On March 17th, the U.S. Attorney’s Office filed charges in U.S. Federal Court (Western District Washington) against Russian national Alex A. Kibkalo for stealing trade secrets from software giant Microsoft under The 1996 Economic Espionage Act (18 U.S.C. § 1832). Although U.S. v. Kibkalo (14-mj-00114) has yet to be ruled on, and despite involving a large multi-national business like Microsoft, this case highlights several cross-border trade secret protection issues all internationally-focused businesses should consider.
Facts. To understand these trade secret protection issues, it is important to first understand the alleged facts of this case. According to the U.S. Attorney’s Complaint, Kibkalo was a Microsoft employee, working as software architect in Microsoft’s Lebanon office. He allegedly signed a non-disclosure agreement (“NDA”) at the beginning of his employment.
Between July and August 2012, Mr. Kibkalo allegedly established a virtual machine on a computer server at Microsoft’s Redmond, Washington headquarters to upload unreleased versions of Microsoft’s software updates and a software development kit (collectively, “Content”) to his personal cloud storage account. The Content was secured on Microsoft’s internal system by Microsoft’s internal security program that included limited facility and electronic system access points, facility monitoring, and unique identifying signature technology to track downloaded proprietary information from the internal system. Those who accessed content on Microsoft’s internal electronic system were also required to accept Microsoft’s terms of service that included warnings concerning the proprietary nature of content on the internal system as well as reminders to Microsoft employees and others of their non-disclosure obligations pertaining to proprietary information on the system.
Once Mr. Kibkalo allegedly downloaded the Content, he allegedly transmitted links to the Content to a French technology blogger whose actual geographic location was unknown. Microsoft became aware of alleged transmission through an outside source who was contacted by the blogger about the Content. Microsoft subsequently monitored the blogger’s communication through the blogger’s Microsoft Windows Live Messenger account. An examination of the blogger’s Messenger communications and emails allegedly verified the transmission and unique identifiers in the Content.
Lessons To Be Learned. Although this fact pattern is by no means novel, it does reveal cross-border trade secret protection issues all companies should consider in order to ensure their trade secrets are protected under U.S. and foreign trade secret laws.
So what protection issues need to be considered?
Worker Protection Measures. Kibkalo emphasizes that establishing trade secret protections through contractual provisions with contractors and employees is essential for businesses to protect their proprietary information, both at home and abroad. Under U.S. law (18 U.S.C. § 1839(3)) and international legal standards (Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) – Art. 39.2(c)), businesses who wish for their proprietary information to qualify for trade secret protection must take “reasonable” measures to protect such information from public disclosure. Often, this requires that a business have their employees, contractors or any other person to whom they disclose the business’ proprietary information sign a NDA (or similar agreement) prohibiting such persons from disclosing the proprietary information to others. See MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 521 (9th Cir. 1993).
Assuming Microsoft had an effective NDA executed with Mr. Kibkalo under U.S. law, Microsoft would likely be in a position to enforce trade secret protections in the Content under U.S. law.
Any business, regardless of its geographical location or the location of its employees or contractors, can also take similar protective measures.
Internal Security Measures. This case also highlights that international businesses need to establish internal security measures in order to effectively protect their proprietary information. Electronic and facility security measures, such as access restrictions, surveillance mechanisms have been found to be reasonable protection measures to help businesses qualify for trade secret protection. See U.S. v. Chung, 659 F.3d 815, 825 (9th Cir. 2011). As Microsoft attests to maintaining similar security measures, such measures would likely help Microsoft to obtain trade secret protection for its Content.
It goes without saying that not all businesses can afford the same level of security protections as multinational businesses like Microsoft. Yet, simple and relatively inexpensive security measures such as password protections, locking of files and computer equipment, as well as posting confidential notices on proprietary information can effectively help any business to better qualify for trade secret protection, both in the U.S. and abroad.
Online Monitoring Measures. Lastly, this case highlights the importance of online surveillance and tracking measures that businesses should consider acquiring to protect their proprietary information throughout the globe. Although generally not required to obtain trade secret protection under U.S. and/or foreign laws, the monitoring of suspected persons or entities who may be misappropriating trade secrets (*provided they are done so in compliance with applicable laws and regulations), as well as tracking software, are both effective tools to identify and prevent trade secret misappropriation. Microsoft would not have been able to determine that Mr. Kibalko had allegedly stolen the Content in the U.S. and allegedly transmitted it to the blogger outside of the U.S. without its unique identifier technology.
Granted, not all businesses have the same circumstances that allowed Microsoft to find out about the blogger and Mr. Kibalko’s alleged activities (e.g., outside sources, access to Messenger and email accounts, etc.), nor the available funds to conduct Microsoft’s extensive online surveillance activities. Yet, there are many (legal) monitoring services, investigating agencies, and identifying software products on the market that can help businesses better monitor misappropriating conduct both at home and abroad.
What’s The Takeaway? It remains to be seen how U.S. v. Kibkalo will be decided. However, this ongoing case shows that all internationally-focused businesses can develop sound practices and procedures to ensure their proprietary information is protected throughout the world. By establishing effective worker protection measures, internal security measures, as well as online monitoring measures, businesses can better protect their trade secrets from being misappropriated both at home and abroad.
Over the last week, the Office of the U.S. Trade Representative (USTR) and the International Intellectual Property Alliance (IIPA) released reports on the current state of intellectual property (IP) protections for U.S. businesses abroad. These reports provide updated insights on foreign countries and foreign retail markets (both physical and online) that have recently caused U.S. businesses the most IP protection difficulties.
