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2015/SOM1/IPEG/027 Agenda Item: 4b-i

Trade Secrets Protection in the APEC Economies (Volume I)

Purpose: Consideration

Submitted by: United States

40th Intellectual Property Rights Experts’ Group Meeting

Clark, Philippines31 January - 1 February 2015

January 2015

This publication was prepared by Judy Goans, Janine Mans, and Marwa Abdou of Nathan Associates Inc. for review by the United States Agency for International Development.

TRADE SECRET PROTECTION IN THE APEC ECONOMIES U.S.-APEC Technical Assistance to Advance Regional Integration (US-ATAARI)

DISCLAIMER

This document is made possible by the support of the American people through the United States Agency for International Development (USAID). Its contents are the sole responsibility of the author or authors and do not necessarily reflect the views of USAID or the United States government.

TRADE SECRET PROTECTION IN THE APEC ECONOMIES U.S.-APEC Technical Assistance to Advance Regional Integration (US-ATAARI)

Contents

Executive Summary 3

Trade Secret Protection in the APEC Economies 4 Introduction 4 Background 5 Importance of Trade Secret Protection 6 International Requirements 8

Trade Secrets and Undisclosed Information 8 TRIPS and Test or other Data 9

Practices in APEC 9 Part I. Legal Framework 9 Part II. Protection of Trade Secrets 10

Who Can Claim Trade Secret Protection? 11 What Types of Information Can Be Protected as a Trade Secret? 11 How Is a Trade Secret Created or Maintained? 11 What Types of Conduct Are Considered Wrongful? 12 Limitations on the Protection of Trade Secrets 13 Scope of Protection 15 Other Issues 15

Part III. Test or other Data 18 Requirements for Test or Other Data 18 Conditions for Protection of Test or Other Data 19 How Is Test or Other Data Protected? 19 Transparency 19 Term of Protection for Test or Other Data 21 Other Issues 22

Part IV. Enforcement 24 Trade Secret Remedies and Recourse 24 Trade Secrets and Government Access 26 Remedies and Recourse for Test or Other Data 27 General Issues Relating to Enforcement 28

Recommendations 34 Enable Protection in All Economies 34 Discuss Variations in Practice 34

EXECUTIVE SUMMARY In 2014, the Asia-Pacific Economic Cooperation (APEC) Intellectual Property Experts Group (IPEG) unanimously endorsed a proposal on “IPEG Work to Enforce Trade Secrets Protection and Enforcement.” As part of that work, the APEC economies agreed to the preparation of a study of “current legal and regulatory regimes in APEC economies with respect to trade secrets.” The study’s purpose is to help APEC member economies identify shared challenges and responses, with the goal of enhancing trade secret protection and fostering continued investment and innovation.

Trade Secrets: Trade secrets are critical intellectual property assets for a broad range of businesses, from small start-ups to some of the world’s biggest companies. Both in the developing and developed worlds, businesses sometimes choose to protect certain information using trade secrets because they are potentially broad in scope, quickly secured, long in duration, and low in cost, particularly in relation to patent protections. For innovators with a limited awareness of patent requirements, trade secrets may offer the only form of intellectual property protection available, particularly in economies that are just developing a modern patent system. Trade secret protection does not include exclusive rights, but trade secrets must be protected against unauthorized acquisition, use, or disclosure that is carried out in a manner that is contrary to honest commercial practices.

The APEC economies that provided information for this report are remarkably consistent in their treatment of trade secrets. In all responding economies, any person or entity lawfully in control of a trade secret can claim protection. All recognize trade secrecy for scientific, technical, and commercial information. All allow claims by a formally-organized for-profit business. Most allow claims by an informal business or a formally-organized not-for-profit organization. In all, a written nondisclosure agreement can establish trade secret rights, and in most, an employment agreement can establish such rights beyond the term of employment. Participating economies exhibited variation in terms of exceptions to trade secret requirements. All offer civil remedies and about two-thirds provide for criminal prosecution of trade secret misappropriation.

Test or Other Data: Businesses invest heavily in testing to ensure the safety and efficacy of new pharmaceutical and agricultural chemical products and, as a condition of marketing approval, submit their test or other data to government offices. WTO Members are obligated to protect such data against unfair commercial use. WTO Members are also obligated to protect such data against disclosure except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use. In all responding economies, governments require the submission of test or other data as a condition for marketing approval and must withhold disclosure of the data and prohibit its direct use. Economies differ as to whether they prohibit indirect use. Most protect data only so long as it remains undisclosed and will disclose data when the public interest requires it.

Administration and Enforcement: Businesses depend upon the legal system to enforce their rights in trade secrets and test or other data. All economies allow civil lawsuits and most provide for criminal prosecution relating to trade secret misappropriation. All provide the possibility of obtaining damages, injunctions, and court costs in civil cases. Eight economies report that incarceration and/or fines are available for the criminal misappropriation of trade secrets. About half can combine restitution or an injunction with criminal prosecution.

Recommendations: A few recommendations are suggested from a review of the survey responses. APEC can work to ensure the availability of trade secret protection in all economies. It would also be valuable for APEC economies to discuss variations in practice and to strengthen national protections based on common criteria and practices in the region.

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TRADE SECRET PROTECTION IN THE APEC ECONOMIES

INTRODUCTION In 2014, the Asia-Pacific Economic Cooperation (APEC) Intellectual Property Experts Group (IPEG) unanimously endorsed a proposal on “IPEG Work to Enforce Trade Secrets Protection and Enforcement.” As part of that work, approximately 50 representatives of APEC economies attended a day-long trade secrets workshop on the margins of the APEC IPEG 2 meeting in August 2014, featuring experts from the private sector, government, and academia. The APEC economies also agreed to the preparation of a study of “current legal and regulatory regimes in APEC economies with respect to trade secrets.” The purpose of the study was to enhance the IPEG’s understanding of APEC economies’ existing legal and regulatory frameworks for the protection of trade secrets in order to help APEC member economies identify shared challenges and responses, with the overall goal of enhancing the protection of trade secrets and fostering continued investment and innovation.

This study furthers work previously undertaken by APEC. In 2011, APEC Leaders agreed to push forward a series of policies to promote effective, market-driven and non-discriminatory innovation policies. In 2012, APEC member economies agreed to develop the APEC Innovation and Trade Implementation Practices to provide guidance to economies on how to implement their 2011 commitment in this area.

This study builds on those commitments by establishing an information base on the legal framework for the protection of trade secrets and test or other data in APEC economies. Sharing this information promotes transparency among economies and highlights both the consistency of practice and the variety of procedures in place. It also offers examples of best practices and reinforces the importance of intellectual property protection in promoting innovation.

Information for the study was obtained from responses to a questionnaire circulated to APEC economies. Preliminary results were reported at the August workshop. The workshop, which featured experts from the private sector, government, and academia, was attended by approximately 50 representatives of APEC economies.

PROPERTY RIGHTS IN IDEAS

If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it. – Thomas Jefferson, inventor and U.S. President (The Writings of Thomas Jefferson, 13:333—35, 13 August 1813).

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This document describes the importance of trade secrets for APEC economies; discusses legal elements of the protection of trade secrets; and reports how those elements are implemented in APEC economies that provided detailed information on their practices. A majority of APEC economies participated in the study. However, since the number of responses varied by topic, the number of “responding economies” is reported for each topic. Methodology is discussed in Appendix I. Economy-by-economy results are tabulated in Appendix II. Full responses by the economies are provided in Appendix III. Laws and other elements of the legal framework are given in Appendix IV. Appendices are included in two separate volumes.

BACKGROUND Secrecy is the most basic way to protect valuable information. As a method of protection, secrecy is available to anyone, even in the absence of special laws on trade secrets. A person who develops something new, such as an innovative process or device, can choose to disclose it or to keep it secret. Likewise, a person may choose to protect business-related information, such as sources of supply, customer lists, or plans to introduce a new product by keeping them secret. Traditionally, trade secret laws developed to protect commercial, or trade secrets. However, all types of information have the potential to be kept as a secret, and a secret that is carefully guarded may be preserved for many years.

The need for legal protection of trade secrets arises in two important situations. One arises when the proprietor1 of the secret information, or someone acting on the proprietor’s behalf, discloses all or part of the secret to one or more persons with an expectation that secrecy be maintained, and there is a risk that the proprietor’s expectations will not be met. Another arises when a person takes steps contrary to honest business practices to acquire, disclose, or use information the proprietor has kept secret.

Disclosure may occur when the proprietor of secret information shares the information, or critical portions of it, with an employee or a potential business partner. Disclosure may also occur when a secret device or process is used where it can be observed by others. Sometimes, merely seeing a device may be sufficient to destroy its secrecy, or essential elements of the secret may be learned by studying non-secret materials, for example, by subjecting samples to testing. The process of learning about the device by studying it is known as “reverse engineering.” For a mechanical device, reverse engineering may be as simple as taking the device apart and reassembling it.

