Tutorial 2 - Chapter 3: Trade Secrets & Confidentiality

Questions to attempt: 3.1,3.2,3.3,3.4

Padlet link: https://padlet.com/avijayalakshmi_venugopal/efqswvglqjpp

Q: 3.1: [Essay Question]

Critically analyse how the protection of trade secrets is typically part of intellectual

property law, even though such secrets are protected under other forms of law
Q: 3.2: [Problem Question]

Paul worked as an investment advisor at Lyons Bank Bhd. Paul won several

awards at the bank for achieving the highest sales volume. Many of his clients wrote

to the bank expressing their appreciation for his care and professionalism. Paul

worked at this bank for 11 years. During his tenure there, he was promoted twice and

consistently received good performance reviews. Paul recently tendered his

contractual notice, informing his supervisor that he would be leaving the bank at the

end of 3 months. Paul’s supervisor (Harry) asked Paul why he was leaving, as the

management was willing to give Paul a salary increment to stay. Paul replied that he

wanted to work for himself. Harry asked Paul what he told his clients at the bank

about him leaving. Paul said that he informed his clients that he was leaving the

bank, but referred them to other investment advisors at the bank to take over their

accounts. Harry continued trying to persuade Paul to change his mind about leaving

the bank, but was unable to do so.

Over the course of the next year, Harry noticed that many of Paul’s former

clients made no further investments with the bank. Harry called each of them

personally to ask them why they no longer made further investments. He was told by

many of them that they preferred continuing their investments with Paul and were

happy working with Paul at his new firm.

Harry called Paul to complain. Harry reminded Paul about the clause in Paul’s

employment contract with the bank prohibiting Paul from using the bank’s

confidential information after leaving the bank. Paul replied that he did not solicit any

of his former clients. After dealing with them for so long, he considered many of them

as friends and they probably did the same, leading to them asking him to continue
dealing with their investments. Harry also pointed out that many of Paul’s strategies

and skills were from training programmes the bank sent him on. Paul responded that

it was still his hard work and talent that led him to be more successful than other

colleagues sent for similar training. Harry believes that Paul took advantage of the

benefits and trust he was given at the bank.

Advise Harry.
Q: 3.3 [Essay Question]

Evaluate the benefits and drawbacks of protecting intellectual property as a trade

secret as opposed to other forms of intellectual property. Provide illustrations to

support your points.

Q: 3.4 [Problem Question]

Gillo Sdn Bhd makes and sells office furniture. Although they have many different

models of tables for sale, their most popular model is a table which has specific

fittings for desktop computers. They call this table their ‘Desktop Table’. Other

companies now offer similarly designed tables. Paul is a director of Gillo Sdn Bhd.

Wanting to increase their sales again, Paul instructed their marketing staff to conduct

a market research survey to find out how customers thought their product could be

improved compared to other models by competitors. Paul discussed the results of

this survey with the manufacturing department. One finding was that customers

thought the fittings were too rigid and would prefer them to be adjustable. Customers

also thought that the tables should have rounded edges so that it is not as painful if

customers knocked into the table edges. Bill worked in the design team at Gillo Sdn

Bhd and heard these findings. Bill made several proposals on how these findings

could be incorporated in a revised design of the Desktop Table. Bill’s proposals were

not accepted. Bill felt unappreciated and frustrated. Bill decides to take up an earlier

job offer from a competitor, Wonjo Sdn Bhd, to work in their design department. Six

months after Bill left Gillo Sdn Bhd, Wonjo Sdn Bhd released a new computer table

model. Paul recognised many of the design features of this new model to be based

on what Bill proposed earlier. Paul has written to Wonjo Sdn Bhd and Bill,

threatening to sue them both if the new model is not withdrawn from the market

soon. Paul points out that in Bill’s employment contract with Gillo Sdn Bhd, Bill was

not permitted to disclose confidential information without express authority. Wonjo

Sdn Bhd replied to Paul’s letter, stating that their new computer table was based on

obvious design problems of earlier models.

Advise Gillo Sdn Bhd on the likelihood of their successfully holding Wonjo Sdn Bhd

and Bill liable for the unauthorised use of Gillo Sdn Bhd’s trade secrets

I will be advising Gillo sdn bhd on the likelihood of a successful claim against Wonjo

Sdn Bhd for using Bill’s proposed designs for the ‘desktop table’ while employed by

Gillo sdn bhd. I will be tackling whether the Bill had breached the confidentiality

clause from his previous contract to Gillo and whether the information disclosed can

be protected under trade secrets.