Here is a summary of the reports:
IIPA 2014 Special 301 Report Submission
On February 8th, the IIPA submitted their 2014 Special 301 Report Submission to the USTR. As one of the largest U.S. lobbying groups for the copyright-based industries, the IIPA’s submission identifies the foreign countries the IIPA believes provides the most ineffective IP legal protections for U.S. businesses. The USTR’s final Special 301 Report (released annually April-May) provides reporting to the U.S. government and the general public on the countries that, according to the Omnibus Trade and Competitiveness Act (19 U.S.C. § 2242(a)), deny “adequate and effective protection of [IP] rights” or “fair and equitable market access to United States persons that rely upon [IP] protection.”
Although the U.S. government rarely imposes trade sanctions based on the Special 301 Report, a country’s listing in the final report often impacts the U.S.’ trade relations with that country and the degree to which the U.S. government initiates trade promotional activities with the same. From both a private sector and practical standpoint, the Report also represents a review of the markets that U.S. businesses have had the most IP protection challenges.
What countries did the IIPA recommend for inclusion in the 2014 Special 301 Report?
Priority Foreign Countries. For a second year in a row, the IIPA has identified Ukraine as being a “Priority Foreign Country.” This is the least favorable designation available under the Special 301 reporting system. Specifically, it identifies that country as one with the “most onerous or egregious acts, policies, or practices” that “have the greatest adverse impact (actual or potential) on the relevant [U.S.] products” without making efforts to ameliorate their status. 19 U.S.C. § 2242(b)(1)). Ukraine’s designation as a Priority Foreign Country was based on a number of factors, most notably the absence of effective online copyright enforcement, and unfair and non-transparent royalty society collections. Shockingly, the classification was also based on reports of widespread software pirating by Ukrainian government agencies.
Priority Watch List and Watch List Countries. The IIPA’s Special 301 Report Submission lists Argentina, Chile, China, Costa Rica, India, Indonesia, Russia, Thailand and Vietnam on the “Priority Watch List,” and Belarus, Brazil, Bulgaria, Canada, Ecuador, Greece, Israel, Kazakhstan, Kuwait, Mexico, Romania, Saudi Arabia, Switzerland, Taiwan, Tajikistan, Turkey, Turkmenistan, United Arab Emirates and Uzbekistan as “Watch List” countries. Although not as a severe rating as a Priority Foreign Country, being listed as a country on the Priority Watch List or simply Watch List means that a country has potential IP protection deficiencies that require varying levels of USTR monitoring.
Newly Non-Listed Countries. It is also important to note that the IIPA has recommended removing a number of countries from the final 2014 Special 301 Report due to their improvements in IP protection. These countries include Barbados, Bolivia, Colombia, Dominican Republic, Egypt, Finland, Guatemala, Jamaica, Lebanon, Pakistan, Paraguay, Peru, Trinidad and Tobago, and Venezuela.
Out-of-Cycle Review of Notorious Markets
Also, on Wednesday, the USTR released an Out-of-Cycle Review of Notorious Markets that identified physical and online markets reported by U.S. businesses and industry organizations as being engaged in substantial IP piracy and counterfeiting. The Review includes particular social media and file transferring sites hosted abroad, including sites hosted in Antigua and Barbuda, Bulgaria, Canada, China, Czech Republic, Finland (possibly), Netherlands, Poland, Russian Federation, Spain, Sweden, Ukraine, United Kingdom and Vietnam. Specific physical markets in Argentina, China, Colombia, Ecuador, India, Indonesia, Mexico, Paraguay, Spain, Thailand and Ukraine were also deemed notorious.
What’s The Takeaway? Every foreign market has its own IP protection challenges. U.S. businesses that are exploring expansion into new markets should consider the IIPA’s Special 301 Report Submission (as well as the USTR’s Final Special 301 Report due out later this year), and the USTR’s Out-of-Cycle Review of Notorious Markets to help evaluate the IP risks associated with such markets. Doing so can help to ensure that such businesses can better protect their IP assets as they expand.
By guest blogger Mark Kusic, President, Founder and Private Investigator, Kusic and Kusic Private Investigators Ltd., Vancouver, British Columbia, Canada.
Obtaining a foreign private investigator (PI) can have a significant impact in foreign intellectual property (IP) litigation. A good and experienced foreign PI understands how to collect evidence in a way that is legally relevant and admissible in the country they are located. The recent Canadian trademark counterfeiting case Guccio Gucci S.p.A. v. Mazzei,  F.C. 404 (Can.) illustrates this point. The famous Italian fashion designer Gucci investigated and brought suit against a Toronto-based seller of counterfeit Gucci products. As a part of their investigative efforts, Gucci worked with three Canadian investigators to investigate and collect evidence on the seller. Initially, one PI working undercover responded to the seller’s online advertisement and set up a meeting with the seller where the investigator purchased the seller’s counterfeit Gucci goods.
Next, a second undercover investigator responded to the seller’s online advertisement and scheduled a time to meet the seller at his storage facility. Once at the facility, the investigator witnessed and was able to video record hundreds of counterfeit items, as well as purchase counterfeit Gucci and other luxury brand products.
Lastly, a third investigator accompanied an attorney and a police detective to the seller’s storage facility and served the seller a cease and desist letter. During the process, the investigator saw and discretely recorded the interaction, which also included evidence of a number of counterfeit Gucci products.
Based on these investigations, the team of Canadian investigators was able to assist Gucci in documenting the existence and sale of the seller’s counterfeit Gucci goods, ultimately helping Gucci obtain a summary judgment ruling and compensatory damages for each count of trademark infringement.
So how can IP owners ensure that a foreign PI they hire will be as effective as those hired by Gucci in Guccio Gucci S.p.A? Well, there are few things IP owners should look for when hiring a foreign PI, as well as things to keep in mind once a foreign PI is hired.