An important issue in trade secret protection relates to the concept of unfair competition and in particular to honest commercial practices. Most trade secret laws allow trade secret information to be acquired, used, or disclosed in a lawful manner but treat the acquisition, use, or disclosure as misappropriation when such acts are accomplished in a manner contrary to honest commercial practices. Most trade secret laws also allow the proprietor to take legal action to

1 The “proprietor” of a trade secret is any person lawfully in control of the secret information. “Proprietor” is preferred over “owner” because more than one person can be lawfully in control of the secret information.

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prevent such illegal acts but recognize that the possibility that more than one person may legitimately be in possession of the same piece of secret information, with each being entitled to use the information and neither being able to prevent the other from using or disclosing the information.

Trade secret rights thus provide a different type of protection from other forms of intellectual property. For example, under the Berne Convention for the Protection of Literary and Artistic Works, copyright laws would (with certain exceptions) allow the author of an original work the ability to prevent others from copying or adapting the author’s work; publicly distributing the work; and from publicly performing the author’s dramatic work or publicly reciting the author’s literary work, among other rights, and these rights would be available even where the work is not secret. Similarly, under the Agreement on Trade-Related Aspects of Intellectual Property Rights (which is applicable to WTO Members), patent rights would generally allow the patent holder to exclude others from making, using, offering to sell, selling or importing an invention even where the invention is not secret and even where another person independently developed the invention.

IMPORTANCE OF TRADE SECRET PROTECTION The ability to protect information against unauthorized acquisition, use, or disclosure offers an important business advantage to the proprietor of the secret information. Businesses devote considerable resources to identifying potential customers and maintaining customer satisfaction; improving and refining their products or methods of production to improve quality or reduce cost, or perhaps even developing new products or methods of production; and exploring business opportunities. Businesses therefore find it useful to keep a variety of different types of information secret in order to protect their investments and maintain the competitive advantage that the investments may provide.

The principal commercial value of undisclosed information is usually the competitive advantage that it provides. Undisclosed business or technical information may contribute to the effectiveness or efficiency of an enterprise, promote the quality of the goods or services it provides, reduce costs, or otherwise contribute to the enterprise’s profitability. The secrecy of such information enhances its value because it allows the enterprise that controls the undisclosed information to realize whatever advantages the undisclosed information confers.

Disclosure of such information allows others to receive the same benefit without having made the investment to develop the body of information that a company wishes to keep for its own use. In addition to whatever competitive advantage a business may derive from the information it maintains as a secret, the unauthorized acquisition, use, or disclosure of the secret information puts a company at a competitive disadvantage because others gain the same advantage without having made the same investment.

Trade secrets are of interest to both developed and developing economies. Trade secrets constitute valuable property and an essential part of the business model of some of the world’s biggest companies. Trade secrecy is, for example, the form of intellectual property that protects the formula for Coca-Cola® and the KFC® fried chicken recipe. A 2010 study by Forrester Consulting estimated that trade secrets represent two-thirds of a company’s information

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portfolios – and a greater share for companies in “manufacturing, information services, and professional, scientific, and technical services” (US Chamber of Commerce).

Trade secrets are also important for smaller businesses and for start-up companies.

Customer lists, supply lists, recipes, and other types of know-how help small businesses set their goods and services apart from those of other businesses in the same field, but such information typically cannot be protected by patent or copyright. In high-tech areas where technology improves rapidly, companies often rely on trade secrets instead of, or in addition to, patents, which they may find too slow for their business needs.

In addition to these advantages, trade secret protection is of particular importance for developing economies and for economies that are just beginning to implement a modern intellectual property system. Individuals and businesses with valuable proprietary assets may not make full use of available tools to protect their intellectual assets. Additionally, inventors sometimes learn about the novelty requirements for a patent after making a disclosure that makes their invention unpatentable.

While trade secret protection might not be the preferred approach to protecting a particular invention, trade secret protection may sometimes be the only method of protection available. For example, trade secrecy may be useful where the subject matter of the invention is not patentable; where disclosures of the invention were made before filing a patent application, rendering patent protection unavailable; or where an inventor or small business does not have access to legal assistance or cannot afford the cost of obtaining a patent.

Although trade secrets do not afford the exclusive rights offered by patents, trade secrets offer some important advantages over patents. Unlike patents, protecting intellectual property as a trade secret does not require the owner to submit an application or to pay fees to a government authority. Although trade secrets are vulnerable to independent discovery, a properly maintained secret can potentially be protected for far longer than the term of a patent.

Both in the developing and developed worlds, businesses may choose to protect information about inventions as trade secrets rather than through the patent system because trade secret protection can be secured immediately and without a government approval, it is potentially broader in scope because there are no subject matter exclusions, it is potentially longer in duration, and it may be less expensive to maintain.

Trade secrets also support the needs of businesses to protect types of information that cannot be adequately protected by another form of protection (patent, copyright, industrial design). They may be of particular use in protecting unpatentable manufacturing know-how as well as customer or supplier lists, new product designs, or marketing plans. Copyright may provide an independent basis for legal action, for example, preventing others from copying drawings or other materials. While most jurisdictions limit copyright protection to written materials, actions for misappropriation of a trade secret typically could be used to prevent or seek a remedy for other types of misappropriations, for example, an unauthorized oral disclosure of the trade secret or use based on learning a trade secret through observation of unwritten procedures.

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INTERNATIONAL REQUIREMENTS As members of the World Trade Organization (WTO), APEC economies must consider the obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). The TRIPS Agreement sets forth many of the core requirements that might be expected to be part of the legal framework for the protection of trade secrets.

Trade Secrets and Undisclosed Information TRIPS uses the term “undisclosed information” to describe information that must be legally protected. For purposes of this report, the terms “trade secret” and “undisclosed information” are considered to have the same meaning.

TRIPS Article 39.2 provides that:

2. Natural and legal persons shall have the possibility of preventing information lawfully within their control from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices so long as such information:

(a) 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) has commercial value because it is secret; and

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

A footnote to paragraph 2 explains that

For the purpose of this provision, “a manner contrary to honest commercial practices“ shall mean 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.

It may also be helpful to know that the term “honest commercial practices” appears in Article 10bis(2) of the Paris Convention for the Protection of Industrial Property: :

(2) Any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition.

This provision is included among the substantive portions of the Paris Convention that are incorporated in the TRIPS Agreement.

Under the TRIPS Agreement standard, virtually any type of information could be protected as a trade secret, provided that it satisfies the three-prong test set forth in Article 39.2. Note also that the term “secret” has a specific meaning, which is that the information, “as a body or in the

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precise configuration and assembly of its components,” is not “generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question.” (TRIPS Article 39.2(a))

The TRIPS Agreement requires WTO Members to protect undisclosed information that satisfies certain conditions. One condition is that the information have commercial value because it is secret. In most cases, information that meets the other two requirements will also have commercial value because it is secret. The mere fact that information is secret does not guarantee that it has commercial value. The TRIPS Agreement sets no minimum value as a requirement for protection and does not specify a standard by which to determine whether information has commercial value because it is secret.

A second condition is that the proprietor of the information has taken reasonable steps in the circumstances to keep the information secret. The language “reasonable … under the circumstances” suggests that a court might take into account factual circumstances such as the nature of the information and the way the information is used, and courts in some jurisdictions have recognized these factors.

TRIPS and Test or other Data In the same article as its provisions on “undisclosed information,” the TRIPS Agreement states specific requirements for “undisclosed test or other data” submitted to government agencies as a condition for obtaining marketing approval. Companies invest in such data to ensure the safety and efficacy of new pharmaceutical or agricultural chemical products that they introduce into the market. They therefore may be concerned about the possibility that their competitors will get a “free ride” by obtaining or using this data.

TRIPS Article 39.3 requires WTO Members to protect test or other data submitted to government offices as a condition of securing market approval for pharmaceutical or agricultural chemical products. Governments are required to protect such data against unfair commercial use. Governments are also required to protect such data against disclosure except where the disclosure is necessary to protect the public and steps are taken to ensure that the data are protected against unfair commercial use. This provision balances the interests of businesses in protecting valuable information against disclosure with the interest of governments in having the flexibility to protect the public.

PRACTICES IN APEC To gain a better understanding of the level of protection available for trade secrets and test or other data, APEC economies were asked to respond to questions about specific elements of legal protection, including issues identified by industry sources.

PART I. LEGAL FRAMEWORK Protection of trade secrets is primarily accomplished by the proprietor, who takes steps to maintain the information as secret. If, however, that information is misappropriated, the proprietor must rely on the legal system to provide a remedy. The ability to protect an

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investment in test or other data also crucially relies on the legal system for protection of that data against disclosure and unfair use.

Economies participating in this study were asked to supply a copy of their relevant laws, regulations, or other documents that supplied the framework for legal protection. Those documents are provided in Appendix III. One economy responded that it does not have a trade secret law and indicated that it would be interested in technical assistance to develop such a law.

What Type of Legal System Do the APEC Economies Have? There are two main types of legal systems in the world: civil code and common law. Civil code systems are most common and are typical of most European countries, while common law systems are found in the United States, Canada, and most former British territories.

