Guide to trade secrets in UK 2022: Trends and developments (2023)

03 August 2022

Guides

Authors:

Matt Hervey, Arnie Francis

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Originally part of a 17 jurisdiction Global Practice Guide by Chambers and Partners, this section on Trade Secrets in UK has been republished with permission.

Chambers and Partners Trade Secrets 2022 guide focuses on best practices for trade secret protection and provides trade secret owners with the latest legal information on, inter alia, extraterritoriality, misappropriation, industrial espionage, criminal liability, litigation and alternative dispute resolution (ADR), the trial process, remedies, and appeals.

Gowling WLG partners Matt Herveyand Arnie Franciscontributed to the "Trends and Developments (UK)" chapter, which offers a comprehensive and current overview of trade secret law in UK.

Download the full guide as a PDF»

NOTE: The information and summaries in the Guide are not provided as legal advice and should not be relied upon as such. Readers should consult the contributing authors or other qualified legal and non-legal advisers directly if they need to further understand what rules and practices might apply in particular situations and jurisdictions.

Protecting Innovation

Across industries, there is an increasing appreciation of the critical importance of trade secrets in protecting innovation.

In April 2021, the UK Intellectual Property Office (IPO) published its report,The economic and innovation impacts of trade secrets, stating the "[g]lobal legal and economic trends suggest that growth in the use of trade secrets is outpacing that of patents". It also reported the following:

  • trade secrets are a preferred strategy for innovative UK firms – some 70% of UK firms who develop product and process innovations use trade secrets to protect these innovations;
  • the use of trade secret protection is higher among those entities that also use patents; and
  • trade secrets are particularly important to UK firms in the R&D services, tech, and across manufacturing and non-manufacturing sectors, including in the services sector where trade secrets can be used to protect key service processes.

We can certainly confirm that trends and developments we have seen within our work for clients over the last 12 months support the above findings. For us, a key trend has been clients' increasing focus on trade secrets as an intellectual asset class for artificial intelligence (AI).

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There has been a dramatic increase in advisory work to develop trade secret management policies, agreements, training, registers and procedures for practical implementation. This looks set to continue apace over the coming 12 months.

The rise of AI

The use of AI, including machine learning (ML), is turbo-charging the need for active and effective trade secrets management. The situation is highly nuanced, but traditional IP rights, including patents and copyright, were not designed for data or the techniques and outputs of AI and especially ML. Trade secrets have emerged as the default de facto protection.

  • Data, in the sense of information per se, are largely excluded from traditional IP rights.
  • Patenting of AI/ML techniques may be prevented in the world's key jurisdictions (including the UK, Europe more generally, the USA and China) by prohibitions against certain types of subject matter, such as mathematical methods and computer programs as such.
  • The outputs of AI/ML, such as artistic work, programs or inventions are largely excluded from copyright protection and patent protection. The UK is an outlier in providing for protection of computer-generated designs and copyright works, and even the latter may not be compatible with the current law on originality. Meanwhile, attempts by the Artificial Inventor Project to secure patent protection for two inventions said to have been devised by an AI, "DABUS", have been rejected by the EPO, USPTO, UKIPO and on subsequent appeals, including before the UK Court of Appeal in September 2021.

The result is that data, AI techniques and AI outputs are, in many cases, most effectively protected as trade secrets. Consistent with the above, the UK has seen a significant increase in the need for nuanced and strategic legal advice on protecting these assets as trade secrets. This trend is unsurprising perhaps given that the UK has, from time to time, been ranked the top economy in Europe by investment in AI, and third globally after the USA and China (for example, see the UK government's National AI Strategy published 22 September 2021). Any casual survey of the trending topics at IP conferences and industry seminars will show the extent and the interest generated in the field of trade secrets and AI/ML. This is clearly set to continue to grow throughout 2022.

While AI has applications in all sectors, we have seen the biggest demand for trade secrets advice in life sciences, automotive and FinTech. Business models in life sciences, in particular, have traditionally depended on patents and much work is needed to re-evaluate the significance of trade secrets in market strategy and internal procedures.

Other sectors experiencing high demand

Other hyper-competitive, high-growth sectors are following the trend to protect more data assets, knowhow and technology via trade secrets. Typically, these are sectors that have traditionally found innovations either difficult or impossible to protect with patents. Examples include digital banking services and social media.

Key trends and themes are:

  • the increased value placed by stakeholders upon innovation;
  • a recognition of the risk of severe loss of value where trade secrets "walk out the door" with departing employees or are stolen by cyber-exfiltration;
  • an increased understanding of how successfully trade secret protection can be used to protect value in these innovations.