Experience. IP owners should make sure that the foreign PI they hire has extensive IP investigation experience. There are several ways to verify such experience. First, an IP owner can check the PI’s online presence by reviewing the PI’s website, and searching their name online in conjunction with terms such as “anti-counterfeiting” and “brand protection” to obtain further information about the PI’s IP investigation experience. They can also check to see if the PI firm is accredited and licensed by regional, national or international PI associations that handle IP investigations (see next point).
It is also good to ensure that a foreign PI has extensive online investigation experience if that is to be the focus of the IP investigation. The foreign PI needs to be able to expertly navigate and research the Internet including websites where potential foreign infringers and counterfeiters are active, such as on Alibaba, Craigslist, Facebook and eBay, among others. As each website and online marketplace has their own rules and processes for handling IP violations, IP owners with a specific website concern should inquire whether the foreign PI they wish to hire has in-depth experience with the particular website in question in order to determine whether the foreign PI can be of assistance.
Licensing. IP owners should make sure the foreign PI they wish to hire is licensed and accredited with governing authorities and industry associations, both regionally, nationally and (preferably) internationally. Any foreign PI firm chosen should be a member of their regional and national professional association, such as the Private Investigators’ Association of British Columbia and the Canadian Association of Private Investigators in the case of my firm respectively. Although not required, a foreign PI firm’s membership with a recognized international investigator association such as the World Association of Detectives and the International Trademark Association (INTA) further solidifies their credentials.
Know Your Ethical and Legal Obligations. IP owners also need to be aware of their legal and ethical obligations once they hire a foreign PI. They should not direct their foreign PI to access information that is not available to the general public, misrepresent themselves, or conduct other illegal practices. Any evidence gathered by a foreign PI under these circumstances is likely inadmissible, and may even result in legal action taken by the subject of the foreign investigation.
Parting Notes. Obtaining a good and experienced foreign PI can significantly benefit a IP owner’s foreign IP litigation efforts. Following these suggestions can help to ensure that the right foreign PI is chosen and effectively utilized.
Co-Authored by Shreya Ley, Attorney and Owner of Lay Roots
You may have thought that this summer was all about capturing that certain bohemian-chic essence, but the true trendsetters are all talking about recent developments in Indian patent law. In April, the Indian Supreme Court ruled in Novartis AG v. Union of India & Others that Swiss pharmaceutical maker Novartis was not entitled to patent protections for their leukemia treatment drug Gleevec. The Indian Supreme Court’s rationale was heavily based on their efforts to stop pharmaceutical “evergreening” – a practice pharmaceutical companies use to extend the life of a patent by seeking patent protection of subsequent improvements to their drugs or alternative, novel uses for such drugs.
Novartis had been attempting to patent a new and improved version of Gleevec. It had been unable to patent the original version of the drug in India because India did not recognize or grant pharmaceutical patents prior to completing their implementation of their World Trade Organization obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in 2005. Upon discovering an improved version of Gleevec, Novartis sought to gain patent protection in an effort to halt the rampant manufacturing of generic forms of the drug in India. However, the Indian Supreme Court found that Novartis had not created enough of an improvement in the new Gleevec to qualify the drug as a new invention. Since Novartis’ ruling, Indian courts have subsequently invalidated other similar patent applications as seen last Friday with the invalidation of the Glaxo Smith Kline’s cancer drug Tykerb.
The Novartis decision and other similar Indian court rulings that refused to grant patent protections to pharmaceutical improvements have become the major impetus for foreign businesses and governments to denounce the Indian patent system as being broken, unjust, or perhaps just biased against non-Indian inventors. Around the world, India’s stand against pharmaceutical evergreening has led such entities to decry the general state of innovation in India. Here in the U.S., the Pharmaceutical Research and Manufacturers of America commented that the Novartis ruling was a sign of India’s “deteriorating innovation environment” and the Office of the U.S. Trade Representative remarked that recent Indian patent developments have “raised serious questions about the innovation climate in India and risk hindering the country’s progress towards an innovation-focused economy.” Such rhetoric has inevitably led American and other non-Indian businesses to become weary of working with Indian resident companies and inventors, ”hear ye, hear ye, innovators around the world! Take heed of this warning tale!”
Well, “fear not!” Keep in mind that Novartis and the other related Indian court decisions only apply to pharmaceutical patents as such rulings have been based on a specific provision in the Indian Patent Act relating to incremental innovations in pharmaceuticals. So, given the limited applicability of Novartis and related cases, foreign businesses should simply forge ahead with their Indian business relationships, right?
Not quite so fast. Dealing with any foreign business, inventor, or entity comes with its own challenges and those looking to partner with Indian resident businesses should consider the following before getting too involved.
1. Get a Comprehensive Agreement in Place Beforehand. Many partnering businesses have a difficult time putting a written agreement together prior to beginning their business relationship. THIS. IS. A. MISTAKE. Getting a clear agreement in place beforehand is important for foreign businesses and their Indian counterparts to prevent future misunderstandings that could potentially derail their objectives and result in substantial costs. Such an agreement should not only clearly outline the parties’ rights and obligations with respect to the Intellectual Property (IP) created in their relationship, it should additionally cover business aspects of the relationship. Although a large part of such relationships is based on the IP, the business side encompasses what happens once IP is created and it is equally important.