Firstly I would like to establish that there was a confidentiality clause in Bill’s previous

contract to Gillo which states that Bill was not permitted to disclose confidential

information without express authority. For Gillo to make a successful claim we must

find out if this clause had been breached by Bill. The confidential information that

Gillo claims was disclosed is Bills Proposed improvements to the desktop table.

However we must identify if the information disclosed would fall under this clause, if

the information was confidential in nature.

We will now attempt to identify a breach of confidence. using the case of Angel

Candies Sdn Bhd v. Loo Yan Wah & Ors, the court stated that confidential

information could extend to any information which is not easily available to the public

and not easily acquired from other sourced. I would like to establish using the facts

of the present case the original ‘desktop table’ design was offered by other

companies other than Gillo, furthermore, as Wonjo states the new table is based off

of obvious design problems of earlier models. If this is an obvious design to the

public and other companies than this information is not confidential. The case of

Angel Candies refers to Dato’ Vijay Kumar Natarajan v Choy Kok Mun, where the
court found that an objective test should be used to see whether a reasonable

person in this situation would consider this information confidential. Again as Wonjo

said these were obvious design problems and Bills proposed solutions to these

issues. The customers feedback to make the table more adjustable and to round the

edges as to prevent injury is the obvious next development of the ‘desktop table’ as

this design to prevent injury has been used by the industry in the designs of other

tables.

Furthermore, I would like to refer to Electro Cad Australia Pty Ltd & 2 Ors v Mejati

RCS Sdn Bhd & Ors which sets out a number of factors to consider. One of these

factors we have already tackled in the previous paragraph. Other factors which are

relevant to this case are, the measures the employer took to make the information

confidential, the value of the information to the employer and competitors, the effort

or money used to develop the information, the difficulty of acquiring or duplicating the

information from other sources. Firstly the Gillo took no measures to protect this

information, as the facts state they rejected Bill’s proposed idea. This information

may be considered as valuable as it was attained from a survey done by Gillo, effort

can be considered as they prepared this survey, however, this information is public

knowledge and obvious and the company did not attempt to develop the idea further.

This information is not difficult to acquire as established before.

We will identify if Bill had an obligation of confidence. Yes, Bill previous employment

contract contained a clause which stated that he cannot disclose confidential

information unauthroised. As stated in Schmitd Scientific Sdn Bhd v Ong Han

Suanan obligation of confidence can arise from an expressed term in a contract.

However using the case of Coco v AN Clark (Engineering) Ltd this obligation is
dependent on a reasonable man in the position of the recipient of the information,

should this man have realised the information was given in confidence with the

expectation to keep this information confidential. Firstly Gillo did not provide this

information, it was Bill’s proposed solution, Bill should not reasonably believe this

information was confidential as it was his proposal and this proposal was rejected as

well. However, Bill did use the survey provided by Paul to the manufacturing

department to create his solution. However, any reasonable person would believe

that the information from the survey was not confidential due to how widespread

knowledge this information is in the industry as established before.

In conclusion, Gillo may not have a successful claim against Wonjo or Bill as Bill has

not breached the confidentiality clause in his contract as the information he has

disclosed to Wonjo was not confidential as we have found, Bills proposed solution

using the survey information was an obvious development in the desktop table. Gillo

also rejected Bill’s proposal as well meaning this was not a solution they were

developing for their table, no effort was made in its development. Thus, Bill has no

obligation of confidence as this information was not confidential meaning Wonjo can

use Bill’s solution.

Breach of confidence :

3 elements

- Under breach of confidence [can put the express term]

**Elements of Trade Secrets Protection**

Trade secrets must meet specific criteria to receive protection. In the case of **Saltman Engineering
Co Ltd & Ors v Campbell Engineering Co. Ltd. [1963] 3 All ER 413**, the court established that trade
secrets demand authenticity in their secrecy. In the context of Gillo Sdn Bhd, their designs and
customer feedback must be genuinely confidential to qualify as trade secrets.
This aspect of confidentiality is vital in the protection of trade secrets, as reiterated in **Coco v AN
Clark (Engineering) Ltd [1969] RPC 41**. Confidentiality is the bedrock of trade secrets and should be
genuinely confidential to merit protection. In Gillo Sdn Bhd's case, the secrecy of their designs,
proposals, and customer feedback is fundamental.