Both types of systems rely on judges to interpret and apply the law. However, judges in common law systems are considered to have greater latitude in interpreting or “construing” statutory law to fit unforeseen circumstances, and the precedential decisions of appellate courts are binding on all lower courts. These decisions form a body of “common law” (sometimes referred to as “judge-made law”) that is developed from experience. In general, the laws of civil code jurisdictions will be more detailed than those of common law jurisdictions. About two-thirds of the responding economies (9/13) are civil code jurisdictions.

All responding economies provided information on their legal frameworks. Almost all of the responding economies have statutory law to protect trade secrets, sometimes augmented by regulations, administrative procedures, guidelines, and judicial decisions.

One responding economy, Singapore, reported that its protection for trade secrets relies entirely on common law and furnished the judicial decisions that provide the legal basis for protection of trade secrets in Singapore. Even in economies where the legal framework for protection of trade secrets is primarily statutory, that framework may continue to develop through judicial decisions that apply and interpret the law in various situations, particularly in common law jurisdictions.

PART II. PROTECTION OF TRADE SECRETS Effective legal protection of trade secrets depends on the availability and effectiveness of trade secret protection, including issues such as who is eligible to claim protection, what types of subject matter are eligible to be protected, what methods are recognized as sufficient to establish a trade secret, and the like. The study identified critical elements of legal protection and invited economies to describe their practices. The elements studied were drawn from international practice, including elements of protection outlined in the TRIPS Agreement, as well

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as issues raised by industry2 regarding deficiencies in trade secret protection in some economies. Part II summarizes the importance of each of these elements, and provides information regarding how these issues are handled in economies participating in this study.

Who Can Claim Trade Secret Protection? The availability of legal protection for trade secrets is a pivotal issue. All 14 responding economies reported that any person or entity lawfully in control of trade secret information can claim trade secret protection. All agreed that trade secret protection is available to an individual doing business and to a formally-organized for-profit business. There was less agreement, however, as to whether a trade secret claim could be made by a non-commercial entity such as a non-governmental organization (NGO), by a municipality or village, or whether an informal or unregistered business could assert a claim for misappropriation of a trade secret. A substantial majority of economies would make protection available in all of these situations, although Singapore noted that the issue of trade secrets for a municipality or village is not relevant to its situation.

What Types of Information Can Be Protected as a Trade Secret? Trade secret protection can be valuable for many types of information. The TRIPS Agreement defines the types of information that must be protected in functional terms – secret as defined in Article 39, having value because it is secret, having been subject to reasonable steps to keep the information secret – but does not place any limitations on the types of subject matter than can qualify for protection. However, industry complaints suggest that in some economies, protection is available only for certain types of subject matter. The two most common uses of trade secret protection are for scientific and technical information and for commercial information such as business plans, customer lists and preferences, and sources of supply – all valuable information for a business to possess and information it would likely not wish to share. All 14 of the responding economies indicated that trade secret protection is available for these types of information. Around half say that their laws do not extend to the protection of information relating to a political, social, or religious organization.

How Is a Trade Secret Created or Maintained? Most trade secret laws focus on the protection to be accorded to trade secrets without necessarily giving attention to how a trade secret is created in the first place. Other than the requirements of secrecy and reasonable efforts to maintain secrecy, TRIPS requirements on undisclosed information do not address either the creation or maintenance of trade secrets, such as the methods that can be used to establish that information is a trade secret and entitled

2 Industry concerns can be found in a number of sources, including the Chamber of Commerce study mentioned above.

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to protection, and what types of measures could constitute reasonable measures under a given set of circumstances.

Looking at different methods that can be used to establish information as a trade secret, almost all of the responding economies reported that their legal system would recognize a written nondisclosure agreement as a method for establishing a trade secret and that it is not necessary for such an agreement to be witnessed or notarized for it to be considered valid.

Ordinarily, information remains subject to protection as a trade secret so long as the information has been properly maintained as a secret. However, where an obligation is created by an employment agreement, it is important to know whether the requirement of confidentiality can extend beyond the term of employment. The vast majority of economies recognized an employment agreement with confidentiality provisions as a method of establishing a trade secret and indicated that such confidentiality provisions can outlast the term of the agreement. Some economies reported that post-employment confidentiality would require the execution of a post-employment agreement. About two-thirds of the responding economies reported that their law would recognize an oral agreement as a method of establishing trade secrecy.

Almost all economies indicated that practical measures can be used to establish a trade secret, for example, signs, warnings, or other precautions against disclosure of the secret information; physical measures such as placing the information in a locked safe or drawer; or procedures such as segregating parts of the manufacturing process to prevent others from learning its details. To these examples, the United States added such methods as limiting physical and digital access; password-protected access; secure facilities; need-to-know access; sign-in, sign-out procedures; physical and digital surveillance and monitoring.

Several economies indicated that their laws focuses less on particular measures to establish trade secrecy and instead take a more comprehensive view in determining whether those measures are sufficient to have created a trade secret.

What Types of Conduct Are Considered Wrongful? Typically, trade secrets are protected only against misappropriation when the acquisition, use, or disclosure of trade secret information is accomplished in a means “contrary to honest business practices,” the phrase used in the Paris Convention for the Protection of Industrial Property to describe acts of unfair competition. It is therefore helpful to know how APEC economies apply this requirement, and in particular, what types of conduct might be considered “contrary to honest business practices” in order to establish misappropriation. Looking at the most common methods of misappropriation, all 14 responding economies agreed that the following acts, undertaken to acquire, use, or cause someone to disclose trade secret information, would constitute the type of wrongful conduct necessary to establish misappropriation:

• An act of fraud or breach of confidence.

• Improper physical intrusion such as breaking into a facility.

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• Electronic intrusion such as eavesdropping on a telephone conversation, tapping a telephone line, or hacking a website or email, although Singapore limited this element to electronic intrusion that is unlawful.

• Breach of duty by the proprietor’s accountant, lawyer, or physician. Korea noted that if the proprietor’s accountant, lawyer, or physician makes a “wrongful use, acquisition, or disclosure of proprietor’s trade secret they will be sanctioned by individual law related with the profession rather than ‘trade secret protection law’.” To the list of persons whose breach of duty might establish misappropriation, the Philippines added “employees, partners and similar business/professional relationships in case of violation of non-disclosure agreement,” and the United States added bankers and stockbrokers.

Another common method of gaining access to secret information is through impersonation – pretending to be a person who is authorized to have access to secret information, or to the facility or electronic regime where such information is held or can be observed. Almost all of the responding economies (13/14) indicated that impersonation constituted the type of wrongful conduct that could be used to establish misappropriation of a trade secret.

Limitations on the Protection of Trade Secrets The protection of trade secrets depends critically on the ability of the proprietor of a trade secret to enforce his/her rights. Where previous sections looked at the elements required to establish a trade secret and to demonstrate misappropriation, this section focuses on limitations. Such limitations are an important corollary to trade secrecy and have been adopted in many jurisdictions to prevent abuses that could allow spurious claims to impede progress and interfere with honest business transactions. This policy concern raises two legal issues: does the law recognize that certain acts are not misappropriation, and are there circumstances where a party is relieved of the obligation to protect certain information as a trade secret.

An economy’s approach to these questions further defines the scope of misappropriation; that is, it defines which acts are prohibited and which acts are not. It also helps to define the nature of trade secrecy itself; that is, when can the proprietor of information invoke legal protection against its use, disclosure, or acquisition, and, by extension, when are those abilities foreclosed. Looking first at exceptions, a clear majority of responding economies (10/14) indicated that their law recognizes that it is not misappropriation for a person to discover trade secret information by copying an item lawfully and honestly obtained, and most (11/14) agreed that “reverse engineering,” chemical testing, or other analysis of an item lawfully and honestly obtained also constitute proper means for learning a trade secret and would therefore not constitute a misappropriation.

Several economies noted that additional exceptions are recognized by their laws. Hong Kong, China mentioned independent creations and pointed out that its answers are subject to the condition that the information itself must have the necessary “quality of confidence” about it

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throughout. Japan referred to Article 19.1 (vi) of its Unfair Competition Prevention Act.3 The United States mentioned independent invention and disclosure in published literature as additional exceptions to a person’s obligation to protect a trade secret.

A second aspect of this issue arises when a party is given access to information under an obligation of confidentiality, and the party either already has access to that information without an obligation to the party making the disclosure or else later acquires the information independently, that is, from a source that is not related to the proprietor or in some other legitimate manner that reveals the information without an obligation of confidentiality. In these situations, there is a legal issue as to whether that party must abide by a confidentiality agreement (or continue to abide by the agreement) or whether such facts relieve the party of the responsibility to protect the information as a trade secret.

There are clearly evidentiary issues to be resolved in such situations. For example, is it sufficient for the recipient of trade secret information merely to assert prior knowledge, and if not, what evidence must be presented and which party has the burden of persuasion? Or, where the party subsequently learns the information from another source, how can a court determine that the information was obtained in a truly independent manner or, alternatively, determine that the information was gained from a supposedly unrelated source – but only because the recipient already had access to the undisclosed information and, in effect, went looking for the information.

