Customer information is one of many ‘data assets’ that can be actively managed as a trade secret

Data and digitization have created a fast-paced information-based economy that places a high value on trade secrets – many of which are poorly managed, if they are managed at all.

Who at a business is responsible for managing trade secrets and know-how was one of many questions that was put to a panel of experts in Washington recently.

“Businesses are focused on delivering in a [global] economy that has changed dramatically over the past 30 or 35 years,” said Jame Pooley, former Deputy Director General of the World Intellectual Property Organization and author of “Secrets,” at a recent briefing in Washington.

“We are definitely engaged in an information-based economy where companies, no matter what their products, are building a big part of value based on gathering information about their customers, mining that information and analyzing it. All of those data assets are protected primarily by secrecy.”

Pooley believe that the recent trade dispute between the U.S. and China is a result of not just theft, but a willingness on the part of some businesses to license or otherwise reveal proprietary rights like IP in order to gain a foothold in what is potentially the largest business market.

GIve and Take

“Just like all of us individually are enthusiastic sometimes about giving up our privacy rights in order to be able to live in the social media world, companies that look at the China market and see its potential, are sometimes clear-eyed about the risks that they are taking when they go there. And that includes a willingness on their part to share information at a level and scale that they wouldn’t be necessarily with partners in this country.”

Pooley was joined on a recent trade secrets panel by Brian Hinman, Chief Innovation Officer at Aon and former Chief IP Officer at Philips and head of licensing at IBM, and F. Scott Kieff, former Chief of United States the International Trade Commission.

Providing the briefing keynote was former U.S. Undersecretary of Commerce and and USPTO Director and ex-head of IP at General Electric, Q. Todd Dickinson.

The event, “Trade Secrets: What People Need to Know Today,” was organized by the Center for Intellectual Property Understanding (CIPU) in conjunction with the Global Innovation Policy Center, and took place on May 29 at the Chamber of Commerce headquarters.

Some panelists believe that the U.S.-China rift has to do with cultural and political differences.

“The Chinese government has told us and shown us that it treats its different activities within the government with a lot less silo than the U.S. does,” said Kieff.  “We keep our FBI separate from our NSA. We keep our FBI and NSA separate from Department of Commerce. We keep our Department of Commerce separate from Boeing.

“Those are separations that are really very, very real here in the West. Explicitly, that is not the case in China. My view is if someone [China] is telling me they’re not doing something that I wish they would do, I’m going to believe them, especially when they keep poking me in the face with it.”

Another panelist suggested that know-how, the “show how” that is sometimes provided under technology licensing or consulting, while not freely shared, is markedly difference from trade secrets.

Know-How vs. Trade Secrets

“Know-how is something that you know and that others need,” said Hinman, former Chief IP Officer at Philips and head of patent licensing at IBM. “With various sophisticated semiconductor process technologies, for instance, you get many big deals where we would wrap patents and technology together. Patents in and of themselves are nice, but when you’re talking about process technologies around semiconductors, then you really have to show people how it’s done – that is ‘know-how’ or technology licensing.

“These are really nice transactions. When you’re licensing the technology on the current generation [of chips], and then when IBM moves and converts it to the next generation, you want to have the others that you’ve already licensed. You want them to keep coming back for more and to establish a standard. But with respect to trade secret, it’s different because it is valuable knowledge but it has never been in the public domain, and you are not licensing it or disclosing it to third parties.

Not at Any Cost

“When you have a patent, you’re in a sense telling people what you have invented and how it works,” continues Hinman. “The claims tell you basically you have a device that does X, Y, Z. With a trade secret the solution may be simple or it may be complex, but it is not something that a business is willing to share at any cost.

“Know-how can be disclosed, selectively, to third parties, in some cases, multiple third parties [under licensing or consulting], not just for revenue generation, but to create a standard for that technology to the industry.”

Hinman went on to explain that when a business is in the R&D process, it has to make one of three decisions: Whether or not you want to publish it; to patent it; or to protect it an a trade secret. A trade secret can only be used by the owner.

At Philips, he said, they would make that decision very consciously. The company wanted to be clear about do it really wants to disclose. As an entrepreneur trying to make decisions about where to invest energy and capital, that is enormously important.

Know-how is not experience that a business shares readily. However, it will share it under the right conditions, such as when a patent is licensed or R&D is acquired. A true trade secret can never be disclosed. Once its revealed it is no longer secret and its value diminishes almost entirely.

Trade Secret Management

Hinman believes that the responsibility for trade secrets should fall under the Chief IP Executive, as opposed to risk management executives.

“I would take a holistic view. I think [responsibility for managing trade secrets] should fall under the Chief IP Officer because it’s an IP strategy for entire the company. Trade secret is one element of risk because you have to make fundamental business decisions. If you’re involved in R&D, you have to figure out what you want to do with this information, then come up with whether you want to file it as a patent, copyright or a trade secret, and manage it accordingly.”

For full the audio file of the trade secret panel, go here.

Image source: GIPC

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