CENSIS white paper: Intellectual Property in Business

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Intellectual Property in Business: IP basics, IP management, IP strategy IP Basics for Start-ups (continued) 3 Confidential information and confidentiality agreements Trade secrets are thought to be the real workhorse of the knowledge economy, because of their pervasive importance. At the same time, trade secrets are viewed as the stepchild of intellectual property because they operate, by definition, in secrecy, and we know much less about their role in market competition than we know about patents, copyrights, and trademarks. 7 Confidential information Some confusion might arise with regard to terms describing ‘confidential information’. Trade secrets are confidential information which is documented, and legal protection will be afforded if the relevant information is secret, has commercial value because of its secrecy, and reasonable steps have been taken to keep the information secret. This latter requirement means that a company must carefully consider its procedures to make sure that trade secrets are properly protected. Trade secrets and confidential information are ruled by two different legal regimes in the UK: trade secrets are protected by Trade Secret Regulations, whereas confidential information is defined by the common law. These two regimes overlap. With respect to ‘secret know-how’, the definition derives from the EU Technology Transfer Block Exemption. However, no specific legal regime has been established as secret know-how falls under one of the two regimes mentioned. The table below gives an overview of the legislative bases and characteristics of these three different terms. Table 2: Confidential information – legal forms Trade secret Confidential information Know-how Legal basis EU: EU Directive 2016/943 EU: see Trade secret EU: Regulation (EU) 316/2014, on the protection of UK: Common law duty of the Technology Transfer Block undisclosed know-how and confidence (i.e. the law is Exemption Regulation business information derived from case law and (EU TTBER) 8 (trade secrets) against their not statutes) unlawful acquisition, use and disclosure (8 June 2016) UK: Trade Secrets (Enforcement, etc.) Regulations 2018 UK: Retained Block Exemption Regulations, expiry date 30 April 2026 9 Definition The information The information must be ‘Know-how’ means a package (i) is secret, being not provided in circumstances of practical information, generally known, giving rise to an obligation of resulting from experience and confidence: the information testing, which is: (ii) has commercial value must not be something which because it is secret, and is public property or which is (i) secret, that is to say, not already in the public domain. generally known or easily (iii) has been subject to The information must have accessible, reasonable steps to keep been provided or made it secret. available in circumstances (ii) substantial, that is to say, importing an obligation of significant and useful for the confidence: a person must production of the contract have known, or ought products, and reasonably to have known, that the information had been (iii) identified, that is to say, given in confidence. E.g., the described in a sufficiently information is classified as comprehensive manner so as confidential between the to make it possible to verify parties. There must be an that it fulfils the criteria of unauthorised use of that secrecy and substantiality. information to the detriment of the party communicating it. 10 7 Orly Lobel, ‘Filing for a Patent Versus Keeping Your Invention a Trade Secret’ (Harvard Business Review, 21 November 2013) accessed 2 December 2022. 8 The EU block exemption regulations exempt certain types of agreements from EU competition law where there are benefits for consumers. The EU block exemptions were retained in UK law at the end of the Transition Period, along with their expiry dates. ‘Notice Retained Block Exemptions’ (Department for Business, Energy & Industrial Strategy, 10 February 2021) accessed 2 December 2022. 9 A number of EU block exemptions in force under EU Law became ‘Retained Block Exemption Regulations’. See also ‘Guidance on the functions of the CMA after the end of the Transition Period’ (CMA125, 1 December 2020). accessed 2 December 2022 10 Mark Chapman, ‘The Common Law Duty of Confidence: Can you rely on it?’ (Herrington Carmichael Solicitors, 24 March 2020) accessed 2 December 2022. 12
Intellectual Property in Business: IP basics, IP management, IP strategy IP Basics for Start-ups (continued) To make things more practical and ‘real-life’, here are some examples of information that can be considered as confidential and should be treated as such. Table 3: Examples of confidential information Example Technical Business Software (proprietary source code) Customer data Algorithms Supplier data Construction and design sketches Marketing plans, unpublished promotional material Formulas for key products Sale concepts and sales data Research results Business plans Unpublished prototypes M&A plans In-house designed equipment Business strategies Inventions: unpatentable or not yet patented Licensing terms Production processes Funding terms and conditions Implementation methodology Cost structures Blueprints Pricing information Production costs Financial projections Raw materials/components Ideas for product names Personnel performance Salary, compensation plans 13
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