- Background
Ms. S is the co-founder and director of a Dutch-Indian social enterprise dedicated to creating safe, efficient, and inclusive zero-waste systems. In 2022, the founder first contacted the SEA IP SME Helpdesk (SEA HD) to seek IP advice for a project on value chain and operational improvement in SEA and to review the IP clauses from a local partnership contract that was being negotiated with a well-known NGO for Indonesia.
In early 2024, she contacted the SEA HD via email to discuss two potential projects in Indonesia involving collaboration with local partners. Knowing of the SEA HD's existence, she sought guidance on IP issues to consider during negotiations with each party.
Regarding Project 1: The plan was to build a large-scale facility in Indonesia through local partnerships (mostly financial assets), forming two separate joint ventures (JV). One entity would serve as the system integrator, while the other entity would act as the system operator. The SME would contribute its knowledge and know-how to both JV.
Regarding Project 2: A major investor in India and Indonesia was having issues with local operations and approached the SME to help them solve these issues. The consultancy services contract drafted by the investor was governed by foreign laws (Singapore and the US) and comprised worldwide and general wordings (a standard template drafted by a legal department).
As there were many topics to cover and discuss, the IP Business Advisor (IPBA) scheduled a virtual consultation to clarify the situation with the two co-founders of the SME, as well as a follow-up email that included some useful links and guides.
- IP issues raised
The founder wanted to know which IP issues she should look at while negotiating each of the two contracts and before executing the same. In addition, she also sought guidance on reviewing several IP clauses from each contract.
Support and advice provided by the SEA HD
- After reviewing the company’s main assets involved in the partnership (mainly know-how), the IPBA held a discussion focused primarily on trade secrets, highlighting them as a valuable alternative to patents. He highlighted the key differences between the two IP rights. Specifically, patents provide a monopoly over an invention for a strict duration in exchange for public disclosure of the invention, while trade secrets protect information that will remain indefinitely confidential, as long as there is no disclosure to the public. In addition, trade secrets are a rather cost-effective tool, which makes them a more suitable option for small companies with limited budgets and extensive know-how.
- The IPBA reminded the founders that trade secret protection imposes greater responsibilities on companies to secure a specific piece of information. Unlike patents (which have a formal registration process), trade secrets rely on the implementation of confidentiality and secrecy measures. In this regard, the IPBA emphasised the importance of proactively managing trade secrets. He also suggested that the company establish comprehensive confidentiality agreements, non-disclosure agreements (NDAs) with any third parties, and internal policies to minimise the risks of disclosure.
Besides this, the IPBA also advised various strategies for the company to be prepared in case of potential breaches of secrecy and confidentiality.
First, he highlighted the importance of knowing the number of trade secrets the company possesses, what is considered a trade secret, and the company’s efforts to preserve the secrecy, as this is crucial for proving ownership in case of litigation.
- Having a thorough plan is essential, as incidents of misappropriation can destroy the company’s competitive edge. Best practices shared by the IPBA included conducting regular employee training on handling sensitive information and implementing robust security protocols for data storage. Another key preventive measure would be conducting audits to identify vulnerabilities and systematically monitoring employees' access to trade secrets.
- Regarding possible actions to be carried out when there is a secrecy breach, the IPBA mentioned a list of quick and simple actions, such as proactively collecting evidence, contacting the breaching party to discuss/negotiate damages, and thinking about a possible civil case before authorities to claim compensation.
- On top of that, the IPBA took the time to review several IP-related clauses from two separate contracts that were under negotiation and were shared by the SME. This process involved a careful assessment of the clauses to ensure they cover the main IP rights belonging to the company while aligning with each party’s strategic interests. Furthermore, the IPBA directly flagged several specific terms with a broad meaning, which could harm the SME’s interests, clearly stating the IP ownership of each party and the deliverables. Additionally, the company was guided to establish clear procedures for addressing potential IP disputes (notably by introducing a special locus fori clause).
- Result:
- After discussing matters with the IPBA, the two co-founders learned the significance of evaluating and understanding IP issues before entering into partnerships with local partners. The process should then be replicated for all future projects.
- They understood that protecting trade secrets internally is of utmost importance and that different layers of protection need to be set up. Besides this, signing NDAs or confidential clauses while negotiating a partnership is pivotal to protecting the company’s assets.
- They also learned how to integrate more detailed and custom IP clauses and the importance of defining rights and responsibilities regarding trade secrets, ownership of assets and IP rights, and dispute resolution mechanisms and the need to include these elements in future partnerships.
- Lessons Learnt:
- SMEs often lack knowledge on how to protect their trade secrets, especially internally. A thorough IP protection strategy (especially for a company that offers know-how and solutions for waste management systems) should include the protection of trade secrets. Effective trade secret management requires not only confidentiality agreements but also a company-wide culture of security. Implementing strong internal mechanisms and controls, plus organising regular training of staff, is crucial to ensuring that sensitive information is handled appropriately at all levels.
- Preparation for potential disclosure or leak of information should be an integral part of a trade secret protection strategy. Besides this, there should be an emergency response plan in case of a breach of confidentiality and such plan should be known by employees.
- Contracts should be meticulously crafted to include IP-related clauses, and protection measures should be applied at an early stage.
- Vague or generic terms (i.e. definitions or geographical limits) can expose a company to future disputes: this is particularly the case in complex partnerships or collaborations with local partners.