Trade Secrets Important But Neglected, IP Experts Say At WTO

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Academics and experts from international organisations met last week at the World Trade Organization to discuss the role of know-how in today’s global economy, stressing the relevance of trade secrets in global value chains and international transfer of technology.

The 1 October workshop, entitled “Managing knowhow and trade secrets in global value chains and the international transfer of technology,” was organised by the WTO Intellectual Property Division in the context of the WTO Public Forum. The forum took place from 1-3 October under the theme “Expanding trade through innovation and the digital economy” (IPW, WTO/TRIPS, 1 October 2013).

The panel on trade secrets was meant to address a “fascinating subject” that has been “neglected compared to other areas of intellectual property,” said event moderator Antony Taubman, director of the WTO Intellectual Property Division.

In his presentation, Nuno Carvalho, director of the Intellectual Property and Competition Policy Division at World Intellectual Property Organization, emphasised the natural tendency of economic actors to create and use trade secrets in their business operations, and underlined the intrinsic relevance of trade secrets in the field of intellectual property.

“Trade secrets are a matter of fact before they become a matter of law,” said Carvalho. “Secrecy is physical, before being legal.”

“Trade secrets are at the origin of almost all IP rights. Indeed, before being patents and copyright, IP rights are almost all trade secrets,” he added.

In recent years, the importance of trade secrets has grown, as innovation’s structures and production chains become more dispersed and yet rely on the sharing of know-how and technological information through the use of the internet among trusted actors from all countries.

Against this background, speakers underlined the importance of trade secrets for all kinds of businesses.

“Trade secrets are essential for family business, but they are also present in pharmaceutical, chemicals and semiconductors companies,” Carvalho said.

In the same vein, Jorge Novais Gonçalves, from the European Commission Internal Market and Services Directorate-General, stressed that “trade secrets are not specific to one industry.” In presenting the outcomes of a new paper commissioned by the European Commission to Baker and McKenzie, Gonçalves underlined that know-how is of particular importance for small and medium enterprises that lack of financial resources to manage a large IP portfolio.

However, despite the increasing relevance of undisclosed information in the global economy, “maybe one percent of IP scholars deal with trade secrets,” said Shamnad Basheer, professor at the National University of Juridical Sciences in Kolkata, India.

Common International Standard

Taubman tried to dispel some criticism of a supposed lack of discipline on trade secrets in international law. At the multilateral level, he explained, undisclosed information is protected by the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The WTO perspective on this issue is linked to the concept of protection against unfair commercial practice, he said.

“When you look at the WTO system and legal texts, undisclosed information is clearly part of the package. The TRIPS Agreement expresses requirements to protect undisclosed information,” Taubman claimed.

“It is an attempt, dating back to over 20 years ago, to codify at the international level the law of trade secrets and provide a broad international standard,” he added.

However, despite the existence of an international standard, countries adopt a great variety of different legal approaches to protect trade secrets, Taubman said. This emerges when analysing the legal mechanisms put in place by WTO members to give effect to their TRIPS obligation. Specifically, the legal measures adopted touch a large number of different sets of laws, such as unfair competition law, administrative law, competition law and even non-statutory common law instruments.

According to some speakers, this variety may create problems by undermining legal certainty. Gonçalves raised the example of EU members’ legislations, where the “legal framework is fragmented, diversified and opaque.”

Gonçalves claimed that a sound system of protection would have beneficial effects on business, reducing the costs of protecting sensitive data, and would facilitate the sharing of know-how. In addition, a safe legal environment would benefit labour mobility, he said.

“In the absence of trade secrets protection, there are more non-compete clauses in contracts, while if trade secret protection is in place, there is less need for such clauses,” Gonçalves argued.

Importance of Know-how for R&D, TK and Tech Transfer

The protection of undisclosed information could have a role also in addressing concerns in the field of traditional knowledge. In this sense, Basheer emphasised that “informal knowledge exists in indigenous communities and it’s in great part a form of trade secrets.”

“Indigenous communities have a relationship with knowledge that often transcends its commercial value and this is an additional rationale of why you want to protect trade secrets,” he said.

Some panellists also discussed the possible benefits to research and development (R&D) activities deriving from the protection of trade secrets. Gonçalves noted that the United States and Japan have a “more mature approach than the EU countries on the protection of trade secrets.” Notably, the US and Japan “perform better [than the EU] in private R&D investment.”

“I’m not saying that investment on R&D depends on the protection of undisclosed information, but trade secrets can be part of the package to improve investment in research,” he argued.

Basheer highlighted a different perspective on the effects of trade secrets on R&D, claiming that the protection of know-how in developing countries that are becoming R&D hubs can be of greater value then patent protection.

“If you have people moving from one R&D area to another, what really matters is trade secrets, not the Indian patent law,” he stated.

Trade secrets can also have a more crucial role than patents in technology transfer, several speakers said.

“Data are scarce on the quantification of the value of trade secrets for businesses,” Carvalho said. “This means that reports on innovation are necessarily incomplete, because they cannot capture innovation deriving from secrets. However, data on technology transfer show that trade secrets are relevant, if not predominant, vis-à-vis other components of IP.”

In this regard, Prof. Sean O’Connor from the University of Washington School of Law explained that there is a “distinction between procedural knowledge – that implies mastering an activity – and declarative knowledge, that is just about factual information and doesn’t require practice.”

O’Connor argued that to enable technology transfer, “there must be more than simple information disclosure.”

“If you just see a patent and you have no access to the laboratory, in many cases you can’t actually produce what is described in the patent,” he said, while explaining that new technologies might be able to ease knowledge transfer by documenting and capturing know-how.

Carvalho claimed that the “opposition between patents and trade secrets does not always correspond to reality.”

“Without know-how, often you can’t exploit a patent, that’s why we have few compulsory licences in developing countries,” Carvalho concluded.

 

Alessandro Marongiu may be reached at info@ip-watch.ch.

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