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Businesses in Asia reveal trade secrets struggles

In-house counsel face challenges in deciding between protecting inventions with patents or keeping them secret as regulations are still developing

tradesecretIn-house counsel in China say that patent protection is preferred because of the lack of comprehensive trade secret regulation in China and a high burden of proof for plaintiffs. Elsewhere in Asia, such as in Singapore and Japan, businesses have difficulty bringing trade secret cases to court due to challenges in getting evidence.

However, trade secret protection is preferred for some inventions due to lower costs.

Every invention is secret when it is first created; some go on to become patents while others are kept as trade secrets. How do companies decide between the two forms of protection?

The main advantages of protecting an invention as a trade secret are that it can last indefinitely and there are no filing or maintenance fees that need to be paid to IP offices. As a trade secret is protectable once it is created, there is no need to go through an application process.

On the other hand, protecting an invention as a trade secret cannot exclude another party from developing, having or using the same secret independently, while patent protection can exclude any third parties from using the invention. The owner needs to take reasonable measures to safeguard a trade secret, and if it is leaked, disclosed or published, its value is diminished. Plus, it is harder to prove trade secret misappropriation than patent infringement.

In trade secrets infringement cases in China, “most businesses fail in preserving evidence of access and have no paper trail of what someone has accessed and the evidence of what data was taken,” says an IP counsel at a Chinese fintech company.

“The burden of proof is high; there should be a shift in the burden to the defendant, but that goes against the general civil law principle of ‘he who asserts must prove,’” they add.

An in-house counsel at a China-based technology company observes that Chinese businesses are even going to US courts to litigate against Chinese rivals due to the lack of discovery system in their home country.

In-house counsel in Singapore and Japan echo concerns about the difficulty in bringing trade secret cases to court. However, they would still protect inventions as trade secrets if there is good reason to.

Trade secrets are good for a nascent technological field because the costs of protection can be reduced.

“You may easily adopt or discard any of your trade secrets as corresponding markets shift,” says a senior IP manager at a plant biotech research institute in Singapore.

Patent strategy

The senior IP manager says that drafting and filing patent applications will negatively affect resources if the filings are to be abandoned in the near or even distant future. Additionally, if companies are uncertain whether certain technologies will be adopted, they are better protected by trade secrets because these can be modified or enriched later down the road.

An in-house counsel at a Japanese agricultural technology company says that he looks at how easily a product could be infringed, when assessing patent strategy.

“For mechanical patents, these can be quite easily infringed upon and copied by others so we would prioritise filing these patents. On the other hand, inventions relating to communication technology between different equipment isn’t as easily copied,” says the in-house counsel.

The senior IP manager says that acquiring patents for self-defence makes more sense since it is only necessary to respond through an opposition or revocation if someone attacks your patents.

“While acquiring patents does equip you with a tool to eliminate competition within the area of your interest, you still have to actively enforce it against infringers and monitor infringement in the area of your interest,” says the senior IP manager. “The two can drain down all your good resources.”

“This strategy can open up engaging partnerships because if you are known to patent for self-defence, people will come looking for you for that reputation of yours,” says the senior IP manager.

While patents still provide the most exclusive protection for inventions, especially ones that cannot be properly kept secret, they are more costly for businesses – and more companies are considering how best to protect inventions as trade secrets

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