Trade Secrets or Confidential Information
What is a trade secret or confidential information?
A trade secret or undisclosed confidential information may relate to specific knowledge, a specialist process or "special recipe", or a product that is unknown to the public (and competitors) and that in turn gives you an advantage over your competitors.
Trade secrets include processes, recipes, quotations and plans prepared for contract bidding, and knowledge acquired by employees as part of their employment.
Who owns a trade secret?
The trade secret is owned by the person or company that holds the secret.
How do you protect your trade secret?
You cannot register trade secrets and confidential information. Your trade secrets should only be disclosed to a limited number of trusted people, and ideally that disclosure should be protected by a confidentiality agreement where there could be a remedy for breach of contract if that information is disclosed.
Trade secrets also receive some protection under the common law action for breach of confidence. Courts can stop the spread of information that is confidential and that was disclosed to a person when that person knew or ought to have known that the information was disclosed in confidence. This extends to information wrongly disclosed to third parties and information obtained through industrial espionage.
The obligation of confidence only exists until the information reaches the public domain, however, when it then becomes free for all to use.
Until recently, breach of confidence or breach of contract have been the only protections available to trade secrets in Aotearoa-New Zealand. Since 2003, however, new provisions in the Crimes Act relating to "taking, obtaining or copying trade secrets" mean that you may also be able to have recourse under this law for some types of intellectual property infringement occurring after 1 October 2003 when the Crimes Amendment Act came into force.
The new offence is only committed where the person taking, obtaining or copying the trade secret:
- knows that the document, model or other depiction contains or embodies a trade secret;
- intends to make money or cause loss to another person; and
- acts without a belief that they were authorised to take, obtain or copy the trade secret and without a belief that their actions were lawful.
This offence will be more difficult to prove than a breach of the general law.12 Offences under this provision are punishable by up to five years' imprisonment.
How long does protection last?
The duration of a trade secret is indefinite so long as the information remains undisclosed, has commercial value and the inventor makes a concerted effort to keep the information secret.
What is not protected?
A trade secret does not prevent competitors from developing an identical product independently, or by copying a product once it is on the market, or from reverse engineering a process. This effectively limits the value of a trade secret where the secret is revealed once a product has been released for commercial sale. In practical terms, the use of trade secrets to protect your IP is likely to be more effective if the secret relates to a process (for example the method for extracting a valuable chemical from a biological organism), that cannot be figured out by competitors once the product is on the market.13
Does trade secret protection apply overseas?
Trade secret protection relies on the owner preventing the information from becoming widely known, so it can be protected overseas. The most famous example of a trade secret is the recipe and process for making Coca-Cola®. Trade secret protection has effectively prevented other companies from reproducing the drink, allowing Coca-Cola® to maintain an advantage over competitors.
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