Notwithstanding the difficulties of applying such provisions, there are policy reasons to consider relieving a party of confidentiality obligations in these two situations. One can imagine, for example, a situation in which an employee is bound by a confidentiality provision in his or her employment agreement and abides by the agreement, perhaps for years, and the information is then disclosed on the Internet. In such a case, enforcing the agreement against the employee would lead to the rather startling situation where the employee is perhaps the only person in the world who is not entitled to use or disclose the information. As another example, one can imagine a situation in which the proprietor of a trade secret licenses the information to another company, and the proprietor’s employee wishes to leave his or her current employment and join the licensee firm but is prevented from doing so because confidentiality provisions in the employment agreement will prevent him or her from working for a company that already has the information.

The question of whether a party is bound to protect a trade secret that it already knows is an issue that is routinely faced by companies with regard to unsolicited information. Individuals may

3 Article 19.1 (vi): unfair competition listed in Article 2, paragraph (1), item (iv) to (ix) - the act of a person who has acquired a trade secret through a transaction (limited to a person who, at the time of acquiring such trade secret, was without knowledge that the disclosure of the trade secret was an act of improper disclosure or that there had been an intervening act of wrongful acquisition or act of improper disclosure with regard to that trade secret, and was without gross negligence in not knowing this), in using or disclosing the trade secret within the scope of authority acquired through such transaction;

For the full text of the law, see Appendix IV.

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approach the company and offer to disclose valuable information that they claim is a trade secret – and that in fact may be a trade secret – and for which they wish to be compensated. The problem for the company is that, until it knows what the information is, it has no way to evaluate either its interest in the information, or the value of the information to the company, or even whether the information is already known to the company. As a result, virtually all companies of any size have polices and standard responses refusing to accept such information and advising that those who wish to offer unsolicited information must do so in reliance on their patent rights, if any. Needless to say, this policy protects companies from lawsuits but also, in most cases, forecloses the possibility of obtaining valuable information from independent inventors. Such policies also limit the ability of innovators to use trade secret protection as a basis for initiating a business relationship.

With this somewhat complex policy background, it is perhaps not surprising that APEC economies are divided as to how they address these issues. Slightly more than half of the reporting economies (7/13) indicate that under their laws, a party is not required to maintain the secrecy of information where the party is already in possession of that information at the time of its disclosure or where the party subsequently acquires the information in a legitimate manner and without an obligation of confidentiality. Fewer than half (5/13) report that a party is not required to maintain the secrecy of information that the party subsequently learns the information from a source not related to the proprietor.

Scope of Protection Once trade secret rights are established, it is critical to have legal protection that provides for redress. All twelve of the responding economies indicated that, where information is established as constituting a trade secret, and is not subject to one of the limitations mentioned in the previous section, their legal systems give the person who is lawfully in control of that information the ability to bring a civil action to prevent the unauthorized use, acquisition, or disclosure of the information.

About two-thirds of the responding economies also indicated that their legal framework also provided for criminal procedures to address the unauthorized use, acquisition, or disclosure of trade secret information, with Singapore noting that “This is only applicable to unauthorized theft of electronic data and not to confidential information in general.” The availability of remedies and recourse is discussed more fully in Part IV, Enforcement, below.

Other Issues This section considers a series of issues that affect the adequacy of trade secret protection in APEC economies. These issues include issues related to undisclosed information; the extent to which the proprietor of a misappropriated trade secret can prevent its further misappropriation; licensing; and the relationship of trade secrecy to copyright, in particular, whether there must be an election of remedies.

Undisclosed Information: While the laws of the responding APEC economies define criteria for establishing a trade secret, only about half report that they have established criteria for evaluating

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whether information is valuable because it is secret or whether steps taken to protect the secrecy of information are “reasonable under the circumstances.”

Preventing further misappropriation: An important question arises as to the remedies available to the proprietor of a trade secret that has been misappropriated. If the secret has been widely disseminated, the proprietor’s continued ability to claim the information as a trade secret has probably been destroyed. However, if the misappropriation is of a more limited nature, it may be possible to continue to maintain the information as a trade secret if the proprietor has the ability to contain the spread of the information and prevent its unauthorized use.

Looking, for example, at a recent famous case of trade secret misappropriation,4 an employee of the Coca-Cola Company conspired with others to offer confidential plans for a new product to Coca-Cola’s biggest competitor, PepsiCo. In this case, the conduct of the proposed recipient was exemplary, as PepsiCo’s executives notified both the competitor whose secrets were being offered and law enforcement officials, who apprehended the individuals who had misappropriated the information.

This case illustrates that a misappropriation may involve a limited disclosure. The harmful effects of such a disclosure can be mitigated through the use of appropriate legal measures, such as a court order prohibiting use of the trade secret information by the recipient and also prohibiting its further disclosure without authorization of a right holder. The availability of appropriate remedies in such cases can often avoid the catastrophic damage that misappropriation of a business’s critical trade secrets would otherwise cause.

Obviously, in the above case, PepsiCo officials immediately recognized that the information being offered involved the misappropriation of a trade secret of a competitor. Unfortunately, not all such misappropriations are obvious to the recipient, who may pay valuable consideration for information in the good faith belief that the party making the disclosure has the right to make the disclosure. In this situation, both the good faith purchaser of the information and the proprietor are victimized by the misappropriating party. However, the proprietor’s rights are senior to those of the purchaser and can be protected if the law of the jurisdiction so allows.

When a trade secret has been misappropriated and then disclosed to a third party who acquired the information in good faith, 9 of 11 reporting economies indicated that the proprietor could prevent the further disclosure or use of the trade secret by the third party (that is, the good faith purchaser of the information) once the third party becomes aware that the party received the information as a result of an unlawful disclosure. Singapore noted that this issue involves equitable considerations and would be highly dependent on the facts of the case.

Licensing: The ability to maintain a trade secret depends on keeping information secret, yet the ability to exploit a trade secret may in some cases be maximized by licensing it to others. It is

4 United States v. Williams, No. 06-00313-CR-3-1 (11th Cir. March 20, 2008); the full text of this opinion is available on the Eleventh Circuit website at http://www.ca11.uscourts.gov/published-opinions by searching for case number 06-00313.

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therefore important to know whether a trade secret can be the subject of a license agreement. All of the responding economies indicated that a trade secret can be the subject of a license, with Russia stating affirmatively, “The exclusive right to the trade secret can be transferred under license agreement.”

Copyright and trade secret protection: It is important to know whether the proprietor of a trade secret can claim both trade secret and copyright protection or whether the proprietor must elect one form of protection over another. The ability to obtain both forms of protection is advantageous because the two forms of intellectual property involve different rights, protect different interests, and offer different remedies.

The availability of dual forms of protection may arise with regard to literary works in written form, such as plans for a new product, lists of products or suppliers, operating manuals, or the like; artistic works such as technical drawings or artistic renderings of proposed products; and literary works such as computer programs or data bases. Both literary and artistic works come within the scope of copyright, and if the information conveyed by these works has been protected as a trade secret, trade secret protection may also apply.

While publication would destroy the trade secrecy of information in a published work, a copyright claim does not necessarily depend on publication. The Berne Convention for the Protection of Literary and Artistic Works, and therefore the TRIPS Agreement, requires protection of unpublished works. Therefore, the fact that a work has not been published would not foreclose the availability of copyright protection.5 Accordingly, it could be expected that both forms of protection would be available, and indeed, about two-thirds of the responding economies (8/13) reported that the proprietor of a trade secret can claim both copyright and trade secret protection for the same work.

One potentially confounding issue arises with regard to registration, which typically requires a deposit of the work. Although the Berne Convention requires that copyright protection be available without formalities, some jurisdictions offer a system of copyright registration, typically as an adjunct to enforcement. If a copy of the work claimed as a trade secret is deposited as part of the registration system, and if such records are available for inspection, registration could destroy the trade secrecy of information disclosed in the work. This need not foreclose the availability of both options, however, as a deposit of an entire work would not necessarily be a requirement for registration. At least some copyright registration offices will accept only limited portions of materials to satisfy deposit requirements. This has long been the situation for computer programs, the text of which can run to thousands of pages, and cases have been reported where, for example, a trade secret technical drawing was accepted for registration on the basis of the drawing sheet with the content of the drawing expunged.

5 The issues relating to trade secrets and copyright are different from the issues relating to trade secrets and patents in this important respect: patents require publication of the invention, while copyright is available for unpublished works.

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PART III. TEST OR OTHER DATA This study also looked at APEC economies’ practices with regard to government requirements for and protection of test or other data submitted as a condition of obtaining marketing approval for agricultural chemicals and pharmaceutical products. Companies that spend millions of dollars conducting tests for the efficacy and safety of pharmaceutical products and for the safety and effectiveness of agricultural chemicals are likely to be concerned about policies that would provide a “free ride” to other companies – competitors – by allowing them either access to the originating companies’ data or by allowing their competitors the ability to make unfair commercial use of the originators’ data.

