Trade Secret Mode: Make the NDA Work

The most guarded trade secret in the world is the “Coca-Cola” formula in the USA. The company manages to store it for over 100 years. Is it possible to achieve such a result of protection of commercial secrets (CT) in Ukraine. How not to worry that an employee will transfer the customer base to competitors, disclose commercial information, or violate the signed NDA.

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Icon Partners team recommends an effective mechanism for solving this problem – introduction of a trade secret regime in company.

# case “Coca-Cola”

One of the failed attempts to steal the trade secret of “Coca-Cola” ended in a high-profile trial in 2006. Three employees kidnapped and offered a direct competitor, Pepsi, to talk about the design and recipe for a new vanilla-flavored cola for $ 1.5 million. They received from 2 to 8 years in prison.

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On the same day, Coca-Cola’s shares fell on the stock exchange – a vivid example of how much KT influences a company’s reputation. The US protects trade secrets under the “Uniform Trade Secret” code.

# you won’t be full with one NDA

In Ukraine, there are several ways to make the NDA work and even more so that it does not work. A common misconception is that it is enough for a company to sign a non-disclosure agreement with its employees and sleep peacefully without worrying about a possible information leak.

In the court register only one case was recorded when it was possible to protect confidential information (do not forget that any commercial secret is confidential information, but not any confidential information can be a commercial secret) using the NDA – decision of 20.05.2020 in case No. 757/17647/19-c. On his personal Facebook and LinkedIn pages, the defendant said that the clients own a company in Cyprus. In addition to being fired, he had to pay a $ 10,000 fine. However, the case can hardly be considered indicative – the defendant’s lawyer did not appear, and no one appealed against the decision.

There are many more opposite situations. In 2019, the owner of “BINARY STYDIO LLC” filed a lawsuit with the Zaporizhzhya court to recover US $ 20,000 for the disclosure of a trade secret by a former employee. The plaintiff’s claims were denied because he incorrectly submitted electronic evidence and put pressure on his opponent. The defendant explained himself in English, which he does not speak well, and made mistakes by copying the text from the sheet of the owner of the company (for example, “Explonation of facts” instead of the correct “Explanation of facts”).
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In order for the NDA to work, we recommend that you not only write down the conditions on “pieces of paper”, but also resort to real measures. The Ukrainian case of Ergon-Electric LLC versus TVK Vector-VS LLC is illustrative. The plaintiff conducted an examination of the violation of the regulation, with the help of the cyber police, seized the media that proved the opponent’s guilt. The Antimonopoly Committee fined the defendant UAH 365,000.

#MUST HAVE for Ukraine

To have evidence in court, you need to follow the following guidelines.
There is no law on commercial secrets in Ukraine; there are separate articles in the Civil and Commercial Code. But that doesn’t mean entrepreneurs are vulnerable. List of local acts that are “must have” in national business:

  • Executive decree – he orders the team leaders / heads of departments to inform the subordinates about the introduction of the CT regime.
  • Documents constituting a commercial secret and a list of information by item. It’s hard to defend something abstract. Team members should understand what is not intended to be publicized.
  • Special statement or privacy policy, where they describe in detail how to create a password, what and to whom cannot be sent, etc.
  • Commitment agreement, which confirms that the person is familiar with the provision and undertakes to comply with it.
  • Non-disclosure Agreement, or NDA – the agreement on non-disclosure of information establishes the employee’s responsibility for the disclosure of CT and obligations for its protection.
  • If a company wants to introduce a classification of secrecy, it is necessary to add the appropriate documentation accounting instruction

# clear desk policy and clear screen policy

The court takes into account not the existence of local acts, but the implementation in practice. Companies are guided by the international information security standard ISO / IEC 27001.
To preserve trade secrets and confidential information, we recommend using the “clear screen policy” and “clear desk policy”:

  • Employees are strictly prohibited from leaving documents unattended on the desktop.
  • Laptops, tablets, phones must have a strong password. It is important to conduct training, to explain even such trivial things as a password. For example, the NordPass website has a top list of the most predictable and hacked passwords: qwerty; 12345; 123456789; date of birth, etc.

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# TIP: it’s time to throw away the iron safes

How to prove possession and use of CT at a certain point if you’ve always kept it a secret? A common recommendation is to provide a cabinet with a key to restrict unauthorized access. In the 21st century, we recommend digital safes popular in Europe.

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WIPO PROOF – notary service of the world organization of intellectual property rights. Date and time imprint is created on a special digital file – token. WIPO PROOF tokens are stored on servers in Switzerland with a high level of security. They appeared in May 2020 and are recognized in 100 countries. Another popular way is i-DEPOTdesigned in Benelux. The safe is not subject to any territorial restrictions. The cost is € 37 for 5 years or € 53 for 10 years.

#GOLDEN RULE

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Remember, there is nothing more valuable to a business than information assets. While you are thinking whether to draw up a trade secret agreement or not, other market players are poaching your staff, using information and making money from it. Today under the strictest confidence: the list of best-selling books “New York Time”, McDonald’s menu big mac sauce, Google search algorithm – the list is endless.
Multibillion-dollar corporations started with a small idea, but smart decisions: they built reliable protection and created conditions for the safety of their technologies and approaches.

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