Specifically, agreements should address the following:
What is being protected? The agreement should clarify for foreign businesses and their Indian counterparts the types of IP their relationship needs to protect. This can be as simple as designating that both patentable and trade secret innovations will be protected and as complicated as describing protections for each and every potential innovation arising out of the relationship, whether a part of the parties’ original intentions or not. This designation process will not only help to define the scope of the parties’ project, it will also help ensure that the parties seek appropriate protections and enforcement measure for their IP. Completing this exercise is especially important in a cross-border context as the enforcement of IP rights abroad may be more difficult than simply making sure everyone is on the same page from the beginning. India in particular has been notorious for lacking the necessary infrastructure to enforce IP rights efficiently.
Who gets ownership? Establishing ownership of resulting IP from an Indian business relationship is important in an initial agreement because countries vary in the rights they give to owners and inventors. For example, Section 2(p) of the Indian Patent Act uses the term “patentee” for patent owners that is defined as “the person for the time being entered on the register as the grantee or proprietor of the patent.” In contrast, the U.S. does not officially use the term “patentee” and most American inventors would probably assume that patentee refers specifically to inventors. As illustrated above however, “patentee” in India is not necessarily limited to inventors. Therefore, making sure that all parties are clear on who will be named inventors and who will own resulting IP is essential to ensuring a good business relationship with an Indian resident business or inventor.
Who gets paid? This, inevitably, is a difficult topic to discuss, and it is inextricably tied to IP ownership rights. When there is no money coming in, everyone wants to split things down the middle. However, once there is money or it looks like there will be no money, businesses start to quibble. In order to avoid costly, drawn out battles that could prevent businesses from furthering an otherwise fruitful relationship, it is important to outline how all parties are to be compensated for their hard work, time and ingenuity once their relationship has taken off as well as when it has reached its conclusion.
Outlining business plans in writing through an agreement not only forces the parties to talk about their innovation strategy, marketing plans, and production plans; it also enables them to have a clearer direction for their relationship. If anyone is worried that creating a detailed, written plan will inhibit their creativity, then remember that a good agreement should leave some room for flexibility. Allowing such flexibility can lead to great innovation and profitability. Ultimately, however, having a clear outline of where the parties’ want to go, how they want to get there, and what they need to get to that point (the “what” usually being the IP) can lead to a more profitable and innovative business relationship and can prevent costly future litigation.
2. Be Conscious of Indian Patent Filing Requirements and Tolling Restrictions. Understanding Indian patent application filing requirements and the interplay between them and other foreign patent filing requirements is essential for businesses to ensure the broadest global patent protections for their resulting innovations. The most important thing for non-Indian businesses to realize is that Section 39 of the Indian Patent Act requires that patent applications for any invention created with the help of Indian residents must first be filed in India. Yes, before filing an international application under the Patent Cooperation Treaty, before filing a U.S. patent application with the United States Patent and Trademark Office (USPTO), and before filing a patent application anywhere else, foreign businesses working with Indian inventors must file a patent application with India’s patent office (The Controller General of Patents, Designs, and Trademarks (Controller)).
Does that sound unreasonable? Foreign businesses may be able to apply for special permission from the Controller to initially file abroad, but don’t bet on the Controller bending the rules. If no special permission is given, a foreign business must wait for approximately six weeks after filing in India to file elsewhere.
So, if a foreign business has applied with the Controller and waited six weeks, they can now submit applications anywhere else…right? Sure! Just make sure not to dilly-dally because filing in India limits the amount of time a business has to file their patent application with the USPTO and other national patent offices. Knowing the timelines from start to finish of the Indian patent application system and how filing dates in India affect the requirements for filing applications in other countries can greatly impact business decisions.
Parting Thoughts. Go forth and innovate with Indian resident compatriots! The considerations above and recent Indian pharmaceutical patent decisions should not stop foreign businesses from doing so. Collaboration enables people to create great innovations, but every business relationship, whether down the hallway or across the world, has its own challenges and limitations. It’s good for businesses to be honest about those challenges and to create a plan for overcoming them before they run into them. These general suggestions don’t apply to everyone and it’s always wise to consult with qualified local counsel and persons who can advise on the particulars of a specific business. In the end, it will save businesses a lot of time, headaches, and money to simply invest in the relationship by setting it up correctly.
Also, no matter how overwhelming the planning process may seem, just remember, at least you’re not going up against Bollywood screenwriters who generously “borrow” from American film. In cases like those, it’s best to pop some popcorn, settle onto the couch, and enjoy the results – because the results ARE rather glorious, are they not?
Trade secrets are arguably the most common form of intellectual property transmitted across borders in today’s global market. Any business that seeks to capitalize on foreign market opportunities—either by working with a foreign partner or establishing their own foreign operations—is likely to transmit confidential information abroad. However, such cross-border transmissions directly impact the legal protections afforded to such information as the extent of trade secret protection and enforceability of trade secret rights varies between countries. Examining some of the main differences in trade secret protection and enforceability between countries is important as businesses increasingly must choose how to contractually structure protections for their confidential information abroad. Further, understanding the extent of trade secret protections afforded to confidential information in different markets can help businesses establish effective country-specific trade secret protection strategies that address the strengths and weaknesses of a particular country’s legal protections for trade secrets.Particular factors that should be considered include:
- Qualifying confidential information
- Injunctive enforceability of trade secret rights
- Foreign judicial system effectiveness
Qualifying Confidential Information. A preliminary factor for businesses to consider is the extent to which their confidential information is protected under a country’s trade secret laws. Most countries have adopted a minimum level of legal protections for trade secrets, yet such protections often vary. World Trade Organization (WTO) member states are required to adopt minimum legal protections for trade secrets. Under Article 3 and Article 39(2) of The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), WTO member states must provide persons or entities of their countries and other WTO member states legal rights to prevent the disclosure of lawfully-held information that:
- 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;
- Has commercial value because it is secret; and
- Has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.