**Role of Contractual Terms**

Contracts play a crucial role in trade secret protection. Express and implied contractual terms impose
obligations of confidentiality. In Gillo Sdn Bhd's scenario, Bill's employment contract likely contains
express or implied confidentiality clauses, as outlined in **George J in Regent Decorators (M) Sdn
Bhd & Anor v Michael Chee & Ors [1984] 2 MLJ 78**. These clauses are crucial determinants in the
case as they can significantly impact Gillo Sdn Bhd's legal position.
Express and implied contractual terms may encompass non-disclosure agreements, confidentiality
clauses, and non-competing clauses. The existence and enforceability of these clauses may influence
the outcome of Gillo Sdn Bhd's case. Specifically, the principles laid out in **Regent Decorators (M)
Sdn Bhd** emphasise the significance of contractual obligations in trade secret protection.

**Application of Equitable Principles**

Equity and equitable principles are crucial in trade secret protection. Courts often stress the obligation
of confidence. **Schmidt Scientific Sdn Bhd v Ong Han Suan [1997] 5 MLJ 632**, referencing
**Prince Albert v Strange (1849) 41 ER 1171**, underscores the importance of upholding obligations
of confidence. For Gillo Sdn Bhd to succeed in their case, they must establish that Bill was under a
professional obligation to maintain confidentiality, which he subsequently breached by disclosing or
using their trade secrets.

**Breach of Confidence - Elements and Defences**

To succeed, Gillo Sdn Bhd must prove that the information constitutes confidential data and that an
obligation of confidence existed. They must further demonstrate that there was disclosure or a threat
of disclosure of their confidential information. The elements to consider are:
1. **Confidential Information:** Confidential information should be data that is not publicly known and
is valuable due to its secrecy. This definition, evident in **Repco (M) Sdn Bhd v Tan Toh Fatt & Ors
[2013] 7 MLJ 408**, should apply to Gillo Sdn Bhd's case.
2. **Obligation of Confidence:** Gillo Sdn Bhd must establish that Bill had an obligation of confidence,
primarily due to his employment role and contractual obligations. **Coco v AN Clark (Engineering) Ltd
[1969] RPC 41** and **Prince Jefri Bolkiah v KPMG (a firm) [1999] 1 All ER 517** highlight the
importance of this element.
3. **Disclosure/Threat of Disclosure:** Evidence indicating that Bill's proposals were used without
authorization is central to the case, as seen in **Schmidt Scientific Sdn Bhd v Ong Han Suan** and
**Worldwide Rota Dies Sdn Bhd v Ronald Ong Cheow Joon [2010] 8 MLJ 297**.

**Trade Secrets vs. Data Protection**

It's essential to differentiate trade secrets from data protection, which is regulated by the **Personal
Data Protection Act 2010**. Gillo Sdn Bhd should clarify that they are pursuing a trade secrets case,
separate from data protection. The key distinction is that trade secrets focus on confidential business
information, while data protection pertains to the safeguarding of personal data.

● Section 4 - Definitions: This section is crucial in distinguishing between personal data

protection and trade secrets. In the case of Gillo Sdn Bhd, they must clarify that they are
 pursuing a trade secrets case. By referencing Section 4, they can establish the PDPA's
primary focus on defining terms related to personal data, emphasising that the Act is
concerned with protecting personal data rather than confidential business information (trade
secrets).
● Sections 30, 34, 38, 42, and 43 - Data Subject's Rights: In the context of Gillo Sdn Bhd's
case, these sections emphasise that the PDPA addresses the rights of individuals (data
subjects) regarding their personal data. The company should point out that their case
revolves around protecting confidential business information (trade secrets) and not the rights
of data subjects. By referencing these sections, Gillo Sdn Bhd can underscore the legal
distinction between their trade secrets case and data protection under the PDPA.
● Section 5 - Data User's Responsibilities: When presenting their case, Gillo Sdn Bhd can
draw a clear contrast between their trade secrets protection and the responsibilities outlined
in Section 5. This section specifies the responsibilities of data users when processing
personal data, further illustrating that the PDPA primarily governs the protection of personal
data, not trade secrets. Gillo Sdn Bhd can emphasize that they are seeking remedies for
unauthorized use of their trade secrets and not addressing personal data protection
obligations.