A trade secret is defined as information, including a formula, pattern, compilation, program device, method, technique, or process, that: (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, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. It has economic value which provides a competitive edge to the owner over a competitor.
When looking into the nature of trade secrets, it is important to establish what the essential requirements of protectable confidential information are. Unlike other forms of intellectual property such as patents, industrial designs and trademarks that are clearly defined and protected by statute; trade secret law is a creation of court precedents over the years. To date there is no legislation that particularly deals with trade secrets in Lesotho. It follows therefore that the requirements for what qualifies for protection as a trade secret protectable by law will be found in precedent.
The requirements are as follows:
- The information must be confidential;
- The information must be applicable in trade or industry; and
- The information must when objectively viewed be of economic value.
Looking at the above requirements, it becomes clear that not all confidential information qualifies for protection as trade secrets. For information to qualify as a trade secret it ought to meet each of the three requirements stated above.
Due to the lack of legislative protection, trade secrets are protected by application of the general principles of the law of delict and the law of contract. Under the law of delict, competitive trading is unlawful when it involves wrongful interference with another trader’s rights and is actionable under the lex Aquilia if it results in loss. If a trader steals information from a competitor which he knows to be secret and confidential, and which has been developed by the competitor’s skill and industry, he is acting unfairly and dishonestly if he uses that stolen information for his own profit and to the detriment of his rival.
The owner of a trade secret can also approach the court for an interdict. An interdict does not require the establishment of fault or damage, the unlawfulness of the conduct is sufficient.
In terms of contract law, the types of contracts usually used in protection of trade secrets are the non-disclosure agreement and the restraint of trade agreement. The non-disclosure agreement generally applies to employees, although it can still be used to restrain any other party to a contract. It bars a party to such a contract from disclosing the confidential information related to the business or undertaking for a period of time provided for in the contract.
A restraint of trade agreement on the other hand is an agreement which enjoins an employee or business partner not to use the trade secrets of the business for their own benefit and in competition with the business. This duty persists even after the relationship has terminated. The purpose of express contractual protection of trade secrets is always to impose a duty on the receiver of the secret not to use the secret for any other purpose than those envisaged by the owner, nor disclose it to other parties.
It is advisable for businesses and employers who want to protect their trade secrets from misappropriation to ensure that they put in place measures such as those referred to above.
Article by Maema Chaka of Webber Newdigate Attorneys