As this widely accepted minimum legal requirement is ambiguous, WTO member states have the ability to establish their own variation, often differing the amount and type of confidential information qualifying for trade secret protection. For example, the U.S. and China provide legal protection for confidential information that has actual (current) or potential commercial value, where TRIPS is silent about the time to which such value must be established. This means that a business that has developed or acquired confidential information that will be commercially valuable at a future date will qualify for legal protection for such information in these countries, subject to protection and secretive requirements.
In contrast, several countries are silent on this commercial value issue and maintain other factors for determining trade secret protection. For example, in India, trade secrets have been judicially defined as “formulae, technical know-how or a peculiar mode or method of business adopted by an employer which is unknown to others.” Not only is this definition silent on when commercial value must be established, it is also silent on what constitutes sufficiently reasonable protection procedures for such information to qualify for trade secret protection.
As these examples illustrate, countries often maintain different qualifying standards for trade secret protection despite satisfying their TRIPS obligations. Based on these differences, businesses must carefully determine what portions of their confidential information qualifies for trade secret protection in a particular country.
Injunctive Enforceability of Trade Secret Rights. Trade secret owners must also consider their ability to protect their trade secrets through injunctive relief in a particular country. Most countries will grant a permanent injunction against a person or entity after they are found by a Court to have misappropriated a trade secret. However, this often requires initiating and succeeding in a legal action, which is not certain to succeed and may take a substantial amount time before being granted. This could harm the commercial value of the confidential information, and in many cases, the potential success of the trade secret owner’s foreign business operations or strategies. As a result, seeking a preliminary injunction, namely an injunction sought at the onset of a trade secret misappropriation proceeding, is essential to effective trade secret protection.
A business’ ability to seek a preliminary injunction to protect their trade secret varies from country-to-country. In the U.S., a trade secret owner may seek a preliminary injunction against a misappropriating party or parties providing them assistance through an initial motion in a misappropriation proceeding. Although U.S. jurisdictions generally maintain high evidentiary burdens for trade secret owners to obtain preliminary injunctions, U.S. courts allow evidentiary exchanges between the parties (known as discovery) and copies of original evidence to be admissible under specific requirements. U.S. courts may also permit discovery proceedings to be expedited based on the sensitivity of the confidential information at issue.
In contrast, other countries make obtaining a preliminary injunction more difficult. For example, preliminary injunctions are rarely granted in Chinese trade secret cases due to the absence of a discovery process and restrictive evidentiary burdens. Chinese trade secret proceedings do not have discovery processes and Chinese Courts will generally only accept original written forms of evidence. This means that trade secret owners in China are forced to gather their own evidence, and can only admit original written evidence, which makes satisfying the evidentiary burden to obtain an preliminary injunction substantially more difficult.
As illustrated with China’s trade secret injunction procedures, trade secret owners need to determine what challenges they will face in enforcing their trade secret protections under a country’s judicial procedures, regardless of the extent of a country’s trade secret protections.
Foreign Judicial System Effectiveness. Even if a country’s injunctive judicial procedures are surmountable, a country must also have an effective judicial system to even allow injunctive enforcement to be brought forward. This requires determining whether a country has an effective judicial system to enforce trade secret protections. There are several resources for businesses to determine the effectiveness of a foreign country’s judicial system, including their national IP offices and trade agencies. In the U.S., the Office of the U.S. Trade Representative (USTR) publishes annual reports (known as Special 301 Reports) that identify IP enforcement concerns for U.S. IP owners by country, including ineffective judicial systems. For example, in the 2013 USTR Special 301 Report, the USTR identified Argentina, Bulgaria, Greece, Guatemala, India, Indonesia, Paraguay, Peru and Turkey as having judicial system inefficiencies for enforcing IP rights.
Parting Notes. Although the above-mentioned factors are important when evaluating cross-border trade secret protections, examining such factors only comprise a portion of an effective foreign trade secret protection strategy. Establishing the best protections for trade secrets abroad should also include other protection measures including the development of internal business protocols to prevent unauthorized information disclosures, among other procedures. Working with qualified counsel can effectively assist with evaluating both the above-mentioned factors and internal business protocols.
 Uniform Trade Secrets Act, § 1.4; 18 U.S.C. § 1839(3)(b).
 J. Benjamin Bai and Guoping Da, Strategies for Trade Secrets Protection in China, 9 Nw. J. Tech. & Intell. Prop. 351, 359 (2011) available at http://scholarlycommons.law.northwestern.edu/njtip/vol9/iss7/1 (citing Zui Gao Ren Min Fa Yuan Guan Yu Shen Li Bu Zheng Dang Jing Zheng Min Shi An Jian Ying Yong Fa Lv Ruo Gan Wen Ti De Jie Shi, Interpretation of Supreme People’s Court on Some Issues Concerning the Application of Law in the Trial of Civil Cases Involving Unfair Competition, art. 10, Fashi 2/2007 (Sup. People’s Ct. 2007) (China)).
 Pedro A. Padilla Torres, Overview of International Trade Secret Protection, National Law Center for Inter-American Free Trade, (2001) available at http://db.natlaw.com/interam/mx/ip/sp/spmxip14.htm.
 Zafar Mahfooz Nomani and Faizanur Rahman, Intellection of Trade Secret and Innovation Laws in India, J Intell. Prop Rights, 341, 346, (Jul. 2011) (citing American Express Bank Ltd. v Priya Puri (2006) III LLJ 540 (Del) (India)).
