Trade Secret

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Trade Secret

Where a person devices/create a formula, compilation, method, technique or process which has some commercial use and which is not generally known or readily ascertainable to anyone else is protected under the laws of Trade Secrets in UAE. Source codes for computer programs, the formula for Coca-Cola and fried chicken recipe of KFC are common examples of a trade secret. The only condition for the protection of a trade secret is the mechanism for the protection of the same.

A trade secret may refer to a practice, process, design, instrument or a compilation of data or information relating to the business which is not generally known to the public and which the owner reasonably attempts to keep secret and confidential. Such data or information may also involve an economic interest of the owner in obtaining an economic advantage over competitors.

Trade secrets, just as other intellectual property rights, can be extremely valuable to a company’s growth and sometimes even critical for its survival. It is imperative therefore, upon businesses to ensure that they adequately protect their business processes, technical know-how and confidential information from competitors.

The question in any trade secret dispute is the exactly what the secret is. The following information has been recognized as trade se crets:   practices, formulas, designs, instruments, patterns, commercial methods and compilations of information. 

Arguably, the most valuable trade secret in the world is the Coca-Cola formula. Popular accounts state that the Coca-Cola formula is only known by a handful of people in the company and the formula is kept in a vault for safe keeping.

 

Trade Secret’ means information which meets all of the following requirements:a) it is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;

b) it has commercial value because it is secret;

c) it has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

 

Trade secrets are protected in different ways, but as part of the due diligence process, the question must be whether appropriate mechanism are in place to protect those trade secrets.  For example, what form of confidentiality agreements are in place with employees and contractors and what kind of information security policies are in place, what kind of communication monitoring policies and consent procedures (if required) are in place.

As per WIPO trade secrets are protected without registration, that is, trade secrets are protected without any procedural formalities. Consequently, a trade secret can be protected for an unlimited period of time. For these reasons, the protection of trade secrets may appear to be particularly attractive for SMEs.

There are, however, some conditions for the information to be considered a trade secret. Compliance with such conditions may turn out to be more difficult and costly than it would appear at first glance.

While these conditions vary from country to country, some general standards exist which are referred to in Art. 39 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement):

 

  • The information must be secret (i.e. it is not generally known among, or readily accessible to, circles that normally deal with the kind of information in question).
  • It must have commercial value because it is a secret.
  • It must have been subject to reasonable steps by the rightful holder of the information to keep it secret (e.g., through confidentiality agreements).

 

Example

An SME develops a process for the manufacturing of its products that allows it to produce its goods in a more cost-effective manner. Such a process provides the enterprise a competitive edge over its competitors. The enterprise in question may therefore value its know-how as a trade secret and would not want competitors to learn about it. It makes sure that only a limited number of people know the secret, and those who know it are made well aware that it is confidential. When dealing with third parties or licensing its know-how, the enterprise signs confidentiality agreements to ensure that all parties know that the information is a secret. In such circumstances, the misappropriation of the information by a competitor or by any third party would be considered a violation of the enterprise’s trade secrets.

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