Requirements for Test or Other Data An important consideration in the protection of test or other data relates to when it needs to be disclosed. All 9 responding economies reported that they require the submission of test or other data in connection with applications for marketing approval for pharmaceutical products and for marketing approval for agricultural chemical products.

• Hong Kong, China noted that, “On or after 1 October 2012, generic drugs are exempted to submit “clinical and scientific documentation substantiating the safety and efficacy of the product” if the “originator products have been registered in Hong Kong, China for over 8 years (previously 5 years before the enhancement of this requirement with effect on 1 October 2012). For more information on this, please refer to the Department of Health, Drug Office, Drug Registration and Import/Export Control Division, Guidance Notes on Registration of Pharmaceutical Products/Substances, https://www.drugoffice.gov.hk/ (March 2014).”

• The United States reported that the submission of chemical data is also required under the Toxic Substances Control Act. Otherwise, no economy reported requiring the submission of data for any other purpose.

With regard to agricultural chemical products, all 9 of the responding economies indicated that the requirement for test or other data does not depend on whether the subject of the request has been previously approved in another economy, and only two of the economies reported otherwise in the case of pharmaceutical products. Singapore stated that “each applicant has to submit its own registration dossier regardless of approval in overseas / other sectors” and observed that, “An application can be filed based on prior approval obtained from the other economy but the regulatory decision/outcome might differ as the balance between the benefits and risks of a pharmaceutical product could vary among jurisdictions.”

The results were similar with regard to the issue of whether marketing approval can be based on an approval granted to the same applicant in another economy, where it is the party’s own data that has been used to obtain the earlier approval.

All 8 responding economies agreed that a party that did not originate the data on which approval was granted in another economy could not obtain marketing approval on the basis of the approval in another economy.

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Conditions for Protection of Test or Other Data Research-based companies are invariably interested in the conditions that must be satisfied to obtain protection of test or other data. In particular, it is useful to know whether protection for test or other data is granted automatically or whether the originator of data must make an application or satisfy other requirements. Almost all economies indicated that protection is automatic. Japan noted that a re-examination period is automatically set with regard to pharmaceuticals that are subject to protection, while Singapore noted, “As long as the applicant submits the dossier for registration purposes, the information is kept confidential.”

Where protection is not automatic, Viet Nam stated that the applicant must submit a request for protection of test or other data relating to pharmaceuticals within a specified time; that the written request must be enclosed in a dossier for a business license or in connection with a request for circulation of agricultural chemicals/pharmaceutical products; and that at least in cases of doubt, an applicant for marketing approval is required to provide evidence that the applicant is the originator of the data or has the owner’s authorization to use it for the stated purpose.

No economies reported that the applicant must satisfy any requirements other than those identified in the questionnaire.

How Is Test or Other Data Protected? Originators of test or other data are also interested to know how their data is protected. All 8 responding economies reported that the government would withhold disclosure of the data, although the United States noted that with regard to agricultural chemicals, certain exceptions apply.” Hong Kong, China, noted that “Such data are only viewed by Government officers on a need-to-know basis for registration. Data are kept confidential unless originator releases or gives permission.”

All 8 responding economies indicated that their agencies are required to prohibit the use of test or other data by a third party to obtain the third party’s marketing approval unless the third party has permission from the originator of the data although the United States noted that with regard to agricultural chemicals, certain exceptions apply. Singapore noted that each applicant has to submit its own dossier regardless of overseas approval.

No other economies reported additional requirements.

Transparency An important element of an economy’s business environment relates to the transparency of its procedures. With regard to test or other data, it is helpful to know whether the conditions for protection of test or other data are clearly stated and publicly available and, if so, how that information is made available. Some governments publish a list of products for which test or other data are protected, and if they do not, it is useful to know whether such information can be promptly obtained by making an inquiry with the responsible regulatory agency. This information is important both for the proprietors of test or other data and also for producers of generic pharmaceutical or agricultural chemical products.

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Responding economies reported a relatively transparent system, with all 9 indicating that the conditions for protection of test or other data are clearly stated and publicly available. This is accomplished chiefly through laws and regulations, which are published or otherwise made publicly available. Several economies publish lists of approved products or make the information available on the Internet, and most provide guidance through laws and regulations or, as with Hong Kong, China, by publishing guides:

• Japan noted that its government notifies the public of the list of newly approved pharmaceutical products and provides a period of data protection (“re-examination”) on the day of approval. For agricultural chemicals, the relevant notification is available online.

• For pharmaceutical products, Hong Kong, China, referred to the Department of Health, Drug Office, Drug Registration and Import/Export Control Division, Guidance Notes on Registration of Pharmaceutical Products/Substances, published online at https://www.drugoffice.gov.hk/eps/do/en/doc/guidelines_forms/guid.pdf (March 2014), and for agricultural chemicals, “A Guide to Pesticide Registration” issued by the Agriculture, Fisheries and Conservation Department and available online at http://www.afcd.gov.hk/english/publications/publications_qua/pub_qua_pes/files/PPRD12G04E.pdf. That economy also referred to its comment that, “On or after 1 October 2012, generic drugs are exempted to submit ’clinical and scientific documentation substantiating the safety and efficacy of the product‘ if the ’originator products have been registered in Hong Kong, China for over 8 years (previously 5 years before the enhancement of this requirement with effect on 1 October 2012).’”

• For agricultural chemicals, Singapore noted that the information is made available under the Control of Plants Act and the Control of Plants (Registration of Pesticides) Rules, available on the Agri-Food and Veterinary Authority of Singapore’s (AVA) website (www.ava.gov.sg) while for pharmaceutical products, the information is available from the Health Sciences Authority (www.hsa.gov.sg).

• Chinese Taipei also makes its information available online, for pharmaceutical products under Article 40-1 of the Pharmaceutical Affairs Act, available online at http://law.moj.gov.tw/Eng/LawClass/LawContent.aspx?PCODE=L0030001; and for agricultural chemicals, in Article 10 of the Agro-pesticides Management Act, available online at http://law.moj.gov.tw/Eng/LawClass/LawAll.aspx?PCode=M0140012.

• For protection of pharmaceutical test data, the United States referred to the website of the Federal Food Drug Administration (www.fda.gov), as well as to Title 21 of the US Code, sections 355, 360, and the Code of Federal Regulations (CFR), sections 314, 316. For pesticide products, the United States referred to the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), Sections 3 and 10, available on the website of the Environmental Protection Agency (www.epa.gov).

Only two economies report that they publish a list of products for which test or other data are protected, although almost all indicate that this information can be promptly obtained by making an inquiry with the appropriate government agency. Singapore notes that, “for agricultural chemicals, the list of pesticides is available on the AVA website.”

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Term of Protection for Test or Other Data The period during which test or other data is subject to protection is also a subject of concern, both to originators of data and to generic concerns. A slight majority of responding economies provide a fixed term of protection for test or other data. The terms provided, and how they are determined, are reported for each responding economy in Appendix II.

Even where there is a fixed term of protection, it is important to know whether there are circumstances that may trigger an earlier termination of the period of protection for test or other data, and if so, the conditions that may lead to earlier termination. About half of the 9 responding economies report that there are circumstances that may trigger an earlier termination of protection of test or other data. Two indicate that the term of protection is limited to the term of patent protection for the product, and two indicate that protection is terminated if the data is publicly disclosed.

Indonesia and the Philippines responded that protection is terminated by disclosure of the test or other data other than to the public, with Indonesia noting that protection is aimed to prevent misconduct of a person or an entity from disclosing information. Viet Nam stated that protection is not terminated in that circumstance and referred to legal provisions6 that outline conditions under which data confidentiality terminates. Singapore responded that protection is terminated by public disclosure of the test or other data, but stated that “This is applicable in relation to agricultural chemicals only.”

All three of these economies responded that the term of protection for test or other data is terminated under the following conditions:

• When health or other authorities determine that the information is generally known or easily accessible to others.

• Based on conduct by the proprietor other than disclosure of the data.

6 Circular No. 05/2010/TT-BYT of Ministry of Health dated 01 March 2010 guiding the protection (keeping of confidentiality) of test data in in the process of drug/medicine registration. Article 14, Termination of the data confidentiality protection. The data confidentiality protection shall be terminated partially or wholly in the following cases:

1. The data no longer meets the requirements as specified in Article 6 of this Circular. 2. A competent agency has firm grounds to determine that the drug-registration establishment owning the

confidential data has no lawful right to use the data. 3. The decision on granting the market approval for the drug having confidential data is no longer valid or the drug

registration number is revoked or the drug-registration establishment voluntarily revocate the registration number.

4. A competent agency issues a compulsory license of a patent relating to the drug containing the confidential data. 5. A competent agency on settlement-disputes invalidates the decision on acceptance of the request for data

confidentiality protection. 6. The termination of the data confidentiality protection is necessary to protect the public health and to meet

urgent needs of the society.

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• On other grounds. As examples, Indonesia mentioned reverse engineering; the Philippines mentioned that termination could occur if the public interest requires disclosure; and Viet Nam referred to the conditions mentioned in its Circular (footnote 5).

