Trade Secret Infringement, How to Settle?

Every business or company must have trade secrets that its competitors should not know. These secrets could be special recipes, production processes, or marketing strategies. But ironically, violations of these trade secrets are still common in the business world. Yes, despite companies’ best efforts to safeguard their sensitive information, irresponsible actors or unethical competitors often try to gain an advantage by leaking or using these trade secrets without authorization. In this article, we will explain the forms of trade secret infringement and tips on how to avoid it. Read on until the end!

What is a Trade Secret?

According to Law No. 30 of 2000, trade secrets are information that is not known to the public in the field of technology and/or business, has economic value because it is useful in business activities, and is kept confidential by the trade secret owner. The Directorate General of Intellectual Property (DJKI) of the Ministry of Law and Human Rights explained that the scope of trade secret protection includes production methods, processing methods, sales methods, or other information in the field of technology and/or business that has economic value and is not known by the general public. However, not all information can fall into the trade secret category. In accordance with Article 3 of the Trade Secrets Law, information is considered a trade secret if it fulfills the following three elements:

Confidential

The information is only known by certain parties or in other words, the general public does not know about it.

Has Economic Value

The confidentiality of this information can be used for commercial business activities or can increase profits or economic benefits.

Maintained Confidentiality Through Appropriate Measures

The owner or the parties in possession have taken reasonable and appropriate steps. For example, keeping standardized procedures listed in the company’s internal regulations as trade secrets and determining who is responsible for confidentiality.

How can trade secret infringement occur?

Trade secret infringement can be said to occur when:

A person intentionally discloses a trade secret, reneges on an agreement or reneges on a written or unwritten obligation to keep the trade secret in question;
A person acquires or controls a trade secret in a manner contrary to the applicable laws and regulations.

Tips to Prevent Trade Secret Infringement

Companies that have trade secrets need to maintain and make confidentiality agreements with employees, consultants, contractors, auditors, partners, and third parties who provide other services to the company. With a confidentiality agreement, the company that owns the trade secret is deemed to have taken reasonable and appropriate steps in showing efforts to maintain confidentiality.

In the Trade Secrets Law, there are several concrete steps that companies can take to maintain their trade secrecy, including:

Putting up the words “NO EMPLOYEE ENTRY”, “STAFF ONLY”, or “NO TRESPASSING”;
Put up “NO PICTURING”, or “NO PHOTOGRAPHING” warning signs;
If it has many database secrets, then the computer is installed “SECRET DATABASE PASSWORD”;
Binding employees by having them sign a statement to keep company secrets or often done with a confidentiality agreement;
Make agreements to maintain the confidentiality of the company with parties outside the company who have the potential to leak company secrets, such as between companies and companies that establish a partnership;
Documents are stored in folders and clearly marked with the words “CONFIDENTIAL” or “COPYING PROHIBITED WITHOUT WRITTEN PERMISSION FROM …”;
If the confidential information is oral, then the phrase “THIS IS CONFIDENTIAL”;
Do not copy important documents at random printing places (it is recommended to do it yourself within the company);
Destroy important documents that are no longer in use;
Permanently delete important documents from the computer when no longer in use; and
Install alarms and/or security personnel.

Maintaining confidentiality is an absolute element for a trade secret to attach defensible rights to anyone. This is different from other intellectual property, because trade secrets are not registered in the public register so that the public cannot access and know the substance or formula of the trade secret. However, in the event of a trade secret transfer and license agreement, it needs to be registered with the DJKI through the DJKI Virtual Counter page.

How to Settle Trade Secret Infringement?

What if a recipe is allegedly copied by another business? How do you resolve a trade secret infringement like this? First, you can determine whether the recipe is a trade secret or not. In addition, see also whether the competing business has permission to use it or not. Where according to Article 1 number 5 of the Trade Secrets Law, the permit in question is in the form of a license granted by the holder of trade secret rights to another party through an agreement based on the granting of rights (not the transfer of rights), to enjoy the economic benefits of the trade secret for a certain period of time and conditions. So, if a competing business has a license, then this is not a trade secret violation. However, if it is proven that the business does not have a license, you can settle the trade secret violation as described in Article 11 of the Trade Secrets Law. Where you can sue a competing business that intentionally and without right uses trade secrets or licenses or discloses trade secrets to third parties for commercial purposes, in the form of:

A lawsuit for compensation to the District Court; and/or
Cessation of all acts that have been committed.

In addition, the parties can also resolve through arbitration or alternative dispute resolution. Article 17 of the Trade Secrets Law also states that there are criminal sanctions for parties who commit trade secret violations (complaint offense), namely a maximum imprisonment of two years and/or a maximum fine of IDR 300 million.

KH Contact

This is an explanation of trade secret infringement and how it is resolved. So, have you understood it? If not, you can do a free consultation with Kontrak Hukum’s legal team. With Kontrak Hukum, you can get various solutions to business law problems that will help you run your business in accordance with applicable rules and laws.

Not only that, we can also assist with confidentiality agreements and license agreements that can be used to protect your trade secrets. For customized information, please visit KH Services – All Services page. If you have any other questions, you can consult for free at Tanya KH and send a direct message (DM) to Instagram @kontrakhukum.