 Ronald S. Wynn, Trade Secret Litigation: TROs, Preliminary Injunctions, and Some Things to Think About First, HansonBridgett, 2-3, Mar. 2012 available at http://www.hansonbridgett.com/Our-Attorneys/~/media/Files/Publications/IP_alert_trade_secret_litigation_2012.pdf.
 Id. at 2 (burden generally includes “(1) probable success on the merits, (2) irreparable harm without the requested injunction, and (3) a balance of hardships between the trade secret claimant and the alleged misappropriator that favors the injunction”).
 Id. at 3.
 J. Benjamin Bai and Guoping Da, supra note 2, at 362-63.
In recent years, many national customs offices have established notification procedures to allow IP rights holders the ability to alert customs officials of their IP rights in order to assist them in their import inspection activities. Like Internet Service Provider takedown requests on the Internet (more information about these procedures), IP customs office notifications is a tool for IP rights holders to protect their IP rights abroad by reducing the global spread of infringing goods and content by preventing its cross-border transit—and in many cases, assisting in its destruction. However, to utilize such protection measures, an IP rights holder must ask themselves:
- Can you submit such a notification in a particular country?
- Does the country you wish to enforce your IP rights have an IP customs notification system?
- Does such a country’s national IP customs notification system include the type of IP you wish to protect?
- What are the particular foreign customs agency’s IP notification requirements?
Can you submit a IP customs notification? Generally, an IP rights holder can only submit an IP customs notification to a foreign customs office if their IP qualifies for protection in that foreign country. Determining if particular IP qualifies for protection in a country depends on the type of IP the rights holder wishes to protect and to what extent the rights holder has secured foreign legal protections. Here is how it breaks down:
Trademarks. If an IP rights holder wants to submit a foreign customs notification to protect a trademark or service mark in another country, they usually need to have registered that mark in the IP office of that specific country or through a centralized international registration mechanism like the Madrid Protocol (more information about the Madrid Protocol). This is because trademark protection is territorial, meaning that a trademark or service mark registration only grants its owner rights in the mark in the territory of the registering country. So for example, if a U.S. company registers its trademark in the U.S. for particular goods or services and wishes to protect that trademark against infringing imports into New Zealand, it must also register that mark through the Intellectual Property Office of New Zealand or the Madrid Protocol in order to submit a trademark notification to the New Zealand Customs Service.
Of course there are some important exceptions to this territoriality requirement to keep in mind. The European Union maintains a community-wide trademark system (Community Trade Mark) allowing one community registration to qualify for customs notification registration in all EU member states (a list of EU member states is available here). The African Intellectual Property Organization (OAPI) also maintains a community trademark system where a single OAPI community mark registration is recognized in 16 African nations (a list of EU member states is available here).
Patents. Like trademarks, a patent rights holder must generally have a registered patent in the country to which they wish to register an IP customs notification. Unlike trademarks, however, there are no current community registration exceptions. As a result, patent rights holders must register their patents in the country to which they wish to register their IP customs notifications.
Trade Secrets: Generally, as trade secrets require that their owners keep the content of their secrets confidential in order to maintain its legal protections, any disclosure of such secrets to customs officials likely eliminates such secrets’ protections. Therefore, there does not appear to be any national customs IP notification systems that permit trade secret notification.
Copyright. Unlike trademarks and patents, a work qualifying for copyright protection in one country may qualify for copyright protection in other countries in order to allow foreign customs notification registration. However, depending on the country, foreign copyright authors may need to file a copyright registration in order to submit an IP customs notification. A work qualifies for international copyright protection under the Berne Convention for the Protection of Literary and Artistic Works (Berne Convention) when it becomes attached. Attachment requires that the author of the work be a national of a Berne Convention country (Berne Convention countries), the author is a habitual resident of a Berne Convention country, that the work is first published in a Berne Convention country, or that the work is published in a Berne Convention country within 30 days after an initial publishing in a non-Berne Convention country. If a work is attached through any of these means, it is treated as if the work originated in each Berne Convention country, and is then subject to each Berne Convention country’s copyright protection requirements in order to qualify for copyright protection in that specific country.
If a work qualifies as an attached work under the Berne Convention and the IP rights holder wishes to register their protected work in a foreign Berne Convention country customs office, they will be able to file a customs registration without having authored the work in the foreign Berne Convention country. Yet, as mentioned above, countries differ on national copyright registration requirements for IP customs notifications. Australia, for example, does not require Australian copyright registration prior to submitting a customs notification application to the Australian Customs Service. However, several major markets, such as the U.S., China and India, require that copyrighted works be registered in their country prior to registering an IP customs notification.
Does the country you wish to enforce your IP rights have an IP customs notification system? Not all countries maintain IP customs notification processes. Some substantial and growing markets, such as Brazil, Canada and Chile, do not currently maintain IP custom notification systems. However, many major markets and transshipment countries maintain various types of IP customs notification systems including Argentina, Australia, China, European Union (EU), Hong Kong, India, Japan, Malaysia, Mexico, New Zealand, Russia, Singapore, South Korea, Taiwan, Thailand, Turkey, Ukraine, United States and Vietnam, among others.
Does such a country’s national IP customs notification system include the type of IP you wish to protect? Several countries only maintain IP notification systems for particular types of IP. For example, The U.S. Customs and Border Protection (CBP) only accepts copyright and trademark notifications, not patent notifications (the CBP only examines imports for patent infringement based on a Section 337 exclusion order from the U.S. International Trade Commission (more information available here)). In contrast, several other countries monitor and detain imports for possible patent and geographical indication infringement. India’s Central Board of Excise and Customs (CBEC) in particular monitors imports for copyright, geographical indication, patent and trademark infringement.
