A Comparative Legal and Economic View of Global Trade Secret Regimes Mark F. Schultz So. Illinois University School of Law George Mason Center for the Protection of Intellectual Property

OECD Trade Secrets Project Project developed in response to a request from OECD Member countries Study Team: Mark F. Schultz ( George Mason University Center for the Protection of IP & Southern Illinois) Douglas Lippoldt (OECD)

Trade Secrets Protection Index Scores countries’ strength of trade secret protection on a scale of 1 - 5 Thirty-seven countries (so far) 1985 – 2010, five year intervals An analytical tool, not normative

Trade Secrets Protection Index Covers dozens of questions Aggregated into five equally-weighted components: Definition of trade secrets & coverage Duties and misappropriation Remedies and restrictions on liability Enforcement, investigation & discovery System functioning and related regulation

Trade Secrets Protection Index, By Country and Component, 2010 Similarities: Scope of protection: technical information, confidential business information; ~ know-how Defences: independent creation Third-party liability: liable if knowledge or reason to know; generally subject to injunction Remedies: civil remedies such as injunctions and damages are generally available Differences: Civil versus criminal law; role of common law & precedent Duty of confidentiality – nature and duration Remedies: types of damages; injunctive relief; seizure and return of materials? Evidence gathering & discovery: documents? Ex parte search? Duty of employees: implied or only explicit? Non-compete agreements: post-employment? Between commercial entities? Protection of secrets during litigation? Data exclusivity: availability and duration of protection Technology transfer regulations? Trade secrets as property or as rules concerning relationships? Figure 1. Trade Secrets Protection Index, By Country and Component, 2010 OECD Trade and Agriculture Directorate

Evolution of TSPI over time 1985 – 2010, OECD and BRICS Countries

Results of OECD Economic Study Hypotheses: Innovation effects: by securing investment in R&D, trade secrets encourage innovation Trade effects: foreign firms are more likely to engage in FDI and trade with countries where trade secrets are protected

Essential Features of an Effective Trade Secret system Definition of trade secrets & coverage Covers both industrial and commercial information No extra requirements Duties and misappropriation Covers breach of duty and corporate espionage Remedies and restrictions on liability Preliminary injunctions Enforcement, investigation & discovery Effective Investigation Related Regulation A well-functioning legal system

Key Points of Divergence Globally Lowest scoring countries (e.g., China and Russia): Stringent proof requirements that render enforceability very difficult Higher scoring countries Criminal protection Breach of duty only OR breach of duty AND misappropriation Investigation and discovery procedures Protection of confidentiality during litigation

4 Key Questions Before Investing or Litigating Across Borders (1) Is trade secret protection defined “normally”? Extra requirements? Do unrelated third parties have duties? (2) Can I get a preliminary injunction quickly? (3) Can I investigate my claim effectively? Via civil discovery? Via the criminal justice system? Receptivity of authorities to criminal claims (4) Can I protect my secrets from further exposure during litigation?

Thank you mschult9@gmu.edu Mark F. Schultz, George Mason Law, CPIP Southern Illinois University School of Law