By Christos Kapsalas
The harmonization of intellectual property rights between different states creates the regulatory certainty required by international investments. International trade secret protection is the most lacking in harmonization in comparison with the other intellectual property rights, because each state’s trade secret protection is based on very different approaches.
In the U.S., trade secrets are regulated mainly by varying state laws as each state is free to enact its own statute governing trade secrets. Most states have adopted some form of the Uniform Trade Secrets Act (“UTSA”). Additionally, the misappropriation of trade secrets remains almost unregulated by federal law. In specific, although a criminal cause of action for misappropriation of trade secrets exists under the Economic Espionage Act (“EEA”), there is no federal civil cause of action.1 On the other hand European nations have long standing traditions of protecting trade secrets; despite the fact that their approaches vary from country to country they all protect trade secrets through breach of confidence (fiduciary theory) or unfair competition law, or under contract law.2
While European nations have protections in place, the scope of protection in Europe is on a different, limited, basis which leads to significant practical differences from the U.S. protection of trade secrets. So by contrast to the U.S. policy, the European Commission takes the view that trade secrets do not merit the same level of deference as that accorded to intellectual property rights.3 In Microsoft the Commission decided that Microsoft’s refusal to disclose secret interoperability information to its competitors constituted an abuse of a dominant position because this refusal created an unfair competitive advantage for Microsoft.4
The Agreement for Trade Related Aspects of Intellectual Property (TRIPS Agreement) is the first step for the harmonization of trade secret protection. The TRIPS Agreement is binding on all WTO Members, while currently 153 States have Member status to WTO. Article 39(2) provides protection for undisclosed information as long as (a) the information is secret, in that it is not known or not generally ascertainable to the public, (b) the information has commercial value due to its secrecy and (c) reasonable precautions are being taken to maintain the secrecy.
Furthermore, the TRIPS Agreement provides for specific enforcement of these rights. Specifically, states must grant fair and equitable treatment to all persons entitled to trade secrets (art. 42) as well as provide effective remedies for the violation of these rights (art. 44-46). Moreover, Article 63 dictates that states must publish any relative legislative provision as well as notify the TRIPS Council which is responsible of monitoring states compliance to the convention. Additionally, according to art. 64, any violation of the provisions of the TRIPS Agreement may raise a claim to the dispute settlement mechanisms created in the General Agreement on Trade and Tariffs (GATT) in Articles XXII and XXIII. TRIPS was created as part of the 1988-1994 Uruguay round of renegotiation of the GATT and is an integral part of consideration for the trade benefits granted though the GATT. TRIPS Agreement participants have responded to it, with free trade agreements, and other international pressures by enacting or enhancing trade secret laws similar to U.S. and European models but enforcement remains uneven.
1 Stephanie Zimmerman, Penn State International Law Review 2011, Secret’s out: the ineffectiveness of current trade secret law structure and protection for global health, 777, 787
2 Pedro Padilla Torres, Overview of International Trade Secret Protection An Overview of International Trade Secret Protection from the International Trade and Investment Perspective available at: http://www.natlaw.com/pubs/spmxip14.htm
3 Katarzyna Czapracka, Antitrust and trade secrets: the U.S. and the EU approach Santa Clara Computer & High Tech. L.J., Vol. 24, 207
4 Case T-201/04, Microsoft Corp. v. Comm’n, 2004 O.J. (C 179) 36. See also Case T-313/05, Microsoft Corp. v. Comm’n, 2005 O.J. (C 257) 31