What are the particular foreign customs agency’s IP notification requirements? Once an IP rights holder verifies that their IP qualifies for legal protections in the foreign country they wish to submit an IP customs notification, and that the type of IP they wish to notify customs about can be registered, the IP rights holder’s customs notification must comply with the foreign customs office’s own notification requirements.
Below are the IP customs notification submission requirements for some of the worlds’ major markets.
Types of IP Covered
|United States||19 C.F.R. 133.1 et seq.
||Copyright and Trademark||Instructions: Copyright and trademark notification (known as e-Recordation) requires:
-The trademark or copyright’s U.S. registration number
-The name, address and citizenship of the IP rights owner
-The place(s) of manufacture of goods bearing the trademark or copyright
-The name and address of individuals authorized to use the trademark or copyright
-The identity of a parent company or subsidiary authorized to use the trademark or copyright (if any)
Fees: US $190.00 per copyright and trademark (per class of goods and services).
Effective Duration of Notification: 20 years.
|e-Recordation Notification Portal|
||Copyright Act 1968, Subsection 135(2)||Copyright and Trademark||General Notes: Australian IP customs notifications are known as Notices of Objection.To register a copyright or trademark notice with Australian Customs Service, an IP rights holder must submit: (1) a notice of objection form; and (2) a deed of undertaking. Both types of forms as well as further instructions are located in the right column.
Duration of Notification: Four years.
|China||Decree of the General Administration of Customs, No. 183||Copyright, Patent and Trademark||Requirements: To file a IP customs notification with the General Administration of Customs (GAC), an application must include:
-a copy of the IP rights holder’s business registration certificate and a Chinese translation
-a copy of the Chinese registration certificate for the copyright, patent or trademark
-Proof of Power of Attorney (if registered by an agent)
-Registration fee (see below)
-Licensing agreements (if any)
-Pictures of the relevant goods and their packaging
Submission: Forms can be filled online or by mail.
Fees:Approximately US $130.00 (800 RMB).
|GAC Online Notification Form (In Chinese)|
|European Union||Council Regulation (EC) No 1383/2003, Article 5.5||Copyright, Geographical Indication, Patent and Trademark||The EU refers to IP customs notifications as Applications For Action. Applications require: (1) a completed application form; and (2) a completed Article 6 Declaration. Both forms are located to the right.
Note: Individual EU member states may maintain their own IP customs notification systems (a link to individual EU member state customs agencies is available here).
|Community Application For Action|
|India||Notification no. 47/2007 – Customs (n.t.)||Copyright, Geographical Indication, Patent and Trademark||Registration: The CBEC requires that copyrighted works be registered with Indian Copyright Office, and geographical indications, patents and trademarks with the Office of the Controller General of Patents, Designs & Trade Marks prior to submitting a CBEC customs notification.
Ports of Entry: The CBEC also requires that notifications be submitted to particular ports of entry.
Duration of Notification: Minimum period of one (1) year.
|Online Notification Submission Portal|
**Note**: The above requirements are meant for comparative educational purposes only. IP rights holders should consult with national customs agencies or qualified attorneys in the jurisdictions they wish to enforce their rights to confirm these and other IP customs notification requirements.
Further Steps. Once an IP rights holder’s IP is registered with a foreign customs office, the foreign customs office will generally notify the rights holder or their representative of any infringing inbound shipments and may detain and potentially destroy infringing imports. However, such detentions may include legal proceedings, as well as additional country-specific enforcement procedures. IP rights holders should obtain qualified local counsel to assist with these enforcement activities.
The Obama Administration released a report late last month entitled Administration Strategy on Mitigating the Theft of U.S. Trade Secrets detailing strategies the U.S. will take to combat trade secret theft, including the pursuit of enhanced foreign legal protections for U.S. trade secrets through ongoing and future trade agreements. Particularly, the Administration will seek to establish new trade secret protections in treaty member states, similar to those provided under U.S. law, in trade agreement negotiations such as Trans Pacific Partnership (TPP; Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, U.S., Vietnam, and potentially the Philippines).
Establishing harmonized trade secret protections in trade agreements—such as the TPP—will likely provide U.S. and treaty member state businesses trade secret protections in treaty countries beyond those currently provided under international IP law. The main standard for international trade secret law, Article 39.2 of the World Trade Organization’s (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), provides that signatory states must establish means for persons and entities to protect information that is: (a) secret; (b) commercially valuable due to its secretive status; and (c) has been kept secret through reasonable measures. However, Article 39.2 has received criticism for not providing specific requirements about what legal protections WTO member states should adopt for compliance, thereby resulting in disparate and often uneven trade secret protections from country-to-country.
The adoption of U.S.-like trade secret protections in foreign countries such as the TPP member states can help to better ensure that both U.S. and treaty member state businesses have necessary trade secret protections, both at home and abroad. Despite the Obama Administration’s call for such harmonization, it remains to be seen whether U.S.-like trade secret protections will be adopted in ongoing and future trade agreement negotiations.
U.S. President Barack Obama, European Council President Herman Van Rompuy and European Commission President José Manuel Barroso announced last Tuesday that the U.S. and the European Union (E.U.) would be entering into free trade agreement (FTA) negotiations following nearly two years of consultative talks and evaluation. Identified as the Transatlantic Trade and Investment Partnership (TTIP), the potential FTA will a have a substantial impact on the world economy as it would liberalize nearly a third of the world’s trade. It may also have substantial intellectual property (IP) implications for IP owners if the U.S. and E.U. can overcome ongoing disagreements over international IP protection reforms.
