1. TRADE SECRETS workshop II © 2009 Prof. Charles Gielen EU-China Workshop on the Protection of Trade Secrets Shanghai 23-24 June 2009

2. TS in The Netherlands Many Dutch and foreign technology developers and brand builders Akzo Nobel DSM Philips (ASMI, ASML) Unilever Agricultural industry Bio industry etc.

3. TS in The Netherlands, cont. Strongly patent oriented No strong ts-protection policies

4. Protection of TS in the Netherlands No special law Civil law (act of tort); see the case Rising Sun vs. Shining Moon Contract law Employment law Criminal law Procedural law (workshop IV)

5. The Rising Sun v. Shining Moon case, 1 Rising Sun Inc. (Tokyo) possesses genetically modified bacteria strain used for an increased production of the feed additive PIG Crown jewel of Rising Sun. Never sold or made available to public + patents on the biogenetic engineering of bacteria

6. The Rising Sun v. Shining Moon case, 2 Shining Moon Ltd. (Beijing) produces feed additive PIG using a bacteria with increased production of PIG Rising Sun files a case in the courts in The Netherlands: patent infringement illicit use of TS (Rising Sun claims that DNA sequencing shows that DNA is the same incl. non functional parts)

7. The Rising Sun v. Shining Moon case, 3 Legal basis claim Rising Sun: Art. 6:162 Civil Code: damaging unlawful acts can be opposed Use by Shining Moon of bacteria is unlawful act Unlawfulness to be established on basis of art. 39 TRIPs Shining Moon: rec’d bacteria strain from Chinese government agency/ no clue about how strain was developed/obtained by this agency

8. Conditions for successful action in TRIPS What exactly is info protected as TS? Lawful ownership Must be secret Must have commercial value because it is secret Reasonable steps to keep it secret Info is disclosed to, acquired by or used by Shining Moon in a manner contrary to honest practices

9. Precision of TS TS must be clearly identified US IMAX v. Cinema Techs (1998):. Moreover, [defendant] could not be expected to prepare its rebuttal to [plaintiff's] trade secrets claim without some concrete identification of exactly which 'dimensions and tolerances' [plaintiff] alleged were incorporated into [defendant's] own projector system Other courts: identify TS with reasonable particularity Does Rising Sun claim the whole bacteria as TS, or particular genetic modifications? watch out: those claimed in the patents cannot be claimed as TS, because public!

10. Secrecy (39.2.a TRIPs) …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 Bacteria strain of Rising Sun ≠ available on the market, so not generally known Is it readily accessible? Yes if the info can be reverse engineered, quickly or inexpensively

11. Secrecy (39.2.a TRIPs) Shining Moon could say that bacteria can be found in PIG, so…readily ascertainable? Depends whether the non disclosed parts of the bacteria can be reverse engineered easily, quickly and inexpensively The possibility of reverse engineering is not sufficient to disqualify as a protected TS

12. Commercial value because its secret (Art 39.2.b) Should Rising Sun prove it has invested a lot of money in the development of strain? No, value should be derived from its secrecy; for example something can be found by mere chance (the sweetening power of aspartame) Should Rising Sun prove that it actually uses the TS? No Lets assume the info held by Rising Sun is that the bacteria does not work in a proper way: is that a protectable TS? Yes, because it would help a competitor decide to discontinue research with this bacteria

13. Reasonable steps (Art. 39.2.c) Rising Sun has a generally worded policy to protect TS; sufficient? No! Secrecy obligation for employees and third parties having access to strain! No heroic or extraordinary measures necessary Eg. Dupont v. Christopher (1970) Due fences, locks, passes etc.!

14. Use contrary to honest practices, Art. 39.2 Footnote at Art. 39.2: … at least practices such as breach of contract, breach of confidence and inducement to breach, and includes the acquisition of undisclosed information by third parties who knew, or were grossly negligent in failing to know, that such practices were involved in the acquisition Also other practices can be dishonest (e.g. espionage) Look at the relevant trade sector to determine what is honest (fashion v. chemical industry)

15. Use contrary to honest practices, Art. 39.2 Can Rising Sun prevent the use of strain? I do not think so: the acquisition by Shining Moon was in good faith, no violation of secrecy obligation, no abuse of trust Only if Shining Moon knew or could have known that Chinese gov. agency acquired it with improper means, use could be unfair What it Shining Moon is later put on notice that Chinese gov. agency got the strain through misappropriation?

16. The Powerflow-case Powerflow makes electric switches De Bie is independent distributor of those, then starts his own business in switches and shows interest in distributing a new Powerflow-switch He receives sample and design drawings; sample is shown to potential customer Negotiations with Powerflow stop and soon thereafter De Bie introduces his own switch Powerflow: illicit copying and use of TS

17. The Powerflow-case Court of Appeal (1994): no violation of trade secrets (sample was send to customers), but De Bie through the exchange of technical and commercial info got a head start in manufacturing competitive products, so De Bie acted in a dishonest way by not waiting some time with introducing a new product or offering a payment for that

18. Protection of TS through contracts Joint ventures/cooperation agreements/ R&D agreements/licenses, etc Employment contracts Non compete ≠ non-disclosure Non-disclosure ≠ no use obligation

19. Protection of TS, labour law Art. 273 Criminal Code makes it an offense for a person to disclose “specific information related to a commercial, industrial, or service organization in which he is or has been employed and regarding which secrecy has been imposed“ Art. 7:678.2.i: ground for dismissal is that an employee discloses specific information regarding the company of his employer that he should have kept secret

20. Labour law: the problems What is in the mind of employees cannot be erased when he leaves (personal education/ development/ professional knowledge) Dutch law: this can be used in new job, but head start advantage can be taken away (Minigel-1996) So best protection is given by specific security measures and specific covenants in agreements, such as non-compete, non- disclosure and non-use of specific info US-law: inevitable disclosure doctrine: even without non compete: prohibition to work for competitor (Pepsico v. Redmond 1995)

21. THANKS! charles.gielen@nautadutilh.com