At the international level, trade secrets are protected under the auspices of the World Trade Organization (WTO). In particular, the signatories and members of the WTO signed a treaty called the Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement) which went into effect in January 1995. The TRIPS Agreement obligated the various member nations to enact national laws to protect trade secrets at least to the level required by the TRIPS Agreement. The TRIPS Agreement also prevented governments from disclosing trade secrets related to pharmaceutical and agricultural chemical products where companies are required to disclose those trade secrets to obtain regulatory approval. See general information about the TRIPS Agreement here.
The protections provided for trade secrets by the TRIPS Agreement are similar to the protections provided here in the US at the federal and state levels. A comparison provides some useful legal context for trade secret lawyers tasked with protecting their clients and prosecuting trade secret misappropriations. The operative provision of the TRIPS Agreement is Article 39 which, in part, states as follows:
Section 2. Natural and legal persons shall have the possibility of preventing information lawfully within their control from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices so long as such information:
(a) is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
(b) has commercial value because it is secret; and
(c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.
For comparison, the Michigan Uniform Trade Secrets Act (“MUTSA”) prohibits unlawful use or disclosure of trade secrets with such being being defined as:
(d) “Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process, that is both of the following:
(i) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.
(ii) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
In comparing the MUTSA and the TRIPS Agreement, several important differences are apparent. First, under the MUTSA, trade secrets are very broadly defined. This is generally true under federal law and in every jurisdiction in the US. By contrast, the definition used under the TRIPS Agreement is much more narrow, clearly focusing on manufacturing processes rather than a wider category of commercial information and data like customer lists, vendor sources, price lists and the like. Further, unlike the TRIPS Agreement, the MUTSA recognizes and excludes from the definition of trade secrets information that can be “readily ascertain[ed] by proper means.” This allows for the common practice of reverse engineering which is not something that should be punished or chilled if free markets are to be encouraged. Another distinction is the recognition in the TRIPS Agreement that trade secrets protection extends to information that might be “lawfully within” the control of a person or business. This acknowledges that trade secrets should be protected even where the information in question might be owned by one entity but legally possessed by another. This distinction is not explicitly recognized in the various trade secret statutes in the US. However, US courts have honored that distinction as in, for example, the case of Advanced Fluid Systems, Inc. v. Huber, Case Nos. 19-1722 and 19-1752 (3rd Cir. April 30, 2020) recently discussed here on this blog.
For more information and/or if you have questions about protecting your trade secrets or if you need to initiate trade secret litigation, contact the trade secret lawyers at Revision Legal at 231-714-0100.
The TRIPS Agreement and National Implementation
While the TRIPS Agreement established a minimum international standard for trade secret protection, the actual level of protection available in any given country depends on national implementing legislation, judicial interpretation, and enforcement capacity. The European Union implemented its own trade secret directive (Directive 2016/943) in 2018, requiring EU member states to harmonize their trade secret laws with EU minimum standards. The EU Directive introduces the concept of “lawful means” of acquiring a trade secret—including reverse engineering and independent discovery—as activities that cannot be restricted by trade secret law. Countries with weaker trade secret protection or weak enforcement mechanisms present elevated risk for businesses that must disclose proprietary information in those jurisdictions for manufacturing, licensing, or regulatory purposes.
The DTSA’s Extraterritorial Reach
The federal Defend Trade Secrets Act (DTSA), 18 U.S.C. § 1836, contains an explicit provision extending its reach to misappropriation that occurs outside the United States, provided that either the misappropriating act was committed by a US person or organization, or that an act in furtherance of the misappropriation was committed in the United States. See 18 U.S.C. § 1837. This extraterritorial reach is significant for US businesses victimized by foreign competitors who received trade secrets in a US facility and then used them abroad. In practice, extraterritorial DTSA claims face significant enforcement challenges: obtaining personal jurisdiction over foreign defendants, serving process under the Hague Service Convention, enforcing judgments in foreign jurisdictions, and navigating foreign government immunity doctrines where state-owned enterprises are involved.
China: Special Considerations
China represents the highest-risk jurisdiction for trade secret theft from the perspective of US businesses. China is a WTO member bound by the TRIPS Agreement and has enacted domestic trade secret legislation under its Anti-Unfair Competition Law, with 2019 amendments that strengthened trade secret protections and shifted the burden of proof to defendants in some circumstances. However, enforcement in Chinese courts can be uneven, particularly in cases involving state-owned enterprises or technologies strategically important to China’s industrial policy. US companies doing business in China should compartmentalize trade secret information so that Chinese manufacturing or JV partners have access only to the portions necessary for their specific function, and should maintain detailed records of the information disclosed.
International Trade Remedies: Section 337 Proceedings
For US businesses whose trade secrets have been misappropriated by foreign actors who then import goods into the United States, Section 337 of the Tariff Act of 1930, 19 U.S.C. § 1337, provides a powerful remedy. Section 337 allows the US International Trade Commission (ITC) to investigate allegations of unfair trade practices in the importation of goods into the United States, including the importation of goods produced using stolen trade secrets. If the ITC finds a violation, it may issue an exclusion order barring the importation of the infringing goods. The ITC process is faster than federal district court litigation and the exclusion order remedy is uniquely effective against foreign manufacturers.
Speak with an International IP Attorney
Protecting trade secrets across international borders requires a multi-layered strategy combining contractual protections, technical security measures, and knowledge of the available legal remedies in each relevant jurisdiction. The intellectual property attorneys at Revision Legal advise businesses on domestic and international trade secret protection strategies. Contact us at 231-714-0100.
