Literature Review "Trade Secret Protection"

Literature Review

Trade Secret Protection

The topic of the work, namely "Trade secret: essence, methods of protection", is significant in the modern world. Considering the significantly increased "price" of damage caused to organizations in connection with the misuse and disclosure of trade secrets, the reduction in the number of violations in the sphere of trade secrets turnover turns into a national problem of the development of a high-tech civilized economy.

 Trade secret is a confidentiality regime of information that has commercial value for a company or entrepreneur. That is, this is information that allows you to benefit, because it is unknown to third parties, and they do not have free access to it.

There are many scientific articles that contain research on the essence of a trade secret and ways to protect it. The purpose of this literature review is to familiarize with these articles and analyze them.

The first article is called «Some economics of trade secret law» [1] and was written by David D. Friedman, William M. Landes and Richard A. Posner in 1991. This article sketches an approach to the economics of trade secret law that connects it more closely both to other areas of intellectual property and to broader issues in the positive economic theory of the common law. The authors raise the following questions: «What is a trade secret», «Choosing between patent and trade secret protection» and «Why is trade secret protection limited».

According to the authors, a trade secret is not property in the usual sense (the sense that it has in the law on real estate and personal property), because it is not something that the owner has the exclusive right to use. If, as a result of an accident, a secret leaks out or a competitor exposes it using reverse engineering, the law does not provide any remedies. The law does provide a remedy if a secret is lost due to a breach of contract, for example, by a former employee who promised not to disclose what he learned at work. But the violation does not concern the right of ownership of the secret, but the right of common law, defined without considering trade secrets or information in general. The authors also believe that the Law on Trade Secrets complements the patent system. Inventors choose trade secret protection when they believe that patent protection is too expensive compared to the cost of their invention, or that it will give them a reward substantially less than the benefit of their invention, or because the duration of patent protection is insufficient. Successfully preserving their trade secrets, they provide evidence that their beliefs were correct. In fact, the common law has plugged several economic holes in patent legislation. The authors consider the latter question using two different approaches. The first approach finds an analogy with the problem of the difference in international law between legal and illegal espionage. The difference, in turn, is based on the cooperative nature of information production. The second approach begins where the first one ends, with a careful focus on the difference in costs and benefits of different ways of assigning and preventing the assignment of trade secrets.

The second article is called «On the interaction between patent and trade secret policy» [3] and was written by Nisvan Erkal in 2014. The author raises the following questions: «What is patent protection», «What is trade secret protection», «What are the main differences between patent protection and trade secret protection», «Evidence on the use of patent and trade secret protection» and «The interaction between optimal patent policy and optimal trade secret policy».

The author claims that the protection of patents and trade secrets are two methods that innovators often use to protect their intellectual property. He explores to what extent the protection

 of patents and trade secrets plays a complementary and substitutive role. He also argues that the Trade secret Law complements patent law at earlier stages of the innovation process, allowing innovators to work on their ideas until they become patentable. After innovations become patentable, the protection of patents and trade secrets becomes a substitute. In such cases, the relevant policy question is not how much patent protection is necessary, but how much protection of patents and trade secrets is necessary. The author's reasoning shows that the optimal length and scope of a patent should be determined considering the fact that innovators will have incentives to keep secret innovations that are less obvious. Moreover, a trade secret policy aimed at innovations that are not yet at the patentability stage, and a trade secret policy aimed at innovations that are rather unobvious and, therefore, will be kept secret, should be relatively stricter.