I.    Introduction

In two companion pieces, my colleagues set out substantive rules governing the protection of trade secrets in the United States and the European Union. In each jurisdiction, these substantive protections are underwritten by complex, established, and sophisticated legal systems and by appropriate procedural protections and remedies for rights holders. And in each jurisdiction, the protection of trade secrets has served, even if only informally, as an integral element of its intellectual property protection regime. With robust protections in place, a rights holder can have recourse to domestic courts and, with the help of expert counsel, obtain remedies to address its concerns.

Discussions with my colleagues practicing internationally in this field suggested that this was not a universal state of affairs in either substantive or procedural protection. In some jurisdictions, there may well be no rules to protect trade secrets; in others, there may be discriminatory domestic court procedures, unnecessary delays, or insufficient remedies, leading to a denial of rights. In such cases, recourse to domestic courts might not be available or relevant, or may be so costly and lengthy as to lead to an effective denial of rights. What can a rights holder do?

This paper identifies the international legal framework within which rights holders who are denied substantive and procedural protection may seek vindication and protection. The legal framework—the treaty system establishing and underlying the World Trade Organization (the “WTO”)—is not without its own delays and weaknesses, but it does provide a global body of rights and obligations aimed at the protection of intellectual property. And, as we will see in the case of trade secrets, a unique set of international legal protections.

II.   What’s so special about the WTO?

The WTO is an international organization comprising 164 Members, including sovereign states, customs territories, and the European Union; this membership covers the vast majority of the world economy. The treaty structure establishing and underlying the WTO—I will refer to this as the “WTO Agreement”—includes a number of discrete agreements, binding on all Members, that set out rights and obligations with respect to domestic measures that affect trade between Members. Among these are the General Agreement on Tariffs and Trade 1947, which sets out the basic rules of nondiscrimination under the WTO, and—important for our purposes here—the Agreement on Trade-Related Aspects of Intellectual Property Rights (the “TRIPs Agreement”).

Subject to specific exceptions, all Members of the WTO have agreed to abide by all the obligations of the WTO Agreement (this includes all the multilateral “covered agreements” such as the TRIPs Agreement; this concept is known as the “single undertaking”). Where a Member does not do so, other Members may challenge, before an international tribunal, its failure to abide by its obligations under the WTO Agreement. By and large, Members are aware of their obligations and seek to implement them in good faith—and where a basic commitment to the rule of law is not enough, threat of multilateral dispute settlement and sanctions can be persuasive in bringing a wayward Member into compliance. WTO dispute settlement may, however, only be launched by Members; as we will see, in practical terms this has its own benefits and challenges.

The TRIPs Agreement brought, for the first time, intellectual property protection within a multilateral trade agreement—and, crucially, made it subject to dispute settlement and potential trade sanctions in case of noncompliance. Simply for this reason, the WTO Agreement may be considered a major win for economies that generate intellectual property.

The most common form of protection used by business is secrecy.

Even more significantly, the TRIPs Agreement went beyond existing intellectual property treaties by incorporating requirements with respect to trade secrets.

First-ever express international protection for trade secrets.

The entry into force of the WTO Agreement thus gave rise to two significant developments. It enshrined “trade secrets” internationally as a class of protected rights for intellectual property rights holders, and it set out international legal obligations for Members of the WTO: Each Member must provide, in their domestic laws, the protections set out in the TRIPs Agreement. And they may not implement measures that are otherwise inconsistent with the WTO Agreement and that harm your business.

III.   What are the protections required by the WTO Agreement?

At the outset, let me reiterate that the obligations set out in the WTO Agreement are binding on the Members of the WTO in international law. That is, in most instances, these protections are not directly applicable by the domestic courts of the Members. Trade secret law, like other forms of intellectual property, continues to be governed by national legal systems.

To be consistent with the WTO Agreement—and, in particular, the TRIPs Agreement—those national legal systems must provide for the required substantive and procedural protections.

            A.     Substantive Requirements

Under Article 39 of the TRIPs Agreement, each Member of the WTO must provide, in its domestic law, protection for

•  “undisclosed information”, which is information

  • not generally known or readily accessible,

  • that has value because it is secret, and

  • that is the subject of “reasonable steps” to keep it secret

• against unauthorized use “in a manner contrary to honest commercial practices.”

Article 39(3) contains additional requirements with respect to “approving the marketing of pharmaceutical or of agricultural chemical products which utilise new chemical entities.” Where, as a condition for such approval, a Member requires “the submission of undisclosed test or other data, the origination of which involves a considerable effort,” the Member must protect such data

• against unfair commercial use; and
• against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use.

On its face, the required protections appear to be a mix of EU and U.S. concepts. This is, of course, not surprising: The TRIPs Agreement is the result of many years of multilateral negotiations and, as compromise text, encapsulates principles and concepts that would have been familiar to the principal negotiators in the Uruguay Round. In this respect, I make the following three observations.

First, the provision has been adopted already by well over 100 Members of the WTO. Implementation and compliance do not, at this point, appear to be 100% under the WTO, but this figure includes most major trading economies and represents a major step forward for trade secret protection.

Second, each Member may implement its obligations and give effect to the protection in the way it sees fit. Therefore, at issue is not so much the legislative vehicle (for example, criminal or civil infraction), but rather the effectiveness of the protection given.