Japan and the Philippines indicated that the term of protection for test or other data is not limited by the term of protection in another economy.

Other Issues An important issue in the protection of test or other data concerns what is meant by “unfair commercial use,” a consideration with profound effects for the strength of protection offered. Other conditions for protection of test or other data can also be important, such as whether a request for marketing approval relates to new uses, new indications, or different dosages of a previously approved product, or to products that combine a previously approved product with other products.

All seven of the responding economies agreed that the term “unfair commercial use” is understood to include direct use of test or other data originated by another party, and almost all of the responding economies agreed that for a party applying for marketing approval, the term is also understood to include indirect use of test or other data by submitting published material or regulatory decisions by agencies that relied on the test or other data originated by another party. Chinese Taipei noted that, in the absence of a prior application relying on the same test or other data, “the originator of test or other data is irrelevant in the examination of an application for marketing approval.”

Several economies noted other conditions for protection:

• Chinese Taipei: The protection of Data Exclusivity is available only for the test or other data of pharmaceutical products and agriculture chemicals containing new chemical entities.

• United States: There are 3 year exclusivity extensions available for certain new indications.

• Viet Nam: In accordance with Circular No. 05/2010/TT-BYT of Ministry of Health dated 01 March 2010 guiding the protection (keeping of confidentiality) of test data in the process of drug/medicine registration:

Article 6 Requirements for the data to be confidently protected. A data shall be protected confidentially if it fully satisfies the following requirements:

1. Being a business secret, which meet requirements for protection as specified in Paragraph 23 in Article 4 and Article 84 of the Law on Intellectual Property;

2. Being the outcome of a considerable investment of effort;

3. Having the request for confidentiality protection as specified in Para 1, Article 7 of this Circular.

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A majority of responding economies condition protection of test or other data on lack of disclosure, while a majority do not condition protection on whether the request for marketing approval relates to new uses, new indications, or different dosages of a previously approved product, or to products that combine a previously approved product with other products. Likewise, most economies do not condition protection for test or other data on whether the test or other data relates to certain types of materials, although the United States noted that it provides 12 years of exclusivity for certain biologic products. Singapore noted that lack of disclosure applies “only in relation to agricultural chemicals” and that with regard to whether the request for marketing approval relates to new uses, “For agricultural chemicals, all information submitted is treated as confidential. For pharmaceutical products, the provisions relating to data protection apply to the grant of a marketing approval but not a variation to an existing marketing approval.”

While economies protect test or other data by withholding its disclosure, most economies also recognize a need for exceptions to a policy of nondisclosure in at least some situations with most economies indicating that they will disclose test or other data where disclosure is necessary to protect the public. A number of economies provided specific information on their policies:

• Hong Kong, China: According to article 39 of the TRIPS Agreement, WTO members shall protect the data against disclosure, except where necessary to protect the public. As we are aware, so far there is no case law in Hong Kong, China discussing this issue.

• Indonesia: domestic security, social health and safety.

• Japan: Although there are no established criteria, disclosure of certain data would be necessary when the regulatory authority decides the cancellation of the registration of a pesticide and its urgent recall on the basis of new scientific information on its constituents. For example, if it is indicated that the a group of impurities contained in certain pesticides pose unacceptable risks to human health and relevant regulatory action is taken, it would be fair and necessary to indicate which products contain what concentrations of the impurities in order to alert the users and vendors of the product. In such a case, it would not be necessary to mind data protection, because the product in question will be sooner or later banned from production and sale.

• The Philippines: In cases of public interest and/or protection issues.

• Singapore: For agricultural chemicals, this would be applicable (i) in the event that the applicant gives his/her consent; and/or (ii) in the event that such disclosure is necessary in order to protect the health / safety of members of the public. For pharmaceutical products, the list is contained in Section 19B of the Medicines Act (www.hsa.gov.sg).

• United States: The Food, Drug, and Cosmetic Act (“the Act” or “FD&C Act”) provides FDA with the authority to oversee the safety and effectiveness of drugs; FDA implements the Act, and its provisions related to exclusivity for approved drugs, in a manner that is consistent with the Agency’s mission to promote the public health. (Other comments shown in Appendix II).

Economies report different steps to ensure that test or other data are protected against unfair commercial use:

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• Hong Kong, China: Written authorization from the supplier of the original data is required.

• Indonesia: Domestic regulations.

• Singapore: For agricultural chemicals, information submitted is treated as confidential. For pharmaceutical products, the relevant steps are contained under Sections 19A, 19B and 19D of the Medicines Act (www.hsa.gov.sg).

• Chinese Taipei: Pursuant to our laws, there are no specific regulations governing steps taken for protection of data against unfair commercial use.

• The Philippines: Prohibition to disclose under pain of sanctions; disclosure is made only after determination that disclosure is necessary because of the actual and existing need to address public interest or protect the public.

• Viet Nam: In accordance with Circular No. 05/2010/TT-BYT of Ministry of Health dated 01 March 2010 guiding the protection (keeping of confidentiality) of test data in the process of drug/medicine registration: Article 6 Requirements for the data to be confidently protected. A data shall be protected confidentially if it fully satisfies the following requirements:

1. Being a business secret, which meet requirements for protection as specified in Paragraph 23 in Article 4 and Article 84 of the Law on Intellectual Property;

2. Being the outcome of a considerable investment of effort;

3. Having the request for confidentiality protection as specified in Para 1, Article 7 of this Circular.

PART IV. ENFORCEMENT Legal protection for trade secrets and for test or other data is only as effective as the procedures available to enforce those rights. In this regard, enforcement is a multi-faceted concept. It includes the availability of civil remedies and criminal penalties; the possibility of obtaining compensation for harm done; and measures to prevent or limit such harm and to mitigate damages.

Trade Secret Remedies and Recourse The need for remedies or recourse to legal measures can involve different types of legal proceedings. Of ten responding economies, all reported that a civil lawsuit is available when a trade secret has been misappropriated, and most also provide for criminal enforcement.

Almost none of the reporting economies indicated that recourse includes action by customs authorities, the sole exception being Indonesia, which indicated that Customs could take action by court order. This would be important where, for example, documents on which trade secrets are recorded or, more likely, items that embody trade secrets are transported from one jurisdiction to another. Such items could include, for example, procedures manuals for a franchise business, pictures or drawings of products under development, or a model of a product under development, among many possibilities. For documents, drawings, and

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photographs, the proprietor could presumably seek to prevent the release of the goods by relying on copyright, but procedures would still be needed to protect the secrecy of the goods.

In addition to civil and criminal procedures, Russia, and Viet Nam reported the possibility of administrative action in cases of misappropriation of trade secrets, and the Philippines reported the possibility of administrative actions against government officials or employees.

The types of remedies that are available in a civil lawsuit are also of critical importance to the effectiveness of trade secret laws. The most important remedies are the ability to obtain an award of damages commensurate with the harm done to the trade secret owner and the ability to obtain an injunction to prevent the further unauthorized use, disclosure, or acquisition of the trade secret information. Given the cost of litigation, it is also helpful to be able to obtain, in addition to damages, an award to cover the proprietor’s costs in connection with the lawsuit.

Where the proprietor prevails in a civil lawsuit, courts in all 12 responding economies have the authority to order an award of damages; to issue an injunction or other order to prevent further use, disclosure, or acquisition of trade secret information; and to order the defendant to pay at least some parts of litigation expenses. Russia stated that “An infringer of the exclusive right to a trade secret, including a person who has illegally received information constituting a trade secret and who has disclosed or used this information as well as a person committed to maintain confidentiality of a trade secret, shall be obliged to pay damages caused by infringement of the exclusive right to the trade secret unless other responsibility is provided by law or by contract with this person. Chinese Taipei noted that with regard to litigation expenses, its courts can order the payment of court costs.

Turning to criminal proceedings, all 8 responding economies that provide for criminal procedures in trade secret cases provide for payment of a fine by offenders and, in appropriate cases, also provide for the possibility of incarceration. Ranges of penalties are shown in Appendix II. The United States reported that penalties vary depending on the law violated, with the possibility in some situations that a fine would be set in an amount three times the value of the misappropriated trade secret.

In the interest of judicial economy (that is, reducing the time that a court must spend dealing with the same or related issues in related cases), some jurisdictions give their courts the ability to fashion civil-type remedies at the conclusion of criminal proceedings where the defendant has been found guilty of misappropriation. In these situations courts might have the authority to issue an injunction against further use or disclosure of the trade secret information by the defendant; to issue an injunction against further use or disclosure of the trade secret information by third parties; or to order payment of restitution to the proprietor of the trade secret.

Economies are divided in their approach to these issues, with about half allowing their courts to take these actions in criminal proceedings. Korea noted that these remedies are possible in a civil action under its laws.