We see these general trends – together with the growing importance of AI/ML – as key drivers of the importance of trade secrets over the coming year.

The UK's implementation of the EU's trade secrets directive

In the coming months, we also expect to see further and increasingly significant cases brought under the UK's implementation of the EU Trade Secrets Directive (The UK Trade Secrets (Enforcement, Etc.) Regulations 2018), referred to here as the "Regulations".

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As the Regulations only entered into force in June 2018, there have been only a limited number of court decisions under the Regulations so far, but we expect the rate of cases to increase over the coming 12 months. We set out below some examples of the cases that are starting to come through.

The first significant reported case under the Regulations was in relation to separators for EV batteries (the case of Shenzen Senior Technology Material Co Ltd v Celgard LLC [2020] EWCA Civ 1293), in which the Court of Appeal upheld a preliminary injunction restraining the import of the appellant's battery separators into the UK. This case confirmed both the utility and effectiveness of the Regulations for technical trade secrets owners seeking to restrain import, dealing, sales, etc, of so-called "infringing goods" – that is, goods which significantly benefit from a trade secret that has been unlawfully acquired, used or disclosed. The fact that the Regulations allow the seizure of infringing goods entering the UK that were made outside of the jurisdiction (perhaps in a territory in which trade secrets enforcement is difficult or impossible) will, we believe, encourage trade secret owners to bring enforcement action in the UK.

More recently, September and December 2021 saw decisions in another case brought under the Regulations. The trade secret owner brought its case under the English common law of breach of confidence, but nevertheless relied upon the Regulations to obtain a particular remedy available under the Regulations. The case in point was in the maritime sector (regarding the design of cable-laying vessels): Salt Ship Design AS v Prysmian Powerlink SRL [2021] EWHC 3583.

The defendant was held by the court to be in breach of confidence over certain vessel designs. The claimant also asked the court for a ruling that there had also been a breach of the Regulations in order to secure a specific form of relief available under Regulation 18 of the Regulations: a so-called "publicity order".

Regulation 18 provides that the court may order, at the expense of the infringer, appropriate measures for the dissemination of information concerning the judgment, including its publication in whole or in part.

The court granted the order (the first time one had been granted under the Regulations) ordering the defendant to display on its website, for six months (in no smaller than 12-point type) a statement declaring that the court had ruled that the defendant had misused the claimant's confidential information in relation to the specified cable-laying vessel, with a link to the full judgment.

Finally, February 2022 saw judgment handed down in the case of Mulsanne Insurance Company Limited v Marshmallow Financial Services Limited and others [2022] EWHC 276 (Ch), in the Intellectual Property Court of the High Court. This case illustrates the importance in the financial services sector of trade secrets and rights in confidential information (indeed, these are often the only form of protection over innovation in the sector).

Marshmallow had been a broker/intermediary for motoring insurance policies provided by Mulsanne, but after a time had decided to form its own insurance company to sell motor policies. It informed Mulsanne that it was exiting the agreement to broker Mulsanne policies, but was then faced with a claim by Mulsanne that, in walking away and setting up its own underwriting business, it was misusing Mulsanne's confidential information and trade secrets, including information provided by Mulsanne that had been used for feeding into the ratings engines for underwriting purposes, together with certain underwriting rules.

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Despite Mulsanne establishing breach of confidence with regard to limited amounts of its information, the court was ultimately of the view, overall, that the breaches were not serious, being more in the nature of incidental or accidental breaches, and that Marshmallow had consciously sought to avoid using Mulsanne trade secrets when setting up its own business. This latter point highlights the importance, as a recipient of another party's trade secrets, of taking steps to make sure that the information is not misused, whether this is information received under a collaboration or other contractual arrangement, information coming in via new employee hires, or otherwise.

Other trends

Given the increased importance of trade secret protection in various sectors, we expect a rise in trade secret enforcement litigation in the UK. Increased litigation may also result from the recent change in working practices. The COVID-19 pandemic has driven a wave of employee turnover, potentially increasing the likelihood of unlawful trade secret use. Together with the rise of hybrid and remote working, this may be weakening companies' control over confidential information and trade secrets.

One of the criteria that must be shown in order to have an enforceable trade secret under the Regulations is that the information "has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret".

Given that the Regulations have been in force for less than three years and the limited number of court judgments under them so far, there is as yet no clear judicial guidance on what does, or does not, amount to "reasonable steps".

