Industry Groups Press For EU, US Action On Trade Secret Protection

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Theft of trade secrets, or “confidential business information,” has reached such an appalling level that legislative action is needed, industry groups say. They’re pushing the European Union and United States to get involved, and may be making headway.

Trade secrets are an important strategic asset for many European companies, EU Internal Market and Services Commissioner Michel Barnier said [pdf] before a 29 June conference on the topic in Brussels. As a result of time-consuming and costly research, decades of experience and presence in a particular market, businesses find they possess unique information and knowledge that allow them to compete successfully, he said.

That know-how is particularly valuable because it can give companies an advantage over rivals, Barnier added. Management of trade secrets, along with intellectual property (IP) rights such as patents and trademarks, is “key to achieving competitiveness gains linked to innovation and excellence,” he said.

But digital technology now enables huge amounts of data to be captured and transmitted across the globe in seconds and at no cost, he said. Outsourcing, subcontracting and expertise consulting, all widely used, involve sharing of strategic information and knowledge. An adequate level of protection for such know-how, alongside effective forms of redress, can help maintain fair competition, he said.

The EC published a study on the legal protection of trade secrets in January. It’s now surveying companies to gauge the economic significance of trade secrets in order to assess their role in complementing patents and their importance for driving the innovation needed to create jobs and growth, Barnier said. The final study will be made public in the first half of 2013, the EC said.

The problem is that there is no EU-level protection for trade secrets, DuPont de Nemours Associate General Counsel Patrick Schriber told Intellectual Property Watch. There’s no good reason for that other than a lack of awareness of the issues and of the importance trade secrets hold for Europe’s economy, he said.

There are national laws, which vary greatly from country to country, Schriber said. DuPont is part of a lobbying group, the Trade Secrets & Innovation Coalition (TSIC), that is pressing for monetary and injunctive relief at European level.

“Severe and Shocking” Theft

Members of the TransAtlantic Business Dialogue are reporting “severe and shocking” trade secret theft problems, TABD US Executive Director Kathryn Hauser said in an 11 July interview. The situation is so bad that the TABD IP Working Group discussed it for the first time on 10 July at a strategy session in Brussels, she said. The TABD wants to use the working group to make government officials in the EU and US aware of the concept of trade secrets in the hope that they will seek a transatlantic solution, she said.

DuPont de Nemours has noticed a striking increase in theft of its trade secrets over the past five to six years, Schriber said. Concerned, the company took internal measures to boost protection, but the thievery continued, he said. One major incident involved Kevlar, a substance DuPont patented in the 1970s, he said. The patents have expired, but the product’s continued success has led to a multitude of trade secret thefts involving the corporation’s manufacturing and processing knowledge, he said.

Alstom is currently in a dispute with a Chinese company over the sale of air quality equipment, a TSIC primer says. The Chinese company, a previous licensee of Alstom, is now selling products outside China, including in the EU, using Alstom technology and know-how illegally, it says.

Michelin had one of its prototype unpatented tires stolen during a 2005 rally in Japan, and more recently was involved in a trade secret theft involving an ex-employee, the TSIC said.

The hike in stealing business secrets is driven by cybercrime and delocalisation of manufacturing and research and development, Schriber said. The phenomenon is linked to the very strong development of global trade, via outsourcing to China, India and other countries, and the advent in those regions of local companies seeking to compete with DuPont and other big companies, he said.

The illegal activity appears to take several forms, Hauser said. It can involve an employee leaving one company and taking confidential business information with him to another, she said. That information may or may not be used in an “evil” way, but there are concerns about how to stop this situation from happening, she said.

Another scenario is when visitors, suppliers or vendors take photographs on mobile phones while they’re inside a particular company, Hauser said. In addition, sometimes visitors are actually working for a state-sponsored organisation, often in a developing economy, looking to gain information from companies, she said.

The IP community has been so focused on copyright and trademark issues that it hasn’t been aware until recently of the damage trade secret theft is causing, Hauser said. She welcomed the fact that the TABD IP Working Group is willing to put this on the agenda.

Seeking a Solution

Among other things, the TSIC aims to raise awareness of trade secrets as a complement to patents and to show how much European innovation is based on business know-how, Schriber said. The fact that the unitary EU patent is finally making some progress can’t hurt the effort, he said.

But there are obstacles to achieving protection for trade secrets, Schriber said. As with all EU-based legislation, there must be support from a majority of member states. The EC Internal Market Directorate is strongly behind the push for protection, but the data it is seeking for its economic study will be hard to get hold of because organisations are reluctant to admit they’ve been robbed, he said.

The coalition wants EU-wide legislation that clearly recognises trade secrets as a form of IP in order to allow redress for theft, Schriber said. It is not seeking new monopolies, and does not oppose reverse-engineering or parallel product development, he said. Companies want monetary redress, but, more importantly, injunctive relief, he said. Under US law, the International Trade Commission can bar imports into the States which have been made using infringed trade secrets, a measure that could be taken up at EU level, he said.

At a minimum, there should be an EU-wide approach to protection, Schriber said. The other concrete step the EU could take would be to expressly include trade secrets as a form of IP protected by the directive on enforcement of IP rights, he said.

Next Steps

Coalition representatives met with European Parliament members on 11 July. At this point, everyone is awaiting the EC study and any proposal the Commission might make.

But interest in the topic is starting to “become buzzing,” TSIC spokeswoman Ann Becker told us. In the works are several possible conferences in the autumn, and there is increased interest from the US side, as well as from other EC directorates, she said.

The TABD IP Working Group usually meets twice a year, Hauser said. She plans to talk to the US Trade Representative and Department of Commerce about replicating the Brussels 10 July strategy session in Washington, but said no date has been set.

Dugie Standeford may be reached at info@ip-watch.ch.

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