Trade secrets and undisclosed commercial information are confidential information in a commercial setting, such as formulaes, methods, technologies, designs, product specifications, business plans and client lists, that have commercial value. In Hong Kong, trade secrets and undisclosed commercial information are protected by common law of confidence. An obligation of confidence will arise whenever the information is communicated to or acquired by a person who knows or ought as a reasonable person to know that the other person wishes to keep that information confidential. An industry or trade custom or practice may also impose an obligation of confidence. The release of trade secrets and undisclosed commercial information would be detrimental to the owner or advantageous to his or her competitors or others. The remedies available for breach of confidence include injunctions, damages, account of profits and delivery up of materials containing confidential information. To enhance the protection of trade secrets and undisclosed commercial information, you should sign non disclosure agreement with everyone who has knowledge of your secrets.
Protection of trade secrets and undisclosed commercial information is of particular importance when the IP is not registrable or you find the period of patent protection (20 years) not long enough. Whereas patents enjoy a limited term of protection, trade secrets and undisclosed commercial information protection last until the information becomes public knowledge. The formulae for Coca Cola is a good example of long-kept trade secrets and undisclosed commercial information. However, trade secrets and undisclosed commercial information do not give you exclusive rights. Your competitors may independently invent an identical product or process or come up with the same ideas which they can exploit freely.
How do trade secrets and undisclosed commercial information differ from patents or copyright?
The application for a patent requires disclosure of details of invention. In other words, details of a patented invention cannot be kept confidential as trade secrets and undisclosed commercial information. As said above, patents enjoy a limited term of protection but trade secrets and undisclosed commercial information last for as long as the information remains confidential.
Copyright only protects the form in which ideas and information are expressed, but not ideas and information per se. The law of confidence protects the substance of ideas and information, no matter how they are expressed. There are statutory permitted acts for works protected by copyright but not works protected by confidence.
The above only set out some basic principles of trade secrets and undisclosed commercial information. Please seek independent professional advice for protection of your trade secrets and undisclosed commercial information.
Non Disclosure Agreement - FAQ
1.What is a non disclosure agreement?
A non disclosure agreement is a legally binding document whereby one or more parties undertake not to disclose confidential information received in the course of a negotiation or dealing between the parties.
2.Why do you need a non disclosure agreement?
In order to attract and convince a potential business partner in the course of a business negotiation, you may wish to disclose to him/her some details of your product, ideas, invention, or even trade secrets. For example, in competition among firms bidding for job contracts, to safeguard your rights over the confidential information of your firm (irrespective of whether the bid succeeds or not), you as the bidder may require the potential business partner to sign a non disclosure agreement to protect your confidential information from being disclosed to third parties. If it were subsequently found that the information concerned had been disclosed without your authorization, the terms of the agreement would provide redress to you.
Apart from that, your employees may handle your organization’s confidential information, documents or other articles on a daily basis. To ensure that this confidential material is kept for internal use only, employers may consider requiring their newly-joined employees to sign non disclosure agreements to prevent unauthorized disclosure. We recommend that employees sign such agreements immediately upon reporting for work for the first time, and in addition at least each year after joining (to take account of changes to the company structure or new confidential information.) In addition, an employee should sign one more time upon leaving the company for whatever reason.
3.What matters are usually covered in a non disclosure agreement?
To start with, a non disclosure agreement must have the ‘confidential information’ defined. After setting out what is ‘confidential’, the agreement should provide for the obligation of confidentiality, that is how the parties are to handle the confidential information. This usually involves an undertaking by a party not to disclose the confidential information to any third party other than employees or agents (if access is provided to them, a further undertaking to bind these employees or agents to the same obligations of confidentiality) and not to use the confidential information for purposes outside the scope of agreement. If applicable, parties may wish to specify a time period during which the obligation of confidentiality is to be maintained. Certain exceptions to the confidentiality obligation may be considered, for example information that is already available in the public domain and disclosure mandated by a court order. Moreover, remedies should be provided in the event that the non disclosure agreement has been breached.
The above list out the basic requirements of a non disclosure agreement. If you wish to prepare a tailor made non disclosure agreement, you should seek independent legal advice.
Trade Secrets (Undisclosed Commercial Information)