Saturday 6 April 2013

Darren Olivier

Trading in trade secrets and the art of knowledge share

I am not sure if many readers know of the IP Finance weblog but it has some fantastic stuff on all things to do with IP and money. Neil Wilkof's posts, in particular, are a treat and this one caught my eye this week - Protecting Trade Secrets - How Many Shades Of Gray Do You Need to Count?

Apart from the nebulous nature of the treatment of trade secrets highlighted by Neil in the context of a Russian-Chinese arms deal, his post coincides with an invitation by Prof Alberts to me recently, to talk on the subject at his annual IP Seminar hosted by the University of Johannesburg (see blog post here). 

This is not a subject I deal with often and very few companies that I have come across treat trade secrets management with anything more than disdain. Yet there is undoubtedly significant value to this unregistered form of IP (in my view it is a form of unregistered IP in South Africa) that deserves more attention. So, speaking on the subject was both challenging and welcome.

Under South African law protection for trade secrets lies in both contract and delict. The delictual action has its roots in the Lex Aquilia which I mention, not because it sounds grand, but because my research caused me to uncover a spat between an academic named Schiller and others over the origin of trade secret law. Schiller had postulated, controversially, that trade secret law arose out the actio servi corrupti which literally means "an action for corrupting a slave". This amused me for two reasons. 

Firstly, it sounded like the employer was at fault for corrupting his employee with information which is bizarre. However, if you think about it, the sentiment may well contain some element of truth. In much the same way that you can only blame yourself if you leave your cell phone on the dashboard and it gets stolen at a traffic light in downtown Johannesburg, the employer may only have himself to blame if trade secrets are not properly managed, and then taken. Secondly, the concept of the employee as a slave is probably further from the truth than it has ever been. Slavery of course is wrong but today the employee is frighteningly emancipated through a combination of the rights, technology and information sharing cultures that prevail. The management of trade secrets is therefore infinitely more difficult and, at the same time, probably more important than it has ever been. 

Business has become an art of knowing what to collaborate on or share, how to do it, who to partner with and how best to share the spoils. It's all about knowledge share, whether that knowledge be protected directly or indirectly by trade secrets, patents, copyrights, trade marks or any other similar type IP right.  And Africa is fertile ground for knowledge share because of the huge technological and educational divide between large parts of it and the developed world which means that there is significant potential for any business (local business too) that becomes proficient in that art and, at the same time, risk if they are not. Hence the focus locally on traditional knowledge protection.

Back to the topic of trade secrets, the conclusion reached by Neil is that: 

"[There is a] need for management education to develop better tools to teach students how to weigh the trade off between revenues and other benefits and the loss of control of one's trade secret assets."

Built into his conclusion is an acceptance that in some, perhaps most cases, there is an inevitable loss of trade secrets when doing business.

The discussions that arose out of the recent Africa IP Forum were abundant in their disparate views on knowledge share. Some felt very strongly that Africans where being exploited and IP is facilitating the exploitation whilst others don't blame IP, they just think it needs to made bespoke to our environment. The now hackneyed topic of  traditional knowledge legislation in South Africa was never far from discussion and is, in my view, little more than a legal mechanism for protecting the trade secrets of a community. If one considers TK like that, if you believe that there is significant value in TK and if you agree with Neil's conclusion, then there is an obvious need for funds and a focus on management education of communities on how to develop tools to become proficient in the art of knowledge share. My observation though based on the IP due diligence exercises that I complete in my day-to-day work, is that all businesses could benefit from such a course. 

If you are interested in my slides which were compiled with the trusty help of the Katherine Harding and Susan Olivier at Adams & Adams, they will be located here (as soon as I can get Slideshare to co-operate -   proof too that sharing ain't always so easy).

Darren Olivier

Darren Olivier

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Write comments
8 May 2013 at 19:51 delete

My name is Milena, brazilian and I´m PHD student in Law University of Coimbra (Portugal), my work is about Intellectual Property in the BRIC´S. I didn´t found the South of Africa law about trade secrets.
A Knew the South of Africa law has a question about unfair competition, but I need the complete text of law. Can you help me?

8 May 2013 at 23:48 delete

Milena, you should contact Darren Olivier, Roshana Kelbrick or Caroline Ncube -- whose contact details are in the side bar -- and ask them.

9 May 2013 at 03:33 delete


Thank´s for your help