This post is a summary of a lecture I attended on trade secrets.
What Are Trade Secrets?#
Previous definition: A trade secret refers to production methods, sales methods, and other technical or business information useful for business activities that is not publicly known, has independent economic value, and has been maintained as a secret through considerable/reasonable effort.
Current definition: A trade secret refers to production methods, sales methods, and other technical or business information useful for business activities that is not publicly known, has independent economic value, and is managed as a secret.
Requirements for Trade Secrets#
Non-public nature
This means the information is not known to an unspecified majority of people, such as through publication in media, and therefore cannot normally be obtained without going through the holder.
Even if someone other than the holder knows the information, non-public nature can still be recognized if that person is under an obligation to maintain confidentiality. In other words, even if information has been shared with multiple people, it's still covered as long as confidentiality is reasonably maintained — for instance, when shared only with authorized users like company executives and employees.
Economic usefulness
The information must have independent economic value. The holder must be able to gain a competitive advantage over competitors through the use of the information, or significant cost or effort must be required to acquire or develop it.
Secrecy management
If a company publicly shares event information like exhibitions on its website while separately managing customer information such as names and affiliated companies so that only employees can access it, and all company accounts are managed by the company representative, then that customer information is recognized as having been managed with reasonable effort as a trade secret.
Methods of secrecy management
- Designation and marking of trade secrets
- Restricting access rights and imposing trade secret protection obligations (confidentiality agreements, etc.)
- Measures regarding third parties or business counterparts
- Physical restrictions (password settings, etc.)
- Training
Protection Through Prohibition of Unfair Competition#
Unfair competition refers to any of the following acts:
Using information containing economically valuable technical or business ideas of others — obtained during business proposals, bids, public offerings, or other trade negotiations or transactions — in violation of the purpose of provision, for one's own or a third party's business benefit, or providing it to others for their use. However, this does not apply if the recipient already knew the idea at the time of receipt or if the idea is widely known in the same industry.
Otherwise, using results created through significant investment or effort by others without authorization, in a manner contrary to fair trade practices or competitive order, for one's own business, thereby infringing on the economic interests of others.
The Necessity of NDA (Non-Disclosure Agreement)#
- Information at the idea level can also be protected under the Unfair Competition Prevention Act
- With the amendment of the Unfair Competition Prevention Act, even without signing an NDA with a negotiating party, unfair use beyond the purpose of provision by the negotiating party can be prevented
- Signing an NDA is a declaration of intent to protect trade secrets, so it should always be done
- Since proving damages from unfair competition is difficult, prevention is key
Non-Compete Agreement#
When protecting a company's trade secrets is impossible unless a former employee is prohibited from working on trade-secret-related tasks at a new company, even without a specific non-compete agreement, measures can be taken under Article 10, Paragraph 1 of the Unfair Competition Prevention and Trade Secret Protection Act to prohibit or prevent infringement and to restrict the employee from working on trade-secret-related tasks at the new company.
Preventing Trade Secret Infringement#
- Obtain confidentiality agreements upon hiring, explain the necessity of trade secret protection, and sign non-compete agreements when necessary
- Restrict the use of work devices, storage devices, email, etc. through security regulations
- Conduct trade secret-related training
- Upon resignation: strict handover procedures, re-obtain confidentiality agreements (when necessary), conduct computer forensics
- (When hiring from competitors) Use public recruitment channels like job portals when possible, avoid drastic increases in title or salary. Ensure they don't use laptops from their previous workplace and don't bring any documents, files, or information from their former employer.
The best thing about the future is that it comes one day at a time.
— Abraham Lincoln