Looking at criminal misappropriation, all 7 responding economies report that in a criminal proceeding, it is necessary to establish that the defendant had knowledge and intent to misappropriate, but that knowledge or intent can be inferred from the circumstances. In this context, Russia notes that a person who used a trade secret without either being aware that it

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was a trade secret or having reason to be aware that its use is illegal, is not criminally responsible; this includes the situation where the person obtained access to the trade secret accidentally or by mistake. Slightly more than half of the responding economies do not require additional elements to establish the offense.

Three economies reported that additional elements are required to demonstrate criminal misappropriation of a trade secret:

• Chinese Taipei mentioned trade secret misappropriation for the purpose of an illicit gain for the person who misappropriates or for a third person, or for the purpose of inflicting a loss on the holder of a trade secret.

• Japan indicated that misappropriation is criminal only if it is for the purpose of acquiring a wrongful gain or causing injury to the owner.

• The United States noted that, under its criminal law, “Showing theft of trade secrets requires proof that a defendant (1) intended to convert the trade secret for the benefit of someone other than the owner, (2) the trade secret is related to a good or service used in or intended for use in commerce, and (3) that the defendant knew or intended that the offense would harm the owner of the trade secret. An economic espionage charge requires proof that the trade secret theft was carried out with the knowledge or intent to benefit a foreign government. Detailed information may be found at http://www.justice.gov/criminal/cybercrime/docs/prosecuting_ip_crimes_manual_2013.pdf. “

Almost no economies provide recourse through customs for misappropriation of trade secrets, although Indonesia notes that customs can act by court order; the Philippines notes that customs can act “if covered by patent protection”; and the United States notes that if special conditions are satisfied, there are “possible administrative proceedings under 19 U.S.C. section 1337.”

Trade Secrets and Government Access Another important aspect of the protection of a trade secret is the availability of procedures to protect trade secrets when the government requires a party to submit the information, for example, for purposes of regulatory review. Almost all economies indicated that they have procedures to prevent the further disclosure, use, or acquisition of trade secret information submitted to the government in connection with litigation or regulatory review, and that similar provisions are available to prevent disclosure by government that receive confidential information as part of business formation, investment conditions, and product registration or certification schemes.

Although Hong Kong, China, indicated that it does not have such procedures, it notes that “Whilst there is no such mechanism on the part of the Government, depending on the circumstances of each case, the courts or tribunals could and may make appropriate orders as they think fit that may bind anybody.”

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A majority of responding economies indicate that they have administrative procedures to prevent the inadvertent release of trade secrets. Korea remarked that it had not seen many cases where trade secrets were disclosed to administrative government agencies.

With regard to specific types of actions that a government might take to protect the secrecy of information that is provided to it, economies are about evenly divided as to whether agencies can simply return trade secret information rather than retain it in government files. The United States notes that this practice may be used by some agencies, although not by the Environmental Protection Agency.

Businesses naturally worry about the protection of their trade secrets by administrative agencies, and they also worry about the ability of courts to protect trade secret information in the course of litigation. This latter issue can arise not only in cases involving the misappropriation of trade secrets, where the defendant may argue that the information is not actually a trade secret, but also in cases relating to employment non-competition agreements and business plans or practices relating to patents, know-how, or industrial designs. Considerations of fairness may dictate that evidence of trade secrets be introduced as evidence, so procedures are needed to protect trade secret information in the context of legal proceedings.

One way to address this issue is by providing special court proceedings (sometimes called in camera proceedings) by which a judge or other official can examine trade secret information without placing such information in a court record. A majority of responding economies reported that their legal system provides for such procedures and that their courts can issue orders to prohibit parties associated with the litigation, such as attorneys, magistrates, or court personnel, from disclosing or using trade secret information.

Remedies and Recourse for Test or Other Data Enforcement provisions are also needed when a party believes a government agency has failed to accord protection to the party’s test or other data. Unlike most trade secret cases, the other party in such cases is likely to be a government agency or its employees or a third party that has benefited by a lack of protection. All 8 responding economies confirmed that, where a party that believes a government agency has failed to accord protection to the party’s test or other data, their legal system offers that party remedies or recourse against the government agency, and almost all agreed that remedies and recourse are available in such situations against individual employees of government agencies and against a third party.

• Japan noted that it offers the possibility of an appeal against the registration of a pesticide where the application was made utilizing protected test or other data without authorization, as well as the possibility of civil litigation for damages. Its law also provides for punishment for the disclosure of secrets by its public officers. Civil litigation for damages is also a possibility against a third party if that party is responsible for the unfair use of test or other data, for example, by making an unlawful request to government officials or by committing deceptive acts.

• Singapore noted that it offers a complaints procedure, and if the situation warrants, the possibility of judicial review.

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• Chinese Taipei noted that Article 40-1 of the Pharmaceutical Affairs Act states that the competent authority shall keep secret the trade secrets submitted for marketing approval; Paragraph 1, Article 9 of the Trade Secrets Act creates a secrecy obligation for civil servants, and those who breach that obligation are subject to civil and criminal liabilities as stated respectively in Article 12 and Article 13-1 of the Trade Secrets Act; while actions against third parties are governed by Article 12 and Article 13-1 of the Trade Secrets Act.

• The Philippines noted that its law provides for the possibility of injunctions/court orders against government agencies; civil, criminal and administrative suits against government employees; and civil and criminal suits against third parties.

• Viet Nam offers administrative remedies through an administrative court for complaints against government agencies.

• The United States notes that an aggrieved party can petition the court for compensatory and/or punitive damage remedies and attorney fees against the agency, against individual agency employees, and against a third party.

General Issues Relating to Enforcement Often, the details of enforcement procedures are critically important to enforcement efforts. Gathering evidence and preventing the further dissemination of misappropriated trade secrets or test or other data may require procedures for obtaining evidence.

Provisional measures: The availability of provisional measures, that is, such measures as temporary injunctions, seizure of goods, or other court orders before a full hearing on the merits of the case, may be used to preserve evidence and gather evidence of misappropriation as well as to limit the harm to the aggrieved party. Provisional measures inaudita altera parte7are of particular importance where evidence is portable and likely to disappear if the defendant learns that legal action is being taken and also where time is of the essence and either the defendant cannot be identified or notified within the time available. Eleven of 12 responding economies indicated that their legal systems do make provisional measures available, with Russia noting affirmatively that “The applicable legislation provides for the provisional measures,” and 10 of the 12 economies responding that they also provide for provisional measures inaudita altera parte.

Economies were also largely in agreement as to the conditions under which provisional measures were available, with almost all responding economies agreeing that provisional measures could be used to preserve evidence and all agreeing that they could be used to prevent the disclosure of a trade secret. The situation was similar with regard to provisional measures inaudita altera parte, with all 9 nine responding economies agreeing that such procedures could be used to preserve evidence and to prevent the disclosure of a trade secret.

7 The other party not having been heard.

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With regard to procedural requirements for provisional measures, 6 of 9 responding economies report that the party requesting provisional measures is usually required to post a security (in the case of provisional measures inaudita altera parte, 6 of 8 require the posting of security). Nine of 11 responding economies make notice to all parties a condition for provisional measures, and for provisional measures inaudita altera parte, 7 of 9 require that the defendant be notified promptly. Interestingly, the time to obtain provisional relief appears to vary not only among economies but by the type of case involved. Responses by economy, notification requirements, and the times required to obtain provisional measures are tabulated in Appendix II.

Within the general category of provisional relief, 9 of 11 responding economies report that their legal system provides for temporary injunctions, and 9 of the 11 (although not an identical group of economies) indicate the possibility of permanent injunctions, at least within the discretion of the court. Several economies provided additional information on their practices:

• Hong Kong, China, noted: “The aim of an interlocutory injunction is to preserve matters pending the trial of matters in dispute.”

• Mexico noted: Any person who, by reason of his work, employment, function or post, the practice of his profession or the conduct of business relations, has access to a trade secret the confidentiality of which he has been warned of shall abstain from revealing it without just cause and without the consent of the person keeping the said secret or of the authorized user thereof (art 85 Industrial Property Law).

Mexico also noted that “It is a crime disclose any secret or confidential communication that is known or received by reason of his employment, office or position” (art. 210 Federal Criminal Code), or to reveal to a third party a trade secret that was known by virtue of employment, position, responsibility, the practice of a profession or business relations, or as a result of the grant of a license for its use, without the consent of the person keeping the trade secret, and after having been advised of its confidentiality, for the purpose of procuring an economic benefit for oneself or for the said third party, or for the purpose of doing harm to the person keeping the secret (art 223 fr. IV Industrial Property Law).

• The Philippines noted that a temporary restraining order is fixed at 20 days, while preliminary injunctions depend on need.

• Singapore stated that a temporary injunction “may be granted before the full trial generally in the situation whereby damages is unlikely to be an adequate remedy. Subsequently, if at the conclusion of the full trial, it is held that the Plaintiff’s application fails, the temporary injunction would be withdrawn.”

• The United States noted that an injunction may be for the period the trade secret exists. The injunction may be extended for any reasonable period to eliminate a commercial advantage.

Procedures for obtaining evidence: It is critically important for parties to have access to procedures for obtaining evidence in litigation involving trade secrets in litigation or test or other data. A substantial majority (9 of 11 responding economies) indicate that they have legal

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procedures for obtaining evidence in trade secret cases, while a bare majority (5 of 9 responding economies) have such procedures for cases involving test or other data.