In contrast, in the USA there has long been a requirement that the information owner take "reasonable measures". Accordingly, there are a significant number of US cases that have explored the meaning of "reasonable measures" and whether a claimant has an enforceable trade secret or not.

We predict, as more cases are brought under the Regulations in the UK, that "reasonable steps" will become an area that defendants will seek to challenge trade secret owners on when defending infringement claims, and that we should start seeing some guidance from the courts on this critical aspect of trade secrets law.

Related , Automotive, , , Tech, Life Sciences, , Intellectual Property Law, , Chemicals, , FinTech Law, Cleantech

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FAQs

What are the 3 components of trade secret? ›

In general, a trade secret has three parts: (1) information (2) economic value from not being generally known by others, and (3) reasonable efforts have been taken to protect the trade secret.

What are trade secrets examples? ›

Examples of trade secrets can include engineering information; methods, processes, and know-how; tolerances and formulas; business and financial information; computer programs (particularly source code) and related information; pending, unpublished patent applications; business plans; budgets; methods of calculating ...

How trade secret are protected in UK? ›

In the UK, protection for trade secrets is provided by two parallel regimes: by common law (the law of confidence) and by state (the Trade Secret Regulations or parallel provisions such as the Computer Misuse Act 1990). In practice, trade secrets are often protected by contract.

What are popular trade secrets? ›

Examples of trade secrets include: KFC's secret blend of 11 herbs and spices. Coca-Cola's recipe for their signature drink. Google's search algorithm.

What is a trade secret formula? ›

Real-World Examples

The secret formula for Coca-Cola, which is locked in a vault, is an example of a trade secret that is a formula or recipe. Since it has not been patented, it has never been revealed. The New York Times Bestseller list is an example of a process trade secret.

What Cannot be kept as a trade secret? ›

For example, information that is not generally known by the public but is known by different manufacturers in the same industry likely does not qualify as a trade secret. Material that is ascertainable through public sources generally does not derive independent economic value justifying trade secret protection.

What are the six factors of trade secrets? ›

Six factors are considered: (1) the extent to which the information is known outside the business; (2) the extent to which it is known by employees and others involved in the business; (3) the extent of measures taken to safeguard the secrecy of the information; (4) the value of the information to the business or its ...

What are the five steps to protecting trade secrets? ›

Five Strategies for Protecting Trade Secrets
  1. Written agreements with employees who have access to trade secrets. ...
  2. Written policies governing employee conduct. ...
  3. Limiting employee access to trade secrets. ...
  4. Limiting outsiders' access. ...
  5. Controls on public dissemination.
4 Dec 2017

What tools are used to protect trade secrets? ›

The remedies available to the owners of trade secrets are: an injunction preventing a licensee, employee, vendor or other party from disclosing a trade secret; the return of all confidential and proprietary information; and. compensation for any losses suffered due to the disclosure of trade secrets.

What is the best way to protect trade secrets? ›

Protecting Trade Secrets
  1. Identify What Needs Protection. ...
  2. Label Documents That Contain Protected Information. ...
  3. Monitor Where Information is Stored. ...
  4. Secure Computers. ...
  5. Maintain Secrecy With Outside Vendors. ...
  6. Provide Adequate Security. ...
  7. Limit Public Access to the Company. ...
  8. Use Caution Internationally.

What is the best way to protect a trade secret? ›

The most common and most effective way to protect trade secrets is through use of nondisclosure agreements (NDAs). Courts have repeatedly reiterated that the use of nondisclosure agreements is the most important way to maintain the secrecy of confidential information.

What are the 5 types of trades? ›

There are five main types of trading available to technical traders: scalping, day trading, momentum trading, swing trading and position trading. Mastering one style of trading is very important, but the trader also needs to be proficient in others.

What is the most famous trade secret in the world? ›

1 . The Coca-Cola Secret

The Coca-Cola Company had decided to keep their recipe as a Trade Secret instead of patenting it as patenting might cause the disclosure of the recipe. It was also told that one of the ingredients of the recipe might be Cocaine.

Why trade secrets is very important in business? ›

Trade secrets protect confidential business information that generally provides a competitive edge to its owner. A patent is a 20-year exclusive monopoly on the right to make, use and sell a qualifying invention. This legal monopoly is considered a reward for the time and effort expended in creating the invention.

Can two companies have the same trade secret? ›

Thus, two or more different entities can conceivably own the same trade secret at the same time. Not every business will own a patent. Nor will every business own a copyright. Many, but not all, will have trademarks, service marks or trade dress.

