Trade Secrets: What is a Trade Secret and how to protect it?

  • By:Tim Slingschröder
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Some companies just clearly stand out among all others. They produce that coffee with that specific aroma, fabricate those indestructible shoes or simply manage to deliver these frying pans days before their competitors do. Ingenious processes or superior technology often form the base for such companies’ edge over others, and these businesses obviously do not want to give away their strong market position. In order for them to protect their advantageous techniques, companies can opt for protection by having them protected as Trade Secrets.

Subjects to be protected through a Trade Secret

Trade Secrets are defined in Article 1 of Law 30/2000 on Trade Secrets. This article roughly describes a Trade Secret as information in the field of technology or business which is unknown by the general public, and which provides a company an advantage in performing its business activities. In its 2010 analysis and evaluation report of Law 30/2000, a team of the Ministry of Law and Human Rights under the supervision of Dr. Agus Broto Susilo, SH., MA. narrows this ‘information’ down to a range of specific subjects suitable for legal protection through a Trade Secret. This list includes predictable items such as technical researches and recipes for foods and beverages but also mentions customer lists, access codes or organizational working structures as being possibly protectable corporate secrets.

The secrecy of a Trade Secret

Having valuable business strategies in itself is not enough to have these protected through a Trade Secret. Article 3 of the Trade Secret Law adds to the definition of a Trade Secret that the parties having access to such information must make reasonable efforts to maintain the secrecy of this information. Practices and data already being widely available in business and commerce, therefore, can not be protected as a protected Trade Secret, and neither can profitable strategies which are of have not been kept a secret. One of the most seen ways to protect Trade Secrets for companies is to place stipulations in the employment contracts of staff members. After all, a company’s employees have direct access to the information being subject to Trade Secret, which makes them the most likely parties to breach such Secrets. If an employee in question breaks the secrecy he signed for, he risks up to two years of imprisonment or fines of hundreds of millions of rupiah as is stated in Article 17 of the Trade Secret Law.

Read Also :The Ins and Out of License Agreements

The 2010 Ministry of Law and Human Rights’ Analysis and Evaluation Report of Law 30/2000 also mentions some other concrete steps companies can take in order to protect their Trade Secrets. Directors, for example, can order the placement of signs with texts like ‘NO TRESPASSING’ or ‘STAFF ONLY’ on doors or walls of places where secret production techniques are being used. Information saved in computer databases could be locked with a password, or could be put in a folder named ‘SECRET – ONLY OPEN WITH PERMISSION OF …’. Physical documents containing Trade Secrets must be stored safely, and unnecessary copies are destroyed where possible.     

The limitations of Trade Secrets

As described in the previous paragraph, Trade Secrets can be enforced in court if an employee willingly shares such Secrets with others. The breach of a Trade Secret is not only illegal in case of an employment relationship. The basic legal protection of a Trade Secret also applies to other ‘ways of improper acquiring’ of the Secrets, such as theft or espionage. In any other case though it is perfectly in line with the law for anyone to ‘reverse engineer’ products or services in which the Trade Secret is processed. If the Secret in question is a specific technology, for example, anyone is allowed to purchase the device in which the technology is used and dissect it to unravel its secrets and use these in his own products. This makes machines with mere physical, solid components tricky subjects when it comes to Trade Secrets, as they can relatively easily be dismembered and put back together. Recipes and formulas for liquids, however, are much harder to dissect and therefore are more suitable for protection through a Trade Secret.

How to have information legally protected through a Trade Secret

Unlike most other forms of Intellectual Property, Trade Secrets cannot be registered in order to obtain exclusive rights to them. The only way to have a Trade Secret protected is by simply treating it as one. The more a company can prove it took measurements as described in the previous paragraph, the stronger the evidence that the information in question can indeed be regarded as a Trade Secret. A restaurant chain keeping its secret recipes in a vault and on an encrypted hard disk, for example, has quite a strong legal standing against an employee who sold a recipe to a competitor.

As there is no registry database protecting Trade Secrets, taking proper measurements to protect a company’s secret techniques and information are vital. A legal expert can help you in drafting closing articles in employment contracts regarding the protection of Trade Secrets and can advise about other tactics to strengthen your legal position.

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