Meaning of trade secrets under Australian law

Discuss about the Contemporary business law assignment Australia for university of technology Sydney.

It is to be mentioned that the term trade secrets has been give a particular meaning under the Australian law. Trade secrets can be defined as confidential information of an organization (Saunders and Evans 2017). It is to be noted that confidential information can be considered to be a broader concept including technical knowhow about any organization. Broadly confidential information refers to the knowledge and facts which are not disclosed to the public and are not available in the public domain. Australian law defines know how and trade secrets differently under the category of confidential information. Knowhow refers to the technical knowledge of how to do something. Know how is usually acquired by experience. Technical know-how is inseparable from the acquired or inherent knowledge of the employee. However, trade secrets as opposed to know-how are referred to the detailed and specialized information which is confidential in nature. In general sense trade secret is defined as any information which a man of ordinary intelligence and honesty considers to be property of the employer and not his own to do as he likes with it.

Control of Trade secrets

It is to be mentioned that who has the authority or entitlement to control trade secrets of an organization has to be discussed in relation to employer-employee relationship (Varadarajan 2016). It can be noted that there are three basic requirements for identifying trade secrets which can be protected by the law. They are:

The information has to be secret or confidential in nature

The information must have commercial value for the reason being secret in nature (Lie 2016)

The owner of the information must make reasonable efforts to keep such information secret under the circumstances.

Protecting trade secrets

Considering the improvement of technology related to communication, it can be said that replicating and duplicating confidential information has been made significantly easy. Thus protecting such information has become challenging to the employers of organizations (Png 2017). The following steps can be taken to protect confidential information, more specifically trade secrets:

• Identifying the valuable trade secrets of an organization and enforcing policy of trade secret protection
• Educating employees about the need to protect trade secrets for the benefit of the organization
• Applying technological and physical restrictions on replicating and breach of trade secrets (Klasa et al. 2016)
• Marking important and relevant documents “confidential’ and ‘secret’ to avoid accidental disclosure of such documents
• Entering into and signing agreements with employees in confidence so that outsiders do not get access to the trade secrets of the enterprise.

Confidential information is generally not regarded as property. The rights attached to confidential information are different from proprietary rights. The person in control of such confidential information has the control of dissemination of such information. It is to be mentioned that confidential information cannot be owned by the employer in a proprietary sense.

Requirements for identifying trade secrets

However, any information generated by any employee during his course of employment which is related to the business of the employer belongs to the employer and is subject to the control of the employer (Linton 2015). It is to be mentioned that any idea or invention of an employee which arises by the use of personal knowledge and skills during the course of his employment is also owned by the employer of such employee. It is to be noted that even if the relation between the employer and employee ends such confidential information will be subject to the employer’s control and retained by the employer (Adams 2016). However, any ex-employee will have the right to use such confidential information which constitutes know-how unless any clause of restraint of trade is present.  An employer has the right to control confidential information to a certain extent in the post employment period by using his proprietary rights in documents and through copyrights in case such ex employee replicates or reproduces any material which belonged to his former employer. An ex-employee will be held tortuously liable if he tries to convert the property of his ex-employer in an inconsistent manner (Patel et al. 2016).

Remedies available for protection of trade secrets

It is to be stated that remedies are available to victims in case of breach or infringement of trade secrets. It can be noted that remedies are available if there is breach of a contractual or equitable obligation or if any of the provisions as stated in sections 182 and 183 of the corporations Act are contravened. Some of the remedies for the breach or violation of confidential information include permanent or temporary injunction, specific performance in case of contractual obligations and damages. Other remedies include delivery of any materials containing confidential information that has been breached. Section 182 and 183 of the Corporations Act provide provisions for civil penalties in case of breach of trade secrets (Legislation.gov.au 2018). The aforementioned sections allow the aggrieved party to seek an injunction and also allow the Australian Securities and Investment Commission to impose a pecuniary penalty of AU$200,000 (Asic.gov.au 2018). It is to be mentioned that the most effective remedy which is available for disclosure of confidential material unauthorized in nature is interlocutory injunction. The purpose of acquiring interlocutory injunction is to halt or restrain the revelation of relevant information. The courts in relation to breach of trade secrets can issue a search and seizure order to allow the aggrieved party to remove any sensitive information from the custody of the wrong doer while the legal issues of the case are determined.

Protection of confidential information

It is to be mentioned that incase any confidential information is disclosed before an injunction order has been issued the aggrieved party can claim for damages or demand an account of profits. The purpose of awarding damages in the aforementioned situation is to provide compensation for loss suffered by the plaintiff due to breach of trade secrets (Pooley 2015). It is to be mentioned that there is definite formula for calculating the damages suffered directly as a result of the breach of trade secrets therefore the final assessment of the damages claimed are done on the basis of the loss of sales of the organization, loss of projected profit and the lost chance of exploiting an idea. Further punitive damages are awarded by the courts if the actions of the defendant are found to be reprehensible. However, punitive damages are rarely awarded in cases of breach of trade secrets in Australia.