Is Google algorithm a trade secret? ›

Here are two of the most famous examples of trade secrets. Google's search algorithm is one of its best-kept trade secrets.

Is the formula for wd40 a trade secret? ›

The formula for WD-40® Multi-Use Product is a trade secret so protected the company never even filed for a patent. In fact, only a single person knows every exact ingredient that goes into the famous formula.

Can a password be a trade secret? ›

In trade secrets cases, many courts emphasize how login and password information can help protect trade secrets stored in computer systems.

Does a trade secret need to be registered? ›

Unlike other forms of IP, trade secrets do not need to be legally registered to be legally protected. Instead, you should use internal classification systems to avoid the public disclosure associated with patents and other forms of IP protection.

What type of law is trade secrets? ›

The United States Patent and Trademark Office refers to a trade secret as a type of intellectual property.

What are the four main barriers to trade? ›

Countries have four types of trade barriers they can implement. These four main types of trade barriers include subsidies, anti-dumping duties, regulatory barriers, and voluntary export restraints.

What are the 4 trade theories? ›

There are 6 economic theories under International Trade Law which are classified in four: (I) Mercantilist Theory of trade (II) Classical Theory of trade (III) Modern Theory of trade (IV) New Theories of trade.

What's your most important tip for preventing trade secret theft? ›

Limit and Monitor Access to Trade Secrets

One way of doing this is limiting and monitoring access to trade secrets. Ensure that only employees who need trade secrets to perform their roles have access to them. You can restrict access to trade secrets using passwords, encryption, physical security, and data segregation.

What do you think is the best way for your company to protect trade secrets without non compete agreements? ›

5 Tips for Protecting Your Trade Secrets Without an Enforceable Noncompete Agreement
  • Check for Laws that May Help. ...
  • Take Proactive Steps at the End of the Employment Relationship. ...
  • Use 'Pay-Not-to-Play' or Garden Leave Clauses. ...
  • Introduce Your Top Customers to Key Executives. ...
  • Negotiate, Mediate, and Consider Arbitration.
1 Jun 2022

Which are the three biggest trading powers? ›

The three largest global players of international trade: EU, China and the USA. The EU, China and the United States have been the three largest global players within international trade (see Figure 1) since 2004 when China surpassed Japan.

What is the strength of trade secret? ›

One of the main advantages of trade secret law is that it provides indefinite future protection. Unlike the 20-year time limit that underlies the protection granted to a patent holder, there is no definite time limit placed on the protection granted to a trade secret owner.

What are two methods of trade protection? ›

Trade protectionism is a policy that protects domestic industries from unfair foreign competition. The four primary tools used in trade protectionism are tariffs, subsidies, quotas, and currency manipulation.

Can you steal trade secrets? ›

The U.S. Economic Espionage Act of 1996, which became effective on January 1, 1997, makes theft or misappropriation of trade secrets a federal crime.

What is the main disadvantage of trade secrets? ›

Trade secrets offer protection by doing exactly the opposite: keeping your IP confidential. However, this means that once your IP is no longer a secret, perhaps because the technology was leaked or reverse engineered, it is no longer protected. This is likely the largest downside of trade secrets for many companies.

Do trade secrets expire? ›

Do Trade Secrets Expire? Trade secrets do not expire, as long as you keep the information confidential. However, over time, trade secrets may naturally lose their value.

What are the easiest trades to learn? ›

Quick trade jobs to learn include truck drivers, medical coders, and personal trainers. Trade school enrollment has surged as college enrollment dropped in recent years. Demand for trade jobs such as trucking has caused governments to relax licensure requirements.

Which type of trade is best for beginners? ›

Beginners should consider starting off with swing trading, which means holding an investment for more than one day and less than a couple of months. It's less time-consuming and stressful than day trading. Stocks and crypto are great for beginners.

Which type of trade is best? ›

Intraday trading: This trading type makes you buy and sell your stocks on the same day before the market closes. You need to track your market position the entire day, looking for a good opportunity to sell your stocks. Intraday trading is a great method of making fast profits provided you invest in the right stocks.

Does KFC have a trade secret? ›

One of the most famous trade secrets of all time is KFC's secret recipe ​“blend of 11 herbs and spices” used on its Kentucky Fried Chicken. For years, people have tried to uncover or replicate this secret recipe without success.

