Trade secret enforcement: A global perspective

Naïm Antaki

…the last cup of coffee or maybe some of the nice croissants and fruits that we have. And we're going to start in a minute. And since this is a wonderful crowd where everyone is already sitting, I think we can start right away.

So my name is Naïm Antaki. I'm a partner here at Gowling, in Montreal, and I'm the leader of our Montreal Tech Group and the co-leader of our AI Team. I'm really, really excited about this wonderful panel that we have today. This is a webinar, and so it's a hybrid format. The presentation will be in English.

Évidemment, si vous avez des questions en français, il n'y a absolument pas de problème.

Some of the members, including Anita, are bilingual. And so with this, I would like to maybe ask Anita to start with the presentation.

Anita Nador

Thank you, Naïm. welcome to all of those present with us in our Montreal office and those who have logged in remotely. This hybrid model is truly a reflection of the modern age that we find ourselves in, not only for those attending, but also for us as a firm. Last night at 8 p.m., I received a call from Tina Aswad, who was to be the moderator for today's event, saying she has come down with a bad cold, likely from her children, likely not COVID; but what do we do?

So the beauty of working with such a great group of professionals is that each of us was ready to step in and transition our roles without stress and without fuss. So although we are sad not to have Tina here in person, "What a great opportunity," I said, "to highlight our firm's seamless and team approach to client service." So there's always a silver lining. Fortunately, Tina is still participating and contributing her insights from a safe, remote location.

Now to the program. So today, we return to the world of trade secrets to ask the questions that arise in the immediate aftermath of a theft of valuable trade secrets. This can happen anywhere in the world at any time, and will reflect that as we move from country to country in pursuit of our thief, we will follow a story based on events which are all too common, if slightly exaggerated for effect and emphasis. Of course, all the steps which might be taken to catch our thief fall within the comfort zone of the average intellectual property lawyer. The pursuit of someone intent on stealing your valuable secrets calls for agility, fast and lateral thinking, and a willingness to try anything lawful to get the desired result. Stand by for some very different ideas to those which you usually encounter on a day-to-day basis. The scenario allows us to explore different causes of actions and how you can mobilise civil procedures and government enforcement agencies, including criminal enforcement, for the causes of action which relate to trade, secret laws, copyright, theft of physical property, unauthorised access of computers, employment law, and more.

The preliminary and emergency measures will differ across jurisdictions. This is why, if such a situation arises and you call a member of the Gowling WLG team, the first step will be for us to gather team members according to the jurisdictions involved – similar to last night when I got the call from Tina – and determine what will be the best strategy for you; and, based on these differences between jurisdictions, also to allow to secure the stolen trade secret as efficiently as possible.

Now, as we work around the world, we will encounter members of our global Gowling IP team: Ivy Liang, who is visiting us from Guangzhou, China. She'll be online. Ivy is based in our China office and is an expert in all IP enforcement matters. Before joining Gowling, she used to be an IP judge in China and has worked in the judiciary for more than 16 years.

Michael Crichton, sitting on my immediate left, as a partner in the Gowling WLG Ottawa office, with 20 years of experience as an IP litigator and patent strategist, Michael is particularly experienced with complex patent copyright and trade secret litigation matters, and a significant number of his cases have involved Canada-US cross border disputes.

Huw Evans, who is also joining us online. There's Ivy at the top. Huw Evans is actually a partner in our Gowling WLG London office with almost 30 years of experience helping clients to protect their IP assets and manage risk in complex disputes involving, in particular, patents and trade secrets. Much of his work is international and cross jurisdictional.

Céline Bey, right beside Michael, is a partner and the head of our intellectual property group in Paris, France. She has expertise in all aspects of intellectual property, information technology and related areas, including trade secrets and confidential information. She is a widely recognised expert experienced in IP litigation, and she regularly manages complex pan-European patent litigation. In collaboration with Gowling WLG offices throughout the world, many of those professionals are specialists in science, engineering and technology and enables her to understand the client's business and to assist them in the best way possible in high technology value cases.

Tina Aswad, who is now joining us online, as a partner in the advocacy department in Montreal, more specifically in the Labour and Employment Law Group. Since the theft of trade secrets often involves employees and in fact most of them, many of them, spawned from employee thefts – innocent, not so innocent – this is the type of case she deals with often in her practice, and we work closely together with Tina and our employment group on such matters.

As for me, I didn't do my proper introduction. I'm a partner in our Toronto office and the current co-lead of our global trade secret practice with a speciality in life sciences. As both a lawyer and a patent and trademark agent, my practice spans IP, regulatory compliance, privacy, and much of corporate transactional matters. So I consider myself more of a strategist to align IP strategies and commercial interests.

Please note that the following exercise, after the following case scenario that we've sort of put up as a teaser to this morning, we'll then turn to Tim Londergan and Naïm, who you met earlier, Naïm Antaki, Tina and myself, to discuss sort of the lessons learned and measures that can be put in place to manage risk and place your company in a better position when these things happen to you or to them. And we'll make a formal introduction of Tim and a more formal introduction of Naïm when we get to that portion.

So let's look forward to the case scenario. We're going to play the video which you may have already seen online.

That's the high-level case scenario. I don't know if you could read it, but we'll go into a little bit more detail now. Obviously, our story has roots in Canada, and in particular, Ontario. The corporate base is in Ontario for this multinational company called Optimus Plastics. Optimus has developed a manufacturing process for a new biodegradable plastic that decomposes for a very short period of time, the next best thing and the fight against plastic and packaging. Some of the research and development took place in Ontario and the rest of the company's US laboratories in a small town close to Boston. The new plastic is made up of known reagents, but in a very particular ratio and in a specific order. In addition, it undergoes precise heating and cooling processes. That is the recipe.