For trade secrets, economies reported about specifics in their legal systems:

• Chile: The applicant may request legal precautionary measures stipulated in the law.

• Hong Kong, China: Pre-trial discovery, discovery of documents and exchange of witness statements by parties to the proceedings.

• Chinese Taipei: According to article 11 of the Intellectual Property Case Adjudication Act: Where any one of the following situations occurs with respect to trade secrets held by a party or a third party, the court may, upon motion along with preliminary proof by such party or third party, issue a confidentiality preservation order upon the other party, agent, assistant ad litem, or other related party to the action:

1. Contents of a party's pleadings disclose its own trade secrets or those of a third party, or evidence-taking that has been or is to be made involves trade secrets of a party or a third party.

2. Limitation on discovery or use is required so as to prevent the discovery or use of the trade secrets in the preceding paragraph being intended for purposes other than those related to the case, and there are concerns of obstruction to the party's or the third party's business operation as a result of the disclosure of the trade secrets.

The preceding paragraph does not apply where the other party, agent, assistant ad litem, or other related party has obtained or possessed such trade secrets through means other than the document review or evidence-taking prescribed in the Paragraph 1 of the preceding paragraph.

The person subject to a confidentiality preservation order shall not use the trade secrets for purposes other than those related to the case, nor shall he disclose said trade secrets to those not subject to the order.

• Malaysia: As in accordance with the High Court Rules 1980 and Civil Procedure Code as well as Evidence Act.

• The Philippines: Courts cannot compel parties to disclose trade secrets/nor modes of discovery apply. It is within the parties’ decision to disclose and submit trade secrets/data as evidence. Courts have discretion to bar the public during trials/hearings.

• Russia: The courts have procedures on trade secrets protection in litigation.

• Viet Nam: In accordance with the Civil Procedures Law (2004):

Article 94. Requesting individuals, agencies and/or organizations to supply evidences

1. Where the involved parties that have applied necessary measures to gather evidences still fail to gather by themselves, they may request the courts to collect evidences in order to ensure the proper resolution of civil cases and/or matters.

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2. The involved parties that request the courts to gather evidences shall make their written applications clearly stating the point(s) to be proved, the evidence to be gathered, the reasons why they cannot gather the evidences by themselves; full names and addresses of the individuals, agencies or organizations that are managing or keeping the evidences which need to be collected.

3. The court may request directly or in writing individuals, agencies or organizations that are managing a keeping the evidences to supply them. The individuals, agencies or organizations that are managing or keeping such evidences shall have the responsibility to supply the evidences fully and in time as requested by the courts within fifteen days as from the date of receiving the requests.

While most responding economies indicated that they have legal procedures for obtaining evidence in cases involving trade secrets, responses were considerably more mixed with regard to test or other data. A bare majority of responding economies (5 out of 8) say that they have legal procedures for obtaining evidence in cases involving the use of, or reliance on, test or other data. Hong Kong, China, notes that its procedures include: pre-trial discovery, discovery of documents and exchange of witness statements by parties to the proceedings. Malaysia notes that its procedures are: in accordance with the High Court Rules 1980 and Civil Procedure Code as well as the Evidence Act.

Protecting trade secrets in litigation: Almost all responding economies (11 of 12) have procedures to protect trade secrets in litigation. Russia notes, “The court can engage experts to the trade secrets cases, other evidences under Article 64 of the Arbitration Procedural Code of the Russian Federation.” The Philippines noted that “courts cannot compel parties to disclose trade secrets” and that “modes of discovery” do not apply. “It is within the parties’ decision to disclose and submit trade secrets/data as evidence.”

Use of experts in litigation: Evidence in cases involving technical issues can be complex, and courts and the parties often turn to experts to help interpret the facts. However, providing for an expert to review trade secret information or test or other data necessarily involves a disclosure. It is therefore important to have procedures governing the use of experts in cases involving trade secret cases. In a clear majority of responding economies (11 of 12), courts allow for the use of experts in trade secret cases and in a substantial majority (7 of 9 responding economies), courts allow for the use of experts in cases involving test or other data.

A number of economies provided additional information on their practices:

• Hong Kong, China, noted that the ability to use experts depended on the circumstances of each case.

• Japan observed that the use of experts is not established by law.

• Chinese Taipei referred to paragraph 2, article 9, of its Trade Secret Act: No parties, representatives of the parties, advocates, expert witnesses, witnesses, and other parties related to the case shall use or disclose without due cause any trade secrets of others, known or obtained by virtue of a judicial investigation or proceeding.

• Malaysia noted that the use of experts was in accordance with its High Court Rules 1980 and Civil Procedure Code as well as its Evidence Act.

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• Russia remarked that a court can engage experts in the trade secrets cases, together with other forms of evidence under Article 64 of the Arbitration Procedural Code of the Russian Federation.

• Viet Nam referred to its Civil Procedures Law (2004), Article 13: Responsibilities of civil procedure-conducting agencies, and persons

1. Civil procedure-conducting agencies and persons must respect the people and submit to the people's supervision.

2. Civil procedure-conducting agencies and persons shall be held responsible before law for the performance of their tasks and powers. Where the civil procedure-conducting persons commit law violation acts, they shall, depending on the nature and seriousness of their violations, be disciplined or examined for penal liability according to law provisions.

3. Civil procedure-conducting agencies and persons must keep State secrets, work secrets as prescribed by law; preserve the economy's fine customs and practices, keep professional secrets, business secrets, personal secrets of the involved parties at their legitimate requests.

4. If civil procedure-conducting persons commit illegal acts, causing damage to individuals, agencies and/or organizations, the courts must pay damages to the victims and the civil procedure-conducting persons shall have to reimburse the courts according to law provisions.

To ensure the protection of secret information by the expert, the Philippines noted that courts have discretion to bar the public during trials and hearings; Singapore mentioned that its courts may use confidentiality undertakings; and the United States mentioned the possibility of in camera review by a judge.

With regard to the use of foreign experts, Malaysia and Chinese Taipei indicated that the parties may offer information from foreign experts, so long as the court approves the use of a foreign expert, while the United States responded that the parties may offer information from foreign experts, so long as the court approves the use of a foreign expert.

National treatment: A critical issue for firms that engage in international commerce is whether they will receive the same treatment as domestic enterprises. All 11 responding economies indicated that foreign parties are entitled to the same treatment as nationals with regard to civil or criminal enforcement for trade secrets. Likewise, all 6 responding economies agreed that foreign parties are entitled to the same treatment as nationals with regard to bringing a civil action or criminal complaint for violations related to the protection of test or other data. Russia noted: “The same procedures are applied to foreign parties as to citizens of the Russian Federation with regard to bringing a civil action or criminal complaint for misappropriation of a trade secret.”

Experience with cases involving trade secrets: Most economies indicated that they have relatively limited experience with cases involving trade secrets, either through government agencies or in the courts. Hong Kong noted that it does not have the relevant statistics. The Republic of Korea reported: “In 2012, approx. 240 cases (120 civil, 120 criminal).”

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RECOMMENDATIONS ENABLE PROTECTION IN ALL ECONOMIES Based on the questionnaire responses received from participating economies, it appears that it could be useful to take steps to enable protection in all economies and by ensuring that each economy that wishes to provide protection for trade secrets and for test or other data has the technical capacity to do so. Papua-New Guinea has informally indicated an interest in receiving technical assistance to help it prepare a legal framework that will protect trade secrets. Since only about two-thirds of APEC economies responded to the questionnaire, it is possible that there are other economies that would be interested in the same type of assistance.

DISCUSS VARIATIONS IN PRACTICE Because businesses may operate in multiple APEC economies, greater consistency in the protection of trade secrets could allow businesses to use trade secrets more effectively and at lower cost. While there is considerable room for variations in practice among the APEC economies, differences in approach to the protection of trade secrets and test or other data may represent areas for useful discussion. Topics of interest might include such issues as:

• Conditions that are recognized as establishing trade secrets. For example, about two-thirds of economies recognize oral agreements as a means of establishing a requirement of confidentiality, while almost all recognize practical measures such as signs, warnings, or other precautions that limit access to secret information.

• Conditions under which exceptions to trade secrecy are, or should be, recognized. About two-thirds of responding economies recognize such exceptions as reverse engineering, but there is little agreement as to whether an exception should be recognized when, for example, information loses its secrecy or a party discloses supposedly secret information that is already known to the recipient. This could be addressed from the perspective of a party to a confidentiality agreement as well as from the perspective of governments charged with protecting information against disclosure.

• The appropriateness of criminal prosecution for misappropriation of a trade secret. Issues to consider might include an economy’s treatment of misappropriation in comparison with its treatment of other illegal acts involving the unauthorized taking property.

• What types of acts might constitute “unfair commercial use” of test or other data and in particular, indirect use, and what types of acts might be prohibited under this category.

• The availability of provisional measures and the conditions under which they are appropriate.