Trade Secrets and Conditions for Protection

Trade secrets and conditions for protection are core contents of intellectual property law, directly linked to competitive advantages and the sustainable development of enterprises. In the context of increasingly fierce competition, correctly understanding the concept and scope of trade secret protection is significant in preventing legal risks and disputes. The following article by Long Phan Consulting Company will analyze current legal regulations on trade secrets and clarify the conditions for trade secrets to be protected under Vietnamese law.

What are trade secrets?

Based on regulations in Clause 23, Article 4 of the Intellectual Property Law 2005 (amended and supplemented in 2009, 2019, 2022), a trade secret is understood as information obtained from financial and intellectual investment activities, which has not yet been disclosed and is capable of being used in business.

This definition encompasses three main constituent elements: origin from investment, confidentiality (undisclosed), and commercial utility. In essence, this information may include technical formulas, production processes, customer lists, marketing strategies, or financial data. Unlike patents, which require absolute novelty and an inventive step, trade secrets focus on secrecy and the economic value they bring. Information is only considered a trade secret when it cannot be easily accessed by those who regularly handle such information.

In corporate governance practice, identifying this asset requires clear classification. Clients need to prove the investment of resources (capital, manpower, time) to create or collect that information. If information is created randomly or is available in mass media, it will not satisfy the legal definition of a trade secret and the conditions for protection. The nature of “being used in business” also requires that the information must be capable of generating actual profit or competitive advantage, not just in theory.

Owner of trade secrets

According to Clause 3, Article 121 of the Intellectual Property Law 2005 (amended and supplemented in 2009, 2019, 2022), the owner of a trade secret is an organization or individual who has lawfully obtained the trade secret and implemented measures to keep it confidential. Trade secrets acquired by an employee or a performing party during the performance of hired or assigned work belong to the employer or the assigning party, unless otherwise agreed by the parties.

This regulation emphasizes two parallel conditions: the legality of ownership and the actual act of confidentiality. In labor and contracting relations, the law sets a default principle regarding ownership if there is no other agreement. Specifically, the intellectual labor results of employees during their work, if satisfying the conditions of a trade secret, will belong to the employer.

However, this principle does not apply absolutely if the parties have a different agreement in the labor contract or service contract. Clients should note that ownership is only recognized when information is collected or created through honest methods. Acts of appropriation, theft, or unauthorized access to others’ data do not give rise to legal ownership rights. The owner has the exclusive right to use, authorize others to use, or transfer ownership of that trade secret. Simultaneously, the owner also bears the risk if they fail to establish adequate measures to protect their ownership rights.

These subjects are not protected under the guise of trade secrets.

According to Article 85 of the Intellectual Property Law 2005 (amended and supplemented in 2009, 2019, 2022), the following confidential information is not protected under the name of trade secrets:

1. Personal secrets (secrets regarding personal status).
2. State management secrets.
3. National defense and security secrets.
4. Other confidential information unrelated to business.

This information is protected by privacy and civil regulations and does not fall within the scope of commercial intellectual property law. Using personal secrets for business without the subject’s consent is a violation of the law.

Conditions for protecting trade secrets

According to Article 84 of the Intellectual Property Law 2005 (amended and supplemented in 2009, 2019, 2022), the conditions for protection of trade secrets include:

1. It is not common knowledge and not easily obtained. For example, a mixing formula printed on product packaging or a technical process published in a patent will no longer be a trade secret. “Not easily obtained” implies that competitors cannot collect that information through ordinary legal measures quickly and at a low cost.
2. When used in business, it will create an advantage for the holder over those who do not hold or use that trade secret. This is the condition regarding the commercial value of the information. Trade secrets and protection conditions are tied to economic benefits. This advantage can be manifested through reducing production costs, improving service quality, or accessing exclusive customer files. If the information does not bring any advantage to the owner in competitive activities, it does not satisfy the purpose of intellectual property protection. This value can be actual value or potential future value.
3. It is kept confidential by the owner using necessary measures so that the trade secret is not disclosed and not easily accessible. This is the most critical subjective condition, demonstrating the will and action of the owner. Necessary measures include technical solutions (data encryption, access control), physical solutions (lockers, restricted areas), and legal solutions (signing Non-Disclosure Agreements – NDAs, internal regulations). Clients must prove that they have applied reasonable measures corresponding to the nature and scale of the information to prevent infringement. If information is leaked due to negligence in management, protection rights will cease.

>>> See more: Conditions for protecting trade secrets for new businesses

Trade secret protection consulting services at Long Phan Consulting Company

Long Phan Consulting Company provides comprehensive solutions to help businesses establish and protect their intellectual property rights, including trade secrets. We approach the issue from a risk prevention perspective to handling actual infringements. Below are the in-depth support services we offer our clients:

• Review, identify, and classify the company’s trade secrets in accordance with legal regulations.
• Consulting on the development of mechanisms and procedures for managing and securing internal information.
• Drafting and finalizing information security agreements and regulations (NDA, NCA, internal regulations).
• Review and adjust intellectual property clauses in employment contracts and service contracts.

Frequently Asked Questions

Below are some frequently asked questions about trade secrets and their protection, for your reference:

Do trade secrets need to be registered with the Intellectual Property Office to be protected?

No. Industrial property rights to trade secrets are established on the basis of legally acquiring the trade secret and maintaining its confidentiality, without the need for registration procedures like patents or trademarks.

(Legal basis: Clause 3, Article 6 of the Intellectual Property Law 2005, as amended and supplemented in 2009, 2019, and 2022)

How long does protection last for trade secrets?

The law does not specify a particular time limit (unlike 20 years for inventions). Trade secrets are protected indefinitely as long as they meet the following conditions: confidentiality, commercial value, and the application of necessary security measures. The protection will terminate as soon as the information is publicly disclosed.

(Legal basis: Article 84 of the Intellectual Property Law 2005, amended and supplemented in 2009, 2019, and 2022)

Is reverse engineering of a competitor’s product considered a violation of trade secrets?

No. If a person discovers a trade secret through analyzing and evaluating a product legally distributed in the market (unless otherwise prohibited by agreement), that act is not considered infringement. This is an honest method of accessing information.

(Legal basis: Point d, Clause 3, Article 125 of the Intellectual Property Law 2005, as amended and supplemented in 2009, 2019, and 2022)

Is it considered a violation for an employee to disclose trade secrets after leaving their job?

Yes, if that information has not been publicly disclosed and remains the property of the former employer. Disclosing or using confidential trade information without the owner’s permission constitutes an infringement of industrial property rights, regardless of whether the employment relationship still exists.

(Legal basis: Clause 3, Article 121 and Clause 1, Article 127 of the Intellectual Property Law 2005, as amended and supplemented in 2009, 2019, and 2022)

If trade secrets are stolen, what rights does the owner have?

The owner has the right to request the competent state authority to compel the infringing party to cease the infringing act, apologize, make a public correction, and compensate for damages. Depending on the severity, the infringing act may be subject to administrative penalties or criminal prosecution.

(Legal basis: Articles 198 and 202 of the Intellectual Property Law 2005, as amended and supplemented in 2009, 2019, and 2022)

>>> See more: Things businesses need to know when transferring business secrets

Conclusion

Compliance with regulations on trade secrets and conditions for protection is a vital factor in maintaining sustainable competitiveness. Clients need to proactively establish a multi-layered security system and perfect the internal legal framework from the early stages. For in-depth advice and timely support, please contact Long Phan Consulting Company directly via Hotline  1900636389.