It can be said that if contractual obligations are established to be existing between the parties, the remedy of specific performance may be awarded by the courts in order to compel the contracting party to perform their duties. It is to be mentioned that the remedies discussed above are applicable in cases of violation of confidential information which occur from espionage, associated impropriety and fraud (Milgrim and Bensen 2017). However, criminal remedies are not applicable in cases of breach of trade secrets. The Australian law in compliance with the article 39.2 of the TRIPS agreement states that a third party may be restrained from using confidential information obtained from breach of confidential information. It can be mentioned that the Australian Common law provides greater protection of confidential information than the provision stated in article 39.2 of the TRIPS which only takes into account conduct of grossly negligent third party (Alrc.gov.au 2018).

It is to be mentioned that the most popular statement in case of breach of confidence claim as held in the case Coco v AN Clark (Engineers) Ltd [1969] RPC 41 must include the following provisions:

• Firstly it has to be established that the information of the plaintiff was confidential in nature
• Such information was kept with the defendant and the defendant had the obligation of keeping such information confidential
• The defendant used such information without obtaining the authority of the plaintiff.

Licensing Trade secrets

All confidential information which includes trade secrets is generally licensed through contractual agreement between the parties. It is to be mentioned that in such agreements one of the parties agrees to disclose the relevant and confidential information to the other party for his specified purpose and the party receiving such information agrees to maintain the information in confidence. It can be stated that the agreement must properly govern the usage of such confidential information in order to ensure that the agreement becomes enforceable if the question contained in the agreement is failed to be determined by the court. Therefore it can be mentioned that certain limitations of regarding the party’s obligation to keep such information confidential must be included in the agreement.

Remedies available for breach of trade secrets

An agreement between two or more parties regarding revelation of confidential information in Australia is governed by the Australia’s Anti-trust legislation just like any other contract. It is to be mentioned that the Trade Practices Act 1974(Cth) is Australia’s primary anti-trust statute (Legislation.gov.au 2018). However, the aforementioned Act excludes certain rights relating to intellectual property from the restrictive trade practice provisions. It can be stated that such Act however, does not exempt confidential information from its scope. 

References:

Adams, M., 2016. Transparency and the Protection of Trade Secrets inthe Fracturing World: The Case for UpfrontSubstantiation and Immediate Evaluation ofFracturing Fluid Trade Secret Claims in Louisiana. LSU Journal of Energy Law and Resources, 4(2), p.15.

Klasa, S., Ortiz-Molina, H., Serfling, M. and Srinivasan, S., 2017. Protection of trade secrets and capital structure decisions.

Lapousterle, J., Geiger, C., Olszak, N. and Desaunettes, L., 2015. What Protection for Trade Secrets in the European Union? CEIPI’s Observations on the Proposal for a Directive on the Protection of Undisclosed Know-How and Business Information.

Lie, H.T., 2016. Introduction to Current Trade Secret Management Research.

Linton, K., 2015. The importance of trade secrets: new directions in international trade policy making and empirical research. J. Int’l Com. & Econ., 7, p.1.

Milgrim, R.M. and Bensen, E.E., 2017. Trade Secrets As, and Related to, Patentable Matter. Milgrim on Trade Secrets, 2.

Patel, A.B., Pade, J.A., Cundiff, V. and Newman, B., 2016. The Global Harmonization of Trade Secret Law: The Convergence of Protections for Trade Secret Information in the United States and European Union. Def. Counsel J., 83, p.472.

Png, I. and Samila, S., 2015. Trade Secrets Law and Mobility: Evidence from’Inevitable Disclosure’.

Png, I.P., 2017. Law and innovation: evidence from state trade secrets laws. Review of Economics and statistics, 99(1), pp.167-179.

Pooley, J., 2015. The Myth of the Trade Secret Troll: Why the Defend Trade Secrets Act Improves the Protection of Commercial Information. Geo. Mason L. Rev., 23, p.1045.

Saunders, K. and Evans, M., 2017. A Review of State Criminal Trade Secret Theft Statutes.

Varadarajan, D., 2016. Trade Secret Precautions, Possession, and Notice. Hastings LJ, 68, p.357.

Coco v AN Clark (Engineers) Ltd [1969] RPC 41

Legislation.gov.au. (2018). Trade Practices Act 1974. [online] Available at: https://www.legislation.gov.au/Details/C2010C00426 [Accessed 1 Feb. 2018].

Legislation.gov.au. (2018). Corporations Act 2001. [online] Available at: https://www.legislation.gov.au/Details/C2018C00031 [Accessed 1 Feb. 2018].

Asic.gov.au. (2018). Our role | ASIC – Australian Securities and Investments Commission. [online] Available at: https://asic.gov.au/about-asic/what-we-do/our-role/ [Accessed 1 Feb. 2018].

Alrc.gov.au. (2018). The TRIPS Agreement and experimental use | ALRC. [online] Available at: https://www.alrc.gov.au/publications/13-experimental-use-exemption/trips-agreement-and-experimental-use [Accessed 1 Feb. 2018]