INTELLECTUAL

PROPERTY ISSUES IN
CYBERSPACE
Patents and Trade Secrets
 Patent Law
◦ Concerns inventions which are:
◦ New (Novel)
◦ Involve an inventive step i.e. non-obvious to those in the field
◦ Capable of industrial application
◦ Grant of patent gives owner (inventor/employer) a monopoly over the
invention—exclusive rights to work the invention for a period of
time;
◦ Duration of protection: 20 years
◦ Subject matter of invention: it may be a new and improved product
OR may be some industrial process
Dr.Lekha Laxman, AHIBS UTM 2
 Patent
◦ A form of personal (intangible) property which may be assigned,
licensed, or charged by way of a mortgage
◦ Monopoly granted for a limited period of time (20 years) in respect
of the invention in return for disclosure of the details concerning
the invention;
◦ These details are available for public inspection and are sufficiently
detailed so that a person skilled in the particular art would be able
to make practical use of the invention
◦ Total disclosure of details is a central prerequisite for the grant of
the patent and nothing must be withheld

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 Patent
◦ Essentially patent is a document,
issued by the relevant government
authority, conferring monopoly to
the creator of the novel invention .
◦ Monopoly granted as part of a
bargaining system between the state
and the inventor, in return for
revealing the working of his
invention to the world and adding to
the store of knowledge in the public
domain
Dr.Lekha Laxman, AHIBS UTM
◦ An Invention may relate either to a
product or process, can be defined
as a novel idea which gives a
practical solution to a specific
problem in the field of technology
◦ Once patent granted, owner can
prevent anyone from exploiting his
invention, even against
independent devisers of the same
invention
4
 Law on Patents in Malaysia

◦ Governed by the Patents Act 1983, as amended by the Patents

(Amendment) Act 1986,1993 and 2000 and Patents Regulations,
1986; Came into force on October 1, 1986.
◦ Two types of protection are available under the Act:
◦ Through the grant of a patent;
◦ Issue of a certificate for ‘utility innovation’
◦ Prior to the Patents Act 1983 coming into force, the only method
of obtaining a grant of a patent, was by first obtaining a grant of a
patent in UK and then re-registering the UK patent in Malaysia.

Dr.Lekha Laxman, AHIBS UTM 5

Conditions for obtaining Patent in Malaysia
◦ The applicant must file an application with the Patent
Registration Office, which satisfies :
◦ all the substantive requirements of the Patents Act 1983 and
◦ also complies with the formal requirements of the Patents Act
1983 and
◦ the existing Regulations

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 How to obtain a patent in Malaysia?
◦ : The Patent Registration office will have to examine the application
to make sure the substantive requirements are satisfied before the
patent could be granted;
◦ Section 11 provides that an invention is patentable if:
◦ Novelty: It is new, if it is not anticipated by the prior art, s.14(1) (anticipatory
materials: everything disclosed to the public i.e, written disclosure, oral
disclosure, use any other way)
◦ Involves an inventive step (obviousness test)—a step which would not have
been obvious to a person having ordinary skill in the art, s.15
◦ Is industrially applicable—can be made or used in any kind of industry, s.16

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Non patentable subject matter, s.13 PA 1983

◦ Discoveries, scientific theories

◦ Plant and animal varieties other than man made living micro-
organisms and the products of such micro organisms processes
◦ Schemes, rules or methods of doing business, performing purely
mental acts or playing games
◦ Methods for