Third, where the implementing measure does not exist or is ineffective, in most instances there would be no recourse to domestic courts: “Redress” in the form of adequate protection may be obtained through trade-focused domestic lobbying, international diplomatic initiatives, and international trade litigation.

In addition to protection required for trade secrets, the TRIPs Agreement sets out more general nondiscrimination obligations with respect to IP protection:

• Article 3: “Each Member shall accord to the nationals of other Members treatment no less favourable than that it accords to its own nationals with regard to the protection of intellectual property.”

• Article 4: “With regard to the protection of intellectual property, any advantage, favour, privilege or immunity granted by a Member to the nationals of any other country shall be accorded immediately and unconditionally to the nationals of all other Members.”

B.    Procedural Requirements

The negotiators of the TRIPs Agreement were aware that substantive protections mean little if domestic enforcement procedures are inadequate to the task or if the remedies are wanting. For this reason, and taking into account the diversity of the legal systems of the Members of the WTO, the TRIPs Agreement contains broad procedural protections for effective enforcement of the protected rights of the rights holder. Briefly, these are set out in the following three provisions:

Article 42 requires “fair and equitable procedures” for the enforcement of intellectual property rights. In particular, it requires each Member to protect the rights holders’ rights to

• civil judicial procedures concerning the enforcement of any intellectual property right covered by the TRIPs Agreement;

• written notice that is timely and contains sufficient detail, including the basis of the claims;

• independent legal counsel;

• the opportunity to substantiate their claims and to present all relevant evidence; and

• protection of their confidential information, unless this would be contrary to existing constitutional requirements.

Article 44 is the injunction provision and provides that a Member must grant its judicial authorities the authority to order a party to desist from an infringement, subject to a good faith exception,

“inter alia to prevent the entry into the channels of commerce in their jurisdiction of imported goods that involve the infringement of an intellectual property right, immediately after customs clearance of such goods…”

Article 45 sets out the requirement related to the grant of damage awards. A Member must ensure that its judicial authorities have the authority to order the infringer to pay the rights holder

• damages for injury suffered because of an infringement; and

• expenses, which may include appropriate attorney’s fees.

IV.  What does all of this have to do with my business?

There are potentially four inflection points with respect to a “trade secret” concern:

1. when investing in a jurisdiction, where protections afforded by the domestic legal system form part of a firm’s overall risk assessment and management;

2. when a firm becomes aware of the potential for loss/disclosure of a trade secret;

3. when information the firm considered to be a trade secret has been disclosed and the firm wishes to seek damages; and

4. when the firm has gone through the enforcement process that is provided for by domestic law, it has to assess whether process and the outcome were fair and reasonable.

At each of steps 1 through 3, the principal question to ask is whether there are adequate substantive and procedural protections for the trade secrets in that jurisdiction—not just adequate to the company’s business needs but also, and importantly with respect to a WTO Member, adequate under the standard of protection required by the WTO Agreement.

If the answer is “no,” there is no—or there is ineffective—recourse in domestic courts.

At that point, a company may consider investment too risky (step 1 – and step 4 would be irrelevant), but what if the investment is important? What is there to do then, or with respect to potential or actual disclosure of a trade secret for an established business?

A potential WTO violation.

What if, in a jurisdiction that has, on its books, adequate protection for trade secrets, a business seeking to enforce its rights finds serious shortcomings in the enforcement procedure or the grant of remedies? Is there access to the required procedures? Do they function fairly and equitably? Are remedies made available, and are they enforceable?

If not, then potential WTO violation.

Are the procedures discriminatory as between domestic and foreign rights holders? As between foreign rights holders of different backgrounds? Or, while not expressly discriminatory, do they have a disproportionately negative impact on foreign rights holders?

 A potential WTO violation.

What happens if we identify a WTO violation?

The WTO Agreement creates rights for private interests, but it is a treaty between states. In most instances, it is not enforceable directly in the domestic law of a Member. This means that, in most cases, there is no recourse in domestic courts against perceived shortcomings that are inconsistent with the WTO Agreement. And in no case can a private interest directly challenge a Member before the WTO for its failure to protect the rights under the TRIPs Agreement.

At the same time, a Member’s failure to fully and effectively implement its WTO obligations can have serious consequences for that Member internationally, not just in the affected sector, but with respect to the rest of its trade balance. This is because in the event of a loss in trade litigation, that Member could be subjected to trade sanctions. More to the point, most Members of the WTO do not wish to be systematically in violation of their obligations under the WTO Agreement.

Accordingly, where an administrative determination, procedure, law, or regulation is inconsistent with a Member’s WTO obligations, or where a guaranteed right has not been provided:

• An IP rights holder could make representations to the offending jurisdiction with respect to the violation and use the WTO Agreement as an additional tool in its advocacy toolbox in seeking to address the problem.
• Where the offending jurisdiction continues with the WTO-illegal measure, its violation could be used to convince another Member to use the dispute resolution mechanisms of the WTO as a means of changing the measure.

The WTO Agreement is a potent instrument for the effective protection of a company’s strategic interests. Where recourse to domestic courts in foreign jurisdictions is not optimal because of nonexistent, inadequate, or discriminatory protections; lengthy, inefficient, inconsistent, or opaque court processes; or lack of adequate remedies, the WTO Agreement could help address structural problems by

• supporting negotiations in the host country; and
• involving home country governments in protecting interests