The recipe is a closely guarded secret. There are patents, but none of these really cover the knowhow, the manufacturing process, and the actual recipe for the plastic. So it was decided that it would be better to rely upon confidential knowhow in the recipe itself.

The knowhow and recipe are known only to a select few trusted individuals. One of those is Dr. Ethel Lee. She is a chemical process engineer. She has dual Canadian and US nationality. And although she now lives in China, she has family and a home in Canada and also a home in the US near the premises of Optimus.

The manufacture of this special plastic is carried out in China. Dr. Ethel Lee runs the manufacturing side of the factory in China. Unbeknownst to Optimus, Ethel has been for months in advance talks with Optimus' major competitor, Megatron Packaging, a company with manufacturing sites and offices across Asia and Europe, offices in London, and headquarters in France. The market for the special plastic is huge and worth billions. Ethel has been offered a life-changing amount of money to move across to Megatron and head up its manufacturing operations in Europe.

Because of the huge value of the knowhow and recipe, Optimus takes many measures to prevent its secrets from being leaked. Importantly, only a very few select people have access to the secrets and on a need-to-know basis only. Ethel is one of these employees.

Even in respect of these trusted employees, security measures are put in place. The recipe and some of the knowhow for the process itself is recorded in a process document of which there are limited hard copies, and these may not be removed from the office in which the particular employee has their desk. The recipe is also in areas of the hard drive of Optimus' server, which only a very limited access is given. Employees are banned from removing paper documents from their offices and from bringing electronic storage devices into the company premises. And they're also not permitted to remove such devices. Much knowhow is in the individual heads of the employees.

So the actual narrative of our story begins in China. The head of security at Optimus, Dale Cooper, is out one evening having dinner at a local restaurant, when he sees Ethel having dinner with a couple of individuals who are quite formally dressed. This seems a little odd to Dale, given the informality of the surroundings, but he tries to put it out of his mind. However, there is something vaguely familiar about the individuals that makes him feel uneasy, and he cannot think quite why.

Two weeks later and after staring at CCTV screens – because he is the head of security – he picks up a copy of Plastics Weekly – because every security guard should have Plastics Weekly beside them – and on the front page, there is a picture of the founders of Megatron. He immediately realises these were the people he had spotted with Ethel. Aghast, he is furious with himself for not realising this earlier and immediately calls Ethel. The call is answered, but by a junior engineer in Ethel's team, and she tells Dale that Ethel has called in sick, which is unusual because Ethel never calls in sick.

So Dale decides to check up on Ethel, and he starts looking at the CCTV footage from the day before and sees Ethel placing a thumb drive into the company's mainframe and then removing it and putting it into her pocket. He also sees her placing a collection of papers inside her coat and then leaving the room. And she takes her laptop as well.

Further investigation shows she had then proceeded to leave the building, and it was also discovered that her copy of the processing manual was also taken. So it's all too clear that Ethel has left the company's premises in China and in all probability, has taken very valuable secrets, in all likelihood.

I apologise for that; I thought I had turned it off.

In all likelihood, she went to meet people at Megatron. So here, in my view, the first step that must be taken in parallel with the legal analysis is the preservation of evidence. Regardless of the jurisdiction, you will need quality evidence that can be presented to a court to assist our litigators, and it's therefore as essential to work closely with forensic experts so that the appropriate measures are taken. The first step taken, we must evaluate where and how to recover the thumb drive and the documents.

So we can now go to our panel of experts. And especially, as this factual situation is changing <0:18:36 coughing, clearing throat> and I really don't have anything. Sorry. I did check. But I do get a dry voice sometimes.

But perhaps we can turn to Ivy, and she can help sort of guide us through what they can do in China.

Ivy Liang

Thank you, Anita. Good morning, everyone. So as this emerging situation is happening in China, I'm thinking about two possible options to manage the crisis, namely the criminal action and the court orders in civil proceedings. So considering the urgent situation right now, the first thing first is to hold back Ethel and the information she took away. So we need to find out in the first place where she is now – I assume that she's still in China – and make sure that she stays in our jurisdiction. So as the first step, I would introduce the criminal part first. Let's see what we can do with the criminal action.

The best choice under this circumstance is to involve the public power, meaning the PSB, the police, to step in and to detain Ethel and Optimus properties she took away. So as the very first step, Optimus should instantly report to the police and assert that Ethel's conduct constitutes the crime of theft. In order to establish a criminal case, Optimus should submit the CCTV footage, as mentioned by Anita earlier, the proof of the ownership and value of the company laptop, the thumb drive, et cetera, to the police. And in the current situation, only the police can use their investigative power to locate and detain Ethel. And under the Chinese law, if the value of the stolen property is worth more than 1000 RMB, meaning approximately 200 Canadian dollars – for example, the laptop – Ethel shall be arrested for 7 to 37 days for the police to further investigations. and Optimus can prompt the police to search for any missing properties from the company. And in this way, Optimus can have more leeway to investigate further with the help of the police and then can effectively secure the laptop and the thumb drive from being lost. And once we have the laptop, thumb drive, and relevant documents containing Optimus trade secrets, Optimus can further assert that Ethel constitutes the crime of trade secret infringement as well under the Chinese criminal law.

