HomeBusiness DigestIntellectual Property Perspectives: Trade secrets and other malpractices

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Misappropriation of trade secrets

Trade secrets are information of a confidential nature with value to the entrepreneur. That is to say, the information must not be public knowledge since it is privileged only to a limited number of people with delegated authority to access and use it, and must be useful to the holder insofar as it presents them with a competitive advantage.

To be deemed valuable, hence protectable, the secret information must be of actual or potential usefulness to competitors insofar as access thereto would undermine the holder’s competitive advantage. It is therefore incumbent upon the holder to put in place  sufficient measures to safeguard the secret information against disclosure to the public and competitors, lest its economic value is lessened or lost altogether.

Not only is disclosure of trade secrets prohibited, but so is its illicit acquisition and use, whether  directly from  the competitor or third parties. The duty not to disclose trade secrets also extends to the entrepreneur’s employees. Depending on the intrinsic value of the information, this fudiciary duty extends beyond the contract of employment, including use for their personal financial benefit, except where and when the information ceases to be of a confidential nature.

Any form of disclosure of trade secrets interfers with the competitor’s goodwill. As aptly stated by  Here  Diemont J in Stellenbosch Wine Trust Ltd vs Oude Meester Group Ltd (South Africa) :

“—- the trader who filches information from a competitor, information he knows to be secret and confidential, and which has been developed by the competitor’s skill and industry, is acting unfairly and dishonestly if he uses the information for his own profit and to the detriment of his rival. His conduct amounts to deliberate misappropriation of a business asset acquired by another’s skill and industry. It is difficult to appreciate how this conduct differs in principle from [someone] who steals goods from the shelves of a rival’s shop. Both types of conduct constitute unlawful interference with the trade of another.”

This and a plethora of other jurisprudential pronouncements across the globe confirm that trade secrets are by their very nature and scope intellectual property worthy of effective and adequate  IPRs protection against free riders, including employees and non-competitors.

Information that qualifies as trade secrets is limitless in as much as it straddles all spheres of human endeavour and ingenuity. It includes manufacturing processes, sales statistics, credit records, customer lists, tender prices, business communications, computer software, etc.
Disparaging a rival’s enterprise

This occurs where a trader spreads or publicises injurious falsehoods concerning a rival’s enterprise, goods or services, thereby infringing on his/her goodwill. The underlying motive is to maliciously prevent the merits of the competitor’s performance from being acknowledged and recognised by the consuming public. There are instances where a trader spreads untruths such as; the competitor’s food products contain poisonous substances, they are substandard or overpriced. As a consequence thereof  the competitor’s right to attract custom is infringed  upon and thus suffers patrimonial loss from lost sales. Further, their personality right is infringed upon by tarnishment of their integrity as a result of the smear campaign. To their relief, however, both injuries are actionable through prohibitive injunctions and damages.

Harrassment of a rival’s establishment

By a rival’s establishment here is meant an enterprise’s customers, suppliers and employees. Harassment implies exerting improper physical or psychological pressure with the motive of discouraging other market players and customers from establishing trade relations with the rival.

In its classical form, physical harassment may be in the form of chasing away a rival’s customers. Psychologically, as is the case in contemporary society, harassment may be in the form of exerting pressure on a rival’s potential clientele through picketing. This refers to organising people outside a competitor’s enterprise to dissuade potential customers, suppliers or employees from doing business with the competitor. This may be done either verbally or by literary means such as flyers, placards or digital means.

Such conduct is blatantly criminal and the affected enterprise is entitled to police assistance and may prefer criminal charges against the culprits.  As this is an infringement on one’s goodwill or right to attract custom, the competitor is also entitled to recover damages in a civil suit.

Trade boycott

A trade boycott is simply refusal by a business entity to do business with another business entity regardless of whether they are in a competitive, complementary or non-competitive relationship. There are two basic forms of trade boycott, namely primary and secondary trade boycotts. Noteworthy is that harassment  as discussed above may constitute a species of trade boycott  by way of instigation.

Primary boycott: This occurs when one undertaking refuses to have business relations with another undertaking. There is no relief available to the affected undertaking under the circumstances, on the logic that it is solely the unfettered prerogative, discretion and freedom of every undertaking to choose who to do business with.

Secondary boycott: Envisaged hereunder are situations where an undertaking instigates others not to engage in trade relations with another undertaking. Unlike the position under primary boycott, with secondary boycott a trader who instigates other traders to boycott against another undertaking infringes on the latter’s goodwill or right to attract custom. This is because the goodwill that will then accrue to them as a result thereof is owed to their interference with their competitor’s goodwill. It is an advantage that accrues to them, not from their own merit, but from the suppression of the competitor’s performance. As such the wronged party is at law entitled to both interdict and patrimonial (damages) relief.

Misappropriation of another’s performance

This form of unfair competition pervades nearly all fields of intellectual property, including patents, utility models, industrial designs, trademarks, plant breeders’ rights, copyright and related rights. It entails the slavish copying or pirating of a rival’s protected intellectual products or performances. At law a trader is only permitted to copy a rival’s idea as resource material for creating their own products. However, where a trader not only copies their rival’s ideas but their performance as well, then this is misappropriation of a rival’s performance.

This type of piracy also includes the making of an identical or substantially similar copy of a rival’s product–the principle of substantiality. As such where there is negligible difference between the main integers or features of the copied works and the original, then the trader would have pirated a rival’s performance and thus relief would be availed to the owner of the original work. Contrarily, where the integers of the derivative works appear unusual or distinctive in comparison, then there is no misappropriation or piracy of the original work perpetrated.

Noteworthy though is that in the absence of statutory protection, anyone could copy the original works of a rival without incurring liability, for these works would have fallen into the public domain upon publication.

e-mail:henripasi@gmail.com, legacyipchambers@gmail.com.

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