20 November 2019

How illegal is stealing trade secrets in the US and UK?

In this article for Open Access Government, we consider the US and UK definition of trade secrets and the impact on protecting intellectual property.

On 15 August 2019, federal prosecutors in the US charged engineer Anthony Levandowski with the theft of trade secrets from Google. Mr Levandowski had previously worked for Google before setting up his own company, in the field of self-driving vehicles, which was eventually purchased by Uber. Mr Levandowski has been released on a $2 million bond and denies the charge.

Uber already settled a corresponding civil case in relation to the theft of trade secrets in February 2018 for $245 million.

What is a trade secret?

In the UK, a trade secret protects information that is secret, has commercial value because it is secret, and has been subject to reasonable steps to keep it secret by the person in control of that information. For example, the recipe for Coca-Cola would be regarded as a trade secret because it fulfils all of these criteria. The recipe has value because no company can make Coca-Cola using the same recipe as only Coca-Cola knows how to do so.

A trade secret is, therefore, an unregistered right in that it is not necessary to request the right from the government. Instead, it subsists automatically as long as the above criteria are met. This is different from registered rights such as patents. Applying for a patent requires that the applicant discloses how the invention may be implemented to the public.

Criminal element

To a UK patent attorney who is used to dealing with trade secrets under UK law, what is interesting is the criminal nature of the US charges. In the UK there are currently no provisions for someone to be charged in this way.

A corresponding civil case in the UK would revolve around the breach of confidentiality, rather than the theft of the intellectual property. As trade secrets are unregistered in UK law they cannot be stolen per se; instead only the obligation to keep them secret can be breached. This means that under current UK law it is not possible to pursue a criminal prosecution directly for theft of trade secrets although it is possible that in the act of stealing trade secrets another crime may be committed that could be prosecuted.

Intellectual property (IP) is a form of property and people may find it is strange that the theft of this property cannot result in a criminal conviction. Indeed, IP is often very valuable hence the $245 million settlement in the US civil case. If someone robbed a bank for such a sum, a long custodial sentence would apply.

Moreover, the UK has recently changed the law so that certain breaches of IP can result in criminal convictions. In 2014, the UK introduced a new criminal offence for the infringement of a registered design, in cases where the infringer is aware that the design is registered.

It, therefore, seems incongruous that the deliberate theft of trade secrets does not have associated with it a criminal offence in this country. This may act as a deterrent to stop others from this practice which can be very damaging to companies. Having such criminal offences in the statute may also promote the UK as a place in which research can be undertaken in the knowledge that the state will help police any theft of the fruits of the research.

How are trade secrets used?

At Mathys & Squire, we specialise in providing commercially relevant advice in all fields of IP, covering patentstrade marksdesigns and litigation. For example, as a chartered patent attorney, when a client is filing a new patent application we often ask whether there are certain aspects of the disclosure that the client would rather not be made public.

When filing any patent the trade-off between the registered right, and the public disclosure is important to consider. In the case where the disclosure of some minor implementation details will likely not be relevant to the patentability of the invention, we often advise that these details are not disclosed. This is especially the case now that the ‘best mode’ requirement of US patent law has been removed.

This means that it is now no longer necessary to publicly disclose the best way of implementing the invention in order to get a US patent. As such, there is more scope for keeping certain details secret whilst still applying for patent protection to cover a broad invention.

Having multiple rights can be commercially useful. For example, if a company has a patent to a product, another patent to a method of manufacture of the product, a design to cover the appearance of the product, and then trade secrets in the implementation details of the manufacturing process (for example, temperature ranges and times for the steps of a process, particular adhesives that may be best suited to the application, or particular numerical methods that may be used in controlling the process), then together these rights can form very strong protection.

The use of trade secrets ensures that competitors will find it difficult to replicate the results of the manufacturing process, whilst the registered rights may be used to exclude competitors from the market altogether. Of course, it may be expensive to instigate court proceedings so seeking to discourage other companies from infringing the patents in the first place is ideal. Trade secrets may achieve this by putting up a larger barrier to entry as more research is required in order to produce a product, and a competitor may not be able to manufacture a product of sufficient quality without knowledge of the trade secrets.

We conduct licence negotiations with our clients. Often these licences are for registered rights, such as patents or designs. However, sometimes a licence for a trade secret can be just as valuable. These licences can be more complex to formulate and negotiate, but they show the value of trade secrets.

Of course, the additional value is that a trade secret lasts as long as it is of commercial value, and is kept secret. A patent lasts 20 years, and so for some concepts, such as the Coca-Cola recipe, a trade secret can be much more valuable.

Top tips

It can be useful to precisely define what information constitutes a trade secret. This way employees are aware explicitly of what information must be kept a secret, and what information cannot be taken with them to a new employer.

When an employee leaves a role there is often a debate as to what information constitutes their know-how, which is theirs to take with them, and what information constitutes a trade secret owned by the employer. Accurately identifying the border between these areas can help, especially in fields in which there is a high turnover of staff.

Another tip is to seek registered rights. For example, applying for a patent or a design may enable a company to gain a monopoly right when the patent or design is granted. This means they have the ability to exclude others from the market-place. This negates the risk of stolen trade secrets, as any other employer will be unable to use them for commercial purposes without infringing your rights.

Click here for more information on how we can help to actively enforce your IP rights in the fight against patent infringement, third party infringement, copyright infringement, trademark infringement and theft of trade secrets.

This article was first published on Open Access Government in November 2019.