And in terms of evidence gathering, reporting the case to the PSB is of great significance because the evidence investigated and gathered by the PSB can then be used in subsequent administrative actions and civil proceedings in China and maybe in other jurisdictions as well.

Anita Nador

Thank you. So it would be ideal for the PSB – and the PSB is the Public Service Bureau in China – to take actions. But are there available remedies in the civil proceedings in China?

Ivy Liang

Yeah, that's a very good question, Anita, because as double insurance, Optimus can simultaneously prepare civil litigation for trade secret infringement in case the PSB considers that there's insufficient evidence to constitute a criminal offence and close the investigation or allow Ethel to be released on bail. And Optimus is entitled to apply for an interim injunction to prohibit Ethel from using these trade secrets and to hand over the thumb drive, manual documents, laptops, et cetera. And we can also apply for the court order to prohibit Ethel from leaving the country of China. It is not rare for Chinese court to issue this restriction order, especially when the defendant has the foreign nationality and is prone to leave the country to avoid being sued and prosecuted.

Anita Nador

Thank you. So unfortunately, despite our best efforts and the efforts of the Chinese authorities, Ethel was got away. What we know is where she is going. How do we know, Ivy?

Ivy Liang

Optimus can either get the information from the PSB directly because we have reported to the police, and we are entitled to get the information from the PSP to get to know the whereabouts of Ethel. Or, from the court, we can get the information from the court because if Optimus successfully secured an interim injunction from the court, the court will have to serve a restraining order on the immigration authorities restricting Ethel from leaving the country. Optimus can therefore use the court to find out the enforcement of the court order and Ethel's whereabouts.

Anita Nador

Thank you. That's very helpful. So from these sources and other sources, we learn that Ethel has actually come to Canada. Now, we know that Ethel is headed for her home in Toronto. Could be Ottawa. That's where we said. Presumably to collect some of her belongings – she does have a home in Ontario – and to take them for her new life with her new employers. And now we turn to Michael in Canada to say, okay, we know she's coming. What do we do?

Michael Crichton

So we know she's boarded a flight from China to Canada. And with that advance notice, we can try and get an early jump on some enforcement. So while Ethel is sitting in her in the plane and deciding what movie that she might watch on the flight, we are busy in the office preparing court materials to try and enforce Optimus' rights.

So there's really two big questions that you have to answer right off the bat. The first one is, which court are we going to go to, to get our enforcement remedies? And what are we going to ask for from the court? To answer the first question, it really depends on the type of material or intellectual property that's at issue. And then to answer the second question, it depends. What's the relationship between Ethel and her company? Is there a contract? And what has she done? What laws has she broken?

So in this case, we know that she's misappropriated trade secrets, misappropriated confidential information, and that's very likely contrary to her employment agreement. So the action against her in court is going to be primarily based on breach of her contract and breach of confidence, which is a tort that you can enforce in Ontario. And there may be other grounds to enforce like copyright infringement. And so all of this means, because of a variety of different causes of action, including breach of contract, you need to move in provincial court when you're in Canada. So that would be in the Ontario Superior Court in this case, because she's going to Ontario.

Anita Nador

So why do you say that's the appropriate court?

Michael Crichton

So in Canada, if you're going to be enforcing a contract or you're going to be bringing an action for misappropriation of trade secrets, it must be done in provincial courts. We do have a federal court system which is a specialised court for patents and trademarks and copyright cases. But if we're in the trade secret space, we go to provincial court.

Anita Nador

Now, we don't expect Ethel to hang around in Canada for very long. What do you recommend to try to stop her from leaving? What can we do to try to get the documents back?

Michael Crichton

So the key is to move as quickly as possible. So while Ethel is on that flight, we are busy preparing court application materials to get an injunction to stop her from doing anything else with the materials and a seizure order to actually take possession of the materials. And so we would prepare these materials. We would work with the head of security to get an affidavit quickly drawn up, and we would get in front of a judge as quickly as possible. And the courts in Ontario will hear urgent applications where there is urgency like in this case. And so it'd probably be an hour hearing in front of a judge. It'd be ex parte. We make this ex parte, so we don't give notice to Ethel; otherwise, she might dispose of the materials. And so we get in front of the judge, we get the order that requires her to give us the materials back and to not use any information she may have for any other purposes. And that's important because it means we've prevented the information from getting into Megatron's hands and we've preserved the evidence for an ultimate trial.

Anita Nador

So you've done all this, you're at the airport. So what happens if she just walks past you and doesn't comply?

Michael Crichton

So with civil orders for seizure, you can't physically grab the materials out of her hands. You cannot do that. You have to ask for voluntary compliance. And if she refuses and disobeys that order and walks away, you then go back to the court and again, you'll get in front of a judge quickly and you will seek a contempt of court order. With a contempt of court order, you can then move forward to try and have her arrested and have the materials seized that way.

Anita Nador

Okay. Thank you. Now, is this the same in all provinces? And I'm not sure if Tina is online or not, but maybe Naïm can comment a little bit or Michael can comment. Tina's not here. I think there are different scenarios in different provinces they may have access to.

Naïm Antaki

Yeah. I mean, Michael can comment a bit further. But obviously, as Michael was saying, because, you know, contractual law is a provincial matter, there are some nuances. I think, though, that from an enforcement standpoint, when I speak with my litigation colleagues, the idea is not necessarily to rely on those nuances, but work with this multi-pronged approach, right, as Ivy was talking about in terms of criminal or civil actions. Michael, I don't know if you'd like to add something to this.