Initially, there were low expectations that any substantial international IP reforms would result from the agreement. The U.S. and the E.U.’s High-Level Working Group on the TTIP stated in their final report last year (available here) that both parties should “address a limited number of significant IPR issues of interest to either side, without prejudice to the outcome” in their FTA negotiations. Further, news outlets reported that there were no plans for the U.S. and E.U. to harmonize their IP systems.
However, just before the February 12th TTIP announcement, U.S. congressional representatives sent a letter to U.S. Trade Representative Ron Kirk identifying priorities the U.S. Congress wants the TTIP to address, including strong IP rights protection for U.S. industries. Sent by Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Senate Member Orrin Hatch (R-Utah), the letter identified certain E.U. policies towards foreign IP as being substantial barriers to trade that should be improved. Particularly, the letter demanded that the TTIP establish measures to address EU policies that undermine the value of foreign IP protection—including pricing, reimbursement and regulatory transparency. Additionally, the senators identified geographical indications, trademark-like protections given to certain goods from specific regions such as CHAMPAGNE for sparkling wine and ROQUEFORT for cheese, as impeding the ability for U.S. agricultural businesses to compete in the E.U. market.
Lastly, the letter demanded that the TTIP should not undermine the U.S.’ ability to achieve high levels of IP protection in other U.S. FTA negotiations. In enacted and proposed FTAs such as the U.S.-Australia FTA and the Trans Pacific Partnership respectively, the U.S. established IP protections beyond minimum international standards established under World Trade Organization’s Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS)—known as TRIPS Plus standards, pertaining to a wide range of IP rights and enforcement.
Despite U.S. calls to address international IP reforms, it is unclear to what degree the U.S. and E.U. can find common ground to enhance international IP protections in their respective countries/blocs. This does not even mention the ability for the U.S. to establish TRIPS Plus IP standards with the E.U. as in other U.S. FTAs. Positive signs towards the potential of meaningful international IP protection reforms between the U.S. and E.U. can be seen in recent cooperative efforts including joint U.S.-E.U. online IP enforcement initiatives, and the establishment of the Cooperative Patent Classification system for harmonized patent document classifications that will be operational this year. Further, the German government, the E.U.’s largest economy, has called for the TTIP to be a fully comprehensive agreement. However, the E.U. Parliament’s rejection of the U.S.-backed Anti-Counterfeiting Trade Agreement last July showed that the E.U. is potentially wary of considering enhanced international IP protections that would likely result from a comprehensive FTA with the U.S. Time will tell whether the U.S. and E.U. can established enhanced international IP protections.
What are your thoughts on TTIP and its potential for international IP reforms? How will it impact you or your business?
The U.S.-China Economic and Security Review Commission (USCC) announced in the Federal Register today that it will host its first public hearing this year on February 7, 2013 in Washington D.C. on national security concerns in the U.S.-China economic and security relationship, which will likely include intellectual property (IP) protection issues. Titled “China’s New Leadership and Implications for the United States,” the hearing is intended to collect input from businesses, academics, and government officials on the current status of the U.S.-China relationship for the USCC’s 2013 Annual Report to Congress. The USCC’s last annual report (2012 Annual Report available here) highlighted multiple Chinese IP concerns including inadequate enforcement of IP rights for foreign goods, inconsistent Chinese IP legislation, the theft and loss of foreign businesses’ IP for such businesses operating in China and in joint-ventures with Chinese businesses, IP cyber espionage, and other related issues. Such annual reports are intended to provide recommendations to the U.S. Congress for legislative and administrative action.
The USCC is expected to hold other public hearings through 2013 as it compiles its annual report. Interested parties may attend hearings or submit comments. Further information on the February 7th hearing as well as attendance and comment submission procedures are available here.
In late December, President Obama signed The Theft of Trade Secrets Clarification Act into law, expanding U.S. federal trade secret protections, particularly for U.S. businesses operating abroad. The Act redefines trade secret thefts qualifying for federal protections under the Economic Espionage Act (EEA), from those “related to or included in a product that is produced for or placed in” interstate and foreign commerce to those “related to a product or service used in or intended for use in” interstate and foreign commerce.
Although the Act’s language is a bit convoluted, it has two important ramifications for U.S. businesses operating abroad. First, the EEA now protects service-related trade secrets. This means that U.S. service-based businesses will have greater trade secret protections when operating abroad as any qualifying proprietary information they have created for use in foreign markets may qualify for EEA protections. Beyond merely expanding legal protections for U.S. businesses abroad, these reforms reflect the U.S.’ increasing need to protect U.S. service exports, which have become the most dynamic sector in U.S. exports. While the U.S. has maintained an overall trade deficit for decades, it has maintained a substantial service export trade surplus during the same period. According to the latest statistics available from the U.S. Department of Commerce’s Bureau of Economic Analysis, the U.S. had a $179 billion service export trade surplus in 2011 and has enjoyed 6 percent annual average surplus growth rates over the past five years. As U.S. businesses increasingly export their services abroad, possessing EEA protections for their trade secrets will provide such businesses vital legal protections in the years to come.
Second, the Act will provide protections for trade secrets that have yet to be used in commerce. By including trade secrets “intended for use” in domestic and international commerce, the EEA will now permit qualifying proprietary information developed for products and services yet to be offered at home or overseas to qualify for federal legal protections. These protections give U.S. businesses operating abroad protection for their trade secrets by not only providing them protection before they launch goods and service offerings abroad, but more importantly extending EEA protections to U.S. businesses who test goods for launch abroad within the U.S. As many leading U.S. businesses test products and service offerings in the U.S. prior to launching abroad, the EEA’s new protections help to ensure that such businesses can retain federal protection for qualifying proprietary information during domestic testing to ensure that international opportunities can be better realized.
How will The Theft of Trade Secrets Clarification Act impact your business?