisie-contrefaçon of the European directive, is it possible to request provisional measures to the preliminary judge in cases of breach of trade secrets and if so what might those measures be?
Céline: It is possible, it's always possible to go and see the preliminary judge and under the French transposition of trade secret there are some specific provisions that allows you to go and obtain an injunction to forbid the use of the trade secret to forbid the marketing of the products. You can also obtain the recall of the product that were made from your trade secrets, the destruction and you can also obtain damages if of course the [unclear 01:02:56] is really clear cut and once again the necessity to have all the evidence and no more. So, yes you can and you can obtain a decision within about three months, several weeks if it's really urgent and three months is an average.
Gordon: Thanks very much Céline and apologies again to those of you who haven't had your questions answered but we will endeavour to get some answers out to you with the summary of the webinar. So many thanks indeed to the panel, thank you very much indeed for your time and for your contribution today and thank you to everyone who has attended this event. We really appreciate your interest and I hope we've been able to enhance your knowledge and understanding of the world of trade secrets. My own takeaway message is this, you should treat trade secrets just as you should treat any other intellectual property right. Yes it is even more intangible than the other rights, there's no nice certificate to show that you own something but a trade secret is a piece of property to be catalogued, guarded and enforced just as much as other IP rights. It is not a poor relation, it can be your best option and it can be incredibly valuable. Of course it's not had the benefit of global legal harmonisation in the way that patent law has evolved internationally but I think another of today's messages is that the sophistication and consistency of trade secrets protection is developing across the globe as more and more countries recognise the economic importance of this key IP right. So, looking ahead for the next webinars in the series we are returning to the world of patents where we will be looking at international patenting strategy and drafting techniques in the separate events dedicated to life sciences and tech and engineering respectively. To look out for the invitations for these events which will be coming out shortly. In the meantime a recording of this event will be appearing at goexcel.gowling.com very shortly, if you would like to watch again or indeed to share with any of your colleagues. So thank you once again for your very kind attention today and we look forward to seeing you soon at one of the next webinars in this series. This broadcast is now going to close automatically in just a few moments. Thank you very much indeed.