Michael Crichton

I would only add that in Quebec, you have the Quebec Civil Code, which is different than the common-law laws of the other provinces. But the Quebec Civil Code has available remedies and procedures for doing very similar to what I just described.

Anita Nador

Thank you both. So unfortunately, I don't know how she did it. She gets wind of the fact that these things are going to be happening at the airport when she lands, and she got to the border and had all of this happening. She did not go to her family home. She immediately goes directly to the gate for a plane leaving to London. So we don't know yet if she's going to stay there. But luckily, we know this. And we have a colleague in London waiting for her. Huw, what do you have waiting for Ethel if she arrives in Heathrow or Gatwick? We're going to have to unmute him.

Huw Evans

Thank you. So I was trying to unmute, but someone had a better idea to keep me quiet. So yeah, so my big moment. Okay, we know she's on the way over here and we have seven hours to get going to try and have a waiting party for her here. Now it was to hear from Michael as to all the steps that you can do in Canada. And perhaps not surprisingly, because both Canada and UK are Commonwealth countries and have a common law system, pretty much the approach described by Michael in Canada can be followed here too. Now that's good because we can reuse much of the material Michael and his team has already prepared for Canada. So just like in Canada, we can likewise look to obtain an urgent search and seizure order on an ex parte basis. And like Michael, we would also most likely focus on there being acts of copyright infringement by bringing the stolen goods into the UK. And we would also raise the issue of breach of confidence, too.

We would look to obtain an order as to search and seizure of the stolen property. And the UK, having jurisdiction since importing the thumb drive and the paperwork and possibly the laptop as well, having copies of Optimus' original documents will be an act of infringement of copyright in its own right.

And given Ethel's behaviour to date and the fact that Megatron have an office in London, there must be a real risk that she is going to pass on the materials to Megatron there.

Now, of course, we know that Ethel has managed to slip the net before, and so she may well run from the service of the search and seizure order. And even if we have a police officer present when we execute the order, she may know that the police officer can't actually carry out a search of her luggage and person. However, having said that, experience does show that the presence of a police officer when you execute one of these orders does have a sobering effect on the perpetrator. But, you know, it may not work, and so we do have to come up with a different plan as well. That's not to say we wouldn't go for the search and seizure order. We would still do that because there is every possibility she may well think that the temperature is too hot and decide to comply. And also, if she does breach the search and seizure order, as in Canada, we can get a warrant for her arrest, and then that could be executed by the local police. And once she's arrested, the goods are hopefully secure.

But I'm not saying that is easy. So whilst we have one team in place getting the search and seizure order, we will at the same time have another team getting a meeting with the police at Heathrow. As a port of entry into the UK, Heathrow is actually probably the one that has the highest police presence. And so our chance of getting the interest and attention of officers there is pretty good. We would explain that we're looking at executing a search and seizure order at arrivals, and knowing what sensitive places airports are, we will need to probably do very little to convince the police that they should be present to ensure there is no breach of the peace, and also to make sure that other users of the airport are not caused concern by any resulting commotion.

However, this is also where Plan B comes in. We will also look to explain to the police that there is also a crime being committed on UK soil as soon as Ethel passes through customs and into the UK. That crime is handling stolen goods, which is an offence under our Theft Act. In line with much of UK criminal law, there is extraterritorial reach to some extent. For something to be stolen goods in the UK, the theft can take place anywhere, but to convince the police that Ethel will have stolen goods on her, we will need more evidence than, say, what was covered off in the evidence for the search and seizure order. We will need to have as much evidence as possible to show the goods are stolen, and also considered to be stolen in China or Canada, which is where ultimately, I guess, the property is owned.

So I would use the CCTV recordings that were obtained in China. I'd also try to get evidence as to the ownership of the manual, the laptop, and maybe it was a company thumb drive as well. And here we want to be able to also identify these objects. So anything we can get to actually identify these objects would be useful to give to the police.

To explain the seriousness to the police, we would refer to the witness evidence we already have as to the value of the trade secrets and that there is a concern they're going to end up with a competitor or elsewhere outside of the UK. And we would also obviously need to provide the police with a good description of Ethel so that they can so that they can make identification of her. We're not expecting her to respond to any Tannoy requests for her to go to customer services, for example.

Now, when working with the police, it's important to remember that they are human. And so it's very necessary to be sensitive to this and it's helpful to be aware of that so you can engage their interest. We also need to be respectful and sympathetic to the fact that they have other demands. But the aim that we should have is so that the officers can make an assessment that they have reasonable grounds to suspect a crime is being committed on UK soil and that will be enough for them to make an arrest and search.

Now, as part of this assessment, the police will have to consider whether it is in the public interest to see if the search and seizure order is complied with first or whether they should make an arrest straight away. One thing the police will be conscious of is that it may not be fair to offer one option to Ethel, and then if she doesn't comply with the search and seizure order, and then arrest in respect of the stolen property. So that is one reason why the police may just arrest in relation to the handling of the stolen goods. Now, that may frustrate the execution of our search and seizure order, but at least we know the laptop, the manual, the other paperwork, and the thumb drive are safe, at least for the time being.

If though, we don't go down that Plan B and we rely on the search and seizure order, we will sort of follow the course that took place in Canada. And if she complies, that's good. If she doesn't comply, then we will need to go and get a committal order and a warrant for her arrest and then try and get that enforced as quickly as possible and hopefully before she leaves the airport or maybe for somewhere else or for Megatron's offices in London. So that's what we're hoping we would get her by now.