Which country has the best trade? ›

Year-to-Date Total Trade
RankCountryExports
---Total, All Countries1,578.9
---Total, Top 15 Countries1,078.7
1Canada300.3
2China122.0
13 more rows

What is the trade secret of Coca-Cola? ›

His recipe contained pepsin, a digestive enzyme extracted from pigs' stomachs. “Brad's Drink” became Pepsin Cola in 1896 and then Pepsi-Cola in 1898. Pemberton, a medicine inventor and morphine addict, created Coca-Cola out of a secret mixture of stimulant coca-leaf and African kola nuts, which contain caffeine.

What are the main components of trade? ›

Export and import are the components of trade. The balance of trade of a country is the difference between its export and import.

How many components of trade are there? ›

The Triad has three key components: systematic planning, dynamic work strategies, and real-time measurement technologies. The Triad approach is based on three primary components.

What are the two main components of trade? ›

Generally, there are two types of trade—domestic and international. Domestic trades occur between parties in the same countries. International trade occurs between two or more countries. A country that places goods and services on the international market is exporting those goods and services.

What are the components of a trader? ›

Key Components of a Trading Strategy
  • Risk tolerance. Risk tolerance refers to the degree of risk that an investor is willing to withstand in their trading activities. ...
  • Trading products. ...
  • Leverage technical analysis. ...
  • Technical and fundamental trading strategies. ...
  • Quantitative trading strategy.
25 Oct 2022

What are the 4 types of trades? ›

  • Day Trading.
  • Position Trading.
  • Swing Trading.
  • Scalping.

What are the 5 types of trading? ›

Here we give a lowdown on the key categories of stock market trading:
  • Intraday trading. Intraday trading is also known as day trading. ...
  • Delivery trading. ...
  • Swing trading. ...
  • Positional trading. ...
  • Fundamental trading. ...
  • Technical trading.
26 May 2022

What are the 3 restrictions of trade? ›

The major obstacles to international trade are natural barriers, tariff barriers, and nontariff barriers.

What are the 3 importance of trade? ›

Trade is critical to America's prosperity - fueling economic growth, supporting good jobs at home, raising living standards and helping Americans provide for their families with affordable goods and services.

What are the 5 free trade areas? ›

  • ASEAN – Korea Free Trade Area (AKFTA)
  • ASEAN – Australia – New Zealand Free Trade Area (AANZFTA)
  • ASEAN – India Free Trade Area (AIFTA)
  • ASEAN – Japan Comprehensive Economic Partnership Agreement (AJCEPA)
  • Philippines – Japan Economic Partnership Agreement (PJEPA)
  • ASEAN – China Free Trade Area (ACFTA)
  • ASEAN Free Trade Area.

What are the five factors affecting trade? ›

Factors affecting trade
  • Uneven distribution of natural resources.
  • Stage of industrial/economic development.
  • Differences in climate.
  • Differences in tradition of population.
  • Transportation.
  • Government policies.

What are the 4 basic items that are traded throughout the world? ›

Key Takeaways

Commodities that are traded are typically sorted into four categories broad categories: metal, energy, livestock and meat, and agricultural.

Which country benefits the most from international trade? ›

The countries have achieved the biggest income gains as a result of the rules-based global trading system, the report found. The US benefited by $87 billion (€77.7 billion) in 2016, China by $86 billion while Germany reaped some $66 billion in financial rewards.

What is trade answer in one sentence? ›

Trade is the activity of buying, selling, or exchanging goods or services between people, firms, or countries.

What are the golden rules for trader? ›

  • Rule 1: Always Use a Trading Plan.
  • Rule 2: Treat Trading Like a Business.
  • Rule 3: Use Technology to Your Advantage.
  • Rule 4: Protect Your Trading Capital.
  • Rule 5: Become a Student of the Markets.
  • Rule 6: Risk Only What You Can Afford to Lose.
  • Rule 7: Develop a Methodology Based on Facts.
  • Rule 8: Always Use a Stop Loss.

What is the most important skill for trading? ›

One skill every trader needs is the ability to analyze data quickly. There is a lot of math involved in trading, but it is represented through charts with indicators and patterns from technical analysis. Consequently, traders need to develop their analytical skills so they can recognize trends and trends in the charts.

What skills do traders need? ›

Six Essential Skills of Master Traders
  • Skills #1 and #2 – Research and Analysis. ...
  • Skill #3 – Adapting Your Market Analysis to Changing Market Conditions. ...
  • Skill #4 – Staying in the Game. ...
  • Skills #5 and #6 – Discipline and Patience. ...
  • Bonus Skill #7 – Record Keeping. ...
  • In the End. ...
  • Related Readings.
25 Oct 2022

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