Anita Nador

I guess it depends on the situation. So I don't know how Ethel does it, but unfortunately, she wasn't caught in China, wasn't caught in Canada. I'm sorry, Huw, but you were just too slow. I have no idea.

Huw Evans

I think she was wearing a good disguise.

Anita Nador

I don't know what happens to these airports and airport security, but somehow, the connection was too close or something, and she makes her way to Paris, which is Megatron's head office, and she situates herself in a company apartment in Megatron and presumably starts working there. So now we think she's probably going to be there for a while. And luckily, we have our colleague in Paris who is ready for her, Céline Bey. And perhaps you can let us know what you can do in France.

Céline Bey

Yes. So, Anita, as Mrs. Lin now is in France and has started working for Megatron French company, obviously, the French court would have jurisdiction over the matter. And in France, we have a specific law on trade secrets that was adopted in 2018, and it originates from a European directive dated 2016. So more or less, we have the same provision and same law protecting trade secrets over all European Union countries. And this legislation includes the possibility of requesting the application of very effective and rapid measures to prevent infringement of trade secrets or to put an end to such infringement if it has already occurred.

So the first thing that Optimus would have to check is whether the information, the manufacturing process, can qualify as a trade secret under this directive, under this law. To summarise, there are three conditions for an information to be qualified as trade secret. The first one is that the information must not be generally known to the industry sector. The second one is that it must have a commercial value. And the third one is that the owner of the trade secret must have taken protective measures, of course, to keep the information secret. So in our case scenario, we've seen that obviously, the manufacturing process can qualify as a trade secret under French law.

So what can Optimus do? Two things. First thing, they would have to, in my view, secure evidence of the fact that Mrs. Lin holds the trade secret; and then it could apply for preliminary injunction before the French court. So to secure evidence, Optimus can apply before the French court to obtain an authorisation from the judge to be allowed to go to Mrs. Lin's apartment and to go as well to Megatron's headquarters. In patent cases, it's called infringement seizure. But for trade secrets, we can well also do those type of "den raids." So a bailiff with the police can come to Mrs. Lin's apartment and investigate. So they'd be allowed to seize the thumb drive and to investigate in her laptops and everything in order to secure evidence of the misappropriation of the trade secret and also to find proof of Megatron's involvement. So we know that she will be working with the French company, but we have no proof so far.

So if we manage to find this proof, we can well go as well to Megatron's headquarters, investigate the same with the bailiff, police, and try to find if there has been a use already of the trade secret or not.

And when we have all this evidence, Optimus can apply for a preliminary injunction, even in very urgency, so in one or two weeks can obtain a preliminary injunction to prevent Mrs. Lin or Megatron or both to use the trade secret. And this would be a preliminary injunction. So Optimus would obviously have to go on the merits in a very short delay. So 30 days, they will have to go on the merits to confirm the preliminary injunction.

And there, as in other countries, it could be civil action, or it could well be criminal action. And this is not in the trade secret law, but under French law, criminal law, of course, the theft of data and the concealment of data. So the fact of holding a trade secret can be punished by the criminal code. So Optimus would have the choice between the two.

Anita Nador

Well, thank you. And thanks, Ivy and Huw and Michael and Celine for providing their insights. This is great. I am glad to report, after all this, Ethel's luck ran out, and so did Megatron's. We were able to secure the documents and the USB key and stop them from using the valuable information and trade secrets.

So after all this, it's hard to leave you in the lynch of saying, "Okay, we got this." How do we handle this? What are the lessons learned from this scenario? What can companies do? What could Optimus have done better, perhaps? What are we seeing? So a little bit of a Q&A amongst myself and all those on the phone and Naïm.

And we're very fortunate to have Tim Londergan here from Tangibly. For those of you who are in the room present, you know who Naïm is. Naïm is a business and technology law partner in our Montreal office. He also deals with strategic solutions to his to his companies, especially on cross border activities. He bridges civil law and common law jurisdictions. And I've worked with Naïm on many matters, so it's really a joy to be on the panel with him today. And he's just closing an M&A deal, so he does everything, and investments, as we speak. And he's one of our leaders of our AI group, which also has a huge component into trade secrets. And he'll speak a little bit about that.

Beside him is our special guest of honour, Tim Londergan, who is the CEO and founder of Tangibly, a SaaS platform that enables companies to implement best in class management of their trade secrets. They help companies identify, track, and protect valuable trade secrets within their organisations. He's a serial entrepreneur who is passionate about technology, intellectual property, and innovation. And he has founded multiple companies, including a Seattle based nanotechnology company, Lumira, which is now part of Renaissance. He's led investments in many different areas, material science and intellectual ventures, and most recently founded a Singapore based IP incubator, WaveFront Venture Labs.

But what I love about Tim – and he'll talk to you a little bit about it later – is that when we were doing our trade secret group and developing our platform and our offerings, the first thing I said was, "Well, we can tell our clients to do all this, but how are they going to implement it?" And thankfully, along came Tim and we worked with him maybe now for the last year, and he has amazing insight on how people manage their information flow in quite an innovative and way and efficient way. So we'll hear from Tim in a moment.

I should start off with some of the points that as a strategist that I sort of saw from this scenario.

Naïm Antaki

Anita, I think that would be great because, you know, we've heard the difficult job that our colleagues around the world have. How do we put them in a better position so that maybe we can stop them already in China or already in other places? What are some of the things that we can think about, you know, from a whole cycle standpoint?

Anita Nador

I do a lot of agreement work. So the one thing is to know what you're talking about, right? And the one thing in this case scenario which is really interesting to me is that they used the word "knowhow" and they use the word that it's valuable.

Well, what is knowhow? A few weeks ago, we gave a presentation to a university technology transfer group. And as you know, universities are amazing. They have awesome knowhow. They can keep a secret for a little bit because they have to file patent applications and they do. But they're increasingly getting collaborations with other companies.

So how do they handle that? How do they know the trade secret versus knowhow, and is there value in it? So we looked at their agreements and if anybody's done agreements, if you look at the definition – if they have a definition of knowhow or confidential information or trade secrets – a lot of the time it's very circular. So he came up with a sort of diagram. I don't know who has the next one. No, the one before that. There we go.

And we actually thought about it with some colleagues. How do we explain what knowhow and trade secrets and confidential information is? Because nobody totally understands. They use templates, you know, provisions. But it's really important to spend some time to identify what's valuable to you. What would you be upset about if Ethel went around the world and took some information?

So obviously, we know the whole thing about confidential information, right? We generally know what that is. Basically, it's just information that's not well known. And usually, in agreements, you have a paragraph of this, and you have a whole bunch of exclusions, including things like, well, if you develop things independently, you know, that's an exclusion to confidential information. Well, in this day and age of AI, and we'll have Tim talk to us about that and Naïm; how do you know it was independent? How did you track that information?

Then we have trade secrets, which obviously it's all confidential because that's the nature of a trade secret. And then we have knowhow. And knowhow could be secret, could be partially secret, could be something in somebody's head. It's still valuable and our courts have recognised that knowhow can be valuable, even if it's not totally secret or totally confidential. Why? Because it's usually information that's known to a few people or developed through expertise. It may not be totally confidential, but it has value. It has value that if you knew that knowledge, if the person that you're licensing to doesn't have that knowledge, that would really help them to springboard their business. The courts have recognised that sense of value and you can have an agreement on that.

So the value of knowhow depends on how many people know it, how many experts are there in the field, and how much the person really, really wants it, right? The tricky thing with knowhow, because how much is an employer's general knowhow that's experience that they can take anywhere, versus actually proprietary to your company? And you have to really think about how to mark that and how to define that. And I know it's hard to have a perfect box, but maybe, you know, spend some time thinking about that.

So that's sort of my few takeaways from that point of view.

Naïm Antaki

And in terms of the cycle, thinking about the cycle, right, we talked about enforcement, which is what happens at the very end. Could you talk to us a little bit more about exactly the cycle and management?

Anita Nador

Yeah. I mean, the major question that we often get from CEOs is, "Do we have any trade secrets? What are they? How are we dealing with it? What information are we getting from other people?" So the first thing is to basically do an audit. It's almost like a due diligence of your company or procedures, talking with you with regard to what's important? And so we identify what you're doing, what you have, so you get a better knowledge of where your value is.

And then afterwards, we figure out, well, geez, what policies do you need to put in place? Are they good enough? Do we need to do something else? We look at your agreements, your agreement clauses, because you may want to track what's going on, and what you're giving and under what terms. And obviously, the huge part of this is training materials. You're going to be onboarding people. I mean, most of these things are employees. People are involved with things. Sometimes they're innocent because people don't even know that they're handling a trade secret. Sometimes it's not so innocent, like Ethel, because I'm pretty sure she knew what she was doing.

And we look at what you can do. Like, I mean, Optimus was pretty good in many of the things that they did. And obviously, the security guard was really well trained to say, "Oh, I saw these people. Who were they?" you know, and to actually turn his mind to what was happening. Now, could they have had better security? Maybe they should have had a two-person login to take anything off of their main drive as opposed to one. There's always things that you can do, but you also have to be practical because the company still has to function. So those are the things that you have to balance.

And obviously, we implement it. We roll out the policies and agreements and training, and hopefully we have enough so that it enables our litigators to do what they did in this scenario and to act very quickly. And mostly, it would likely work. Aside from the fact that Ethel, for some reason, I don't know how; like, she must have been trained in some sort of capabilities to have gotten through all those areas. But basically, that's what we do. Just turn your mind to it and making sure that you know what you have and know where your information is. It's kind of like knowing where your kids are.

So I'll turn it over to Naïm because I know he has a lot of input into this and dealing with his clients and giving them advice.

Naïm Antaki

Yes, I would say, you know, we're talking about this in a very rational way. A trade secret that's stolen is something that really rattles everyone in the company. It's going to have an impact on investors. It's going to have an impact on everyone.

And, you know, I completely agree with everything that you've been saying, Anita. Sometimes even with the best processes, what's missing is people put the emotion into it, if I can put it this way. People understanding with passion how important this is. And I think this is where training is so important, right? We've seen training with cyber security, et cetera, et cetera. We see training with competition, antitrust issues. Do we have the same type of training with respect to trade secrets?

There's so many different ways now – and I know that Tim is going is going to talk about this a bit more – but there are so many different ways that trade secrets can be, I guess, at risk. And so to me, it really is, okay, at the level of the board of directors, at the level of the C-suite that you're all working with or maybe who you are, how do you make sure that this is at the top of the list? And, you know, this is why I thought this idea of a scenario with enforcement and having to go all around the world – thankfully, you have a great team that can help with this – but, you know, this is not an easy solution.

And then if you start thinking about, again, valuation is something that will wake people up at the board of directors' level, right? Competitive edge. Those are points that were in your in your previous slide. And the idea with valuation of intellectual property – everyone knows this – is that it's something that is very dynamic. People think about an IP strategy. They don't just think about trade secrets in a silo and then about patents in a silo. And the value of a trade secret? Well, it only has value as long as it remains a secret. Right? That sounds very basic. But when you think about developments, for example, in artificial intelligence, you need to think about all of those things that may look boring to some people at the C-suite level but are really important. You know, go back to your audit. With developments in AI, is my trade secrets really a trade secret still? How do I need to update my policies and agreements to deal with these issues? Thinking about vendors, also thinking about clients and thinking about interactions with employees, et cetera.

One of the things that would worry me if I was on a board of directors' level is, if I have to enforce, does that mean that I'm going to disclose the trade secret in court? And then what happens? So there's a lot of things there.

On an artificial intelligence, you know, and just going back to this, when I worked with some of my wonderful colleagues on this on strategy – and some of them are in the room today – when you talk about the trade secret, it's something that cannot be easily reverse engineered, right? Well, with developments in AI, Chat GPT or everything else, has it now automatically become much easier to reverse engineer what you thought was a trade secret? And with this, you have to maybe change and rush to say, "Well, maybe what we wanted to keep as a trade secret, we need to think about whether it is patentable or there's another way to protect it." I'm worried about reverse engineering, sometimes even with unwitting, I guess, actions of employees playing around with AI. Someone who may be working on their home computer and then wants to prepare for an important meeting and says, "Well, we have this important business idea, long term business strategy. What are the best ways to prepare my meeting for this?" And it sounds like nothing, but then you may have heard about data breaches relating to Chat GPT, for example, and other types of issues. And so it becomes much easier to make a massive mistake. That's how I would put it, with AI.

And so I think it's important, too. This is where you kind of have to think about it and think about those nightmare scenarios that wake us up all at night, and go back to these trade secret management policies, agreements, et cetera, and are we protected enough, or do we need to think about other things? The other thing is, it needs to work, right? You need to have a solid way to make sure that it works. And Tim is going to talk about this.

The other thing is that you could have a situation where AI – and I'm going in a bit of a more indirect way – here, you had an issue of the USB key, right? What if someone attacks your mainframe? No one took anything out of the US, you know, with a USB key, but someone is attacking the mainframe. With advances, as you know, it's becoming easier for malicious actors to actually attack your mainframe. So again, when you're thinking about trade secrets and what are your barriers to trade secrets, you need to think about how AI is addressing this.

Or, another thing is – and this comes from Tim, actually. All credit goes to Tim. We were talking a lot about this question. It's so interesting to speak with. What if someone just asks Chat GPT, Optimus has this trade secret? We know there's a patent here. There's a trade secret there. There's a patent here, right? "Help me understand what should make the link with what is currently secret." And so this one is really interesting because people are using AI to figure out your trade secret without stealing anything away from you. They're just asking and finding information. So that makes the definition of a trade secret that Céline was talking about – some of the issues, you know, sometimes you go with theft. Michael, you were talking about this, Ivy also, or other means to secure the trade secret. But what if you really have to rely on the fact that it is indeed a trade secret? To me, that's something that's quite important.

The last point that I'm going to talk about – we could talk about this all day – is a question that I have. I ask a lot of questions, and I know you do, too. And I'm sure Louis and others will have those questions. You know, how do you address trade secrets in an age where the current regulatory focus is on explainability of AI? And so as you know, in AI, in different algorithms, sometimes design of neural nets, et cetera, et cetera, you're going to have a strategy where you will have trade secrets as opposed to another IP protection strategy. But now, with the current regulatory focus, you need to be able to explain how your AI works. If you go to court and you used AI for something and you want to make sure that you're not at fault, you need to be able to explain that it's not the AI that caused the issue. And so you have a tension. and this is a tension with keeping trade secrets or real secret while being able to explain enough to now comply with those new regulatory advances that we have all over the world.

We were talking with Rinaldo and Maria Chiara about Italy and Chat GPT developments in just before this. Bill C-27 in Canada, which is currently at second reading, automated decision-making rules that are already in effect in Quebec. There's a lot going on in this. That's why I think there's if you needed a reason to think again about this important process, I think AI may be just what is already on the minds of your board of directors and your C-suite, and it helps them to focus then. "Okay, do I still have a competitive edge? Is my valuation still there and what can I do to protect myself?"

Anita Nador

Thank you so much. Yeah, that's totally true. I mean, if you want to convince a CEO of the value – I had clients coming back from JP Morgan saying, "We need a trade secret policy because that's all we have, is trade secrets, and we have lots of investors, and we need a trade secret policy." I said, "Okay, we can do that."

So that's a great lead-in to what Tim and his company Tangibly do, as to, okay, you're here. How do we make this manageable for companies? And you've seen lots of different things and what you're developing, and you're extremely knowledgeable, so perhaps you can provide us with some insights.

Tim Londergan

So the first thing I'll say is that I had an investor reach out just a few weeks ago and he sent me a screenshot of a deck that he had just gotten, and he was like, "This is the first time I've seen this," which talked about the intellectual property, and it had all the patent numbers. And then it said 436 trade secrets, right? And so I think if I look back in the history of Tangibly, which is almost a three-year-old company now, three years ago, people still looked at me a little sideways when I said, "I'm building a SaaS platform for trade secrets." It was like, "What are you talking about?" Things have come a long, long way in the last three years.

And so I'd say at the outset, you know, trade secret SaaS, what's it really mean? We kind of have architected this platform around a lot of the key themes we've heard here today, which is, we think about, number one, asset. So what is it? Number two, who has access to it? So it's an identity profile. And then number three, it's a contract with that identity, be it a person or a company. What's that contract actually say? What's it sort of designed to do? And so those are what we kind of think of as the triumvirate of trade secrets, those three things.

And then the two things that we do on the platform is that we provide training, number one. And so that training can be for the employees, it could be for the partners, whoever you want it to be for. Let's just sort of create a common vernacular amongst the company so we all understand this stuff.

And then the other thing we do, which again, over the course of three years, I think people have become a little more comfortable with, is the idea of saying what we preach is, "Hey, if someone has access to your trade secrets, just tell them it's a trade secret, right? Be very explicit. Basically put them on notice." And so we've built this workflow to achieve that. And so that's sort of the guts of the system.

Anita had asked me, "What does implementation look like and how hard is it?" And what I'd say is we're still a young company and this is still very much of a developing market. And so we've seen everything, right? So we have companies that come to us. They already have a spreadsheet. They know they want a solution; they see what we do, and they go, "Okay, that's great." And so that implementation path, again, let's say a small and medium company, you know, within a month they're sort of up and running and everything's kind of humming. And then we work through law firms as well. And so sometimes the law firm will be an implementation partner for the client.

And then if I just sort of go to the other side of the spectrum, let's take a Fortune 100, right? So at the sort of Fortune 100 size, which we've probably got about half a dozen of those conversations going, and they range from like, analysis paralysis, like, "This is such an enormous problem at a company the size of," you know, you know, maybe a Fortune 100, back to something actionable. And so what we're starting to see now is this idea that the one thing that a lot of big companies have in common, the big risk that they see with trade secrets – and it bears out in litigation data – is actually contamination risk. And so it's like, I'm taking in information, oftentimes from much smaller companies. How am I handling it? Am I really living up to the terms of the contract that I just signed? Have I ever really destroyed any information that was given to me? Probably not. So we're seeing these point solutions where people need tools to handle the inflow of information. How is it being marked? Who really has access to it? And then what happens upon sort of disposal? So that's one.

And then the other one where we're seeing bigger companies say, "There's a point solution here," is really in diligence for M&A, right? Which is, "Hey, we're going to go buy this company, small company somewhere around the world. You know, we don't know once we sign the deal, exactly what the trade secrets are, but we then go get them. So we know kind of roughly what they are. Now, let's kind of take this big step and go sort of document everything." And so that's kind of been an interesting one to see. Again, it doesn't take, you know, the board of directors to say, "Thou shalt do this." It's sort of someone in the legal department saying, "We're going to go implement this for this very small thing." So what I see is those kind of motions at big companies. That's going to start to also just raise awareness within the company as well.

Anita Nador

So yeah, I've seen that. I'm working on a deal that they've spent a few months working out the various different fields. Each party has brought to the table trade secrets. They want to develop things. And there was no clear delineation, so they've had to spend some time. Otherwise it's going to be a mess once you start working and trying to figure this out. So at least having some rules, maybe putting some more specific provisions in your agreements as to processes and how you figure these things out, may help you avoid expensive solutions later on.

So is there anything else, Tim, that you've seen that you'd like to add? Your last words?

Tim Londergan

Just this whole topic because I think we'll all look back on this time and go, "Wow, that was wild," right? And it's going to play out for the next few years. So if you're still early to the conversation, it's early days. So we've been at it. And I was I was glad to sort of see the Optimus use case. Really, the trade secret was the heating and cooling process.

So we've built some of our own AI on top of large language models. and we're going to make a big announcement next week. So this is sort of the pre-announcement. So we've taken some of that logic. We started this some time ago. And as a chemist by background, you know, I always think about heating and cooling processes. And so we knew that the way patents are often drafted is to obfuscate the trade secret. And so with trained eyes, you can kind of look at a patent claim and say, "Well, there's probably a trade secret here, right?" So we started building that type of logic into our own AI, and then using the power of these large language models to then basically ingest a patent and come out the other end of it with basically a trade secret roadmap. It's not as good as telling you the exact heating cooling process, but it can kind of direct you to the heating and cooling process.

Anita Nador

Which may be important, because obviously it's an important technology that you're patenting.

Tim Londergan

Yeah. It's huge. And I think that kind of comes back to this implementation question. So what we're seeing is, just it's an easy way for people to get their heads around the stuff – they know they have some trade secrets, but like, where is it? What is it? It's going to be a powerful way to help people sort of understand what to start to focus on to get started.

Anita Nador

Thank you so much. And thank you to our panellists. I mean, I just wanted to take us back to a little bit of the scenario and saying, for the purposes of today in the demonstration, we probably could have gotten Ethel maybe a bit sooner than in France, but it was a great way to demonstrate the importance. And I've spoken to many of you, our council, but in different countries, and a lot of it is knowing how to enforce your rights internationally. And hopefully today, you've gotten some creative solutions. You know that it can be seamless from one country to the other. And as long as you're on top of it and have professionals who know what they're doing.

And it's also important to be ready for those situations, what are you going to do? Again, if I'm looking at a lot of the cases, some of them are just employees not knowing. Some of them are employees actively trying to benefit. So having those training systems in place, communicating to your partners, communicating to your employees on how best to handle information and what information has to be handled and how important it is and how serious it is to go to a competitor or whatever or start up their own business or a new joint venture. Hopefully, we gave you a little bit of a taste for that.

So thanks for coming. And I think we're going to turn it over. You've listened to us for the last hour, so now we hope to turn it over to you and we can have a lively discussion. So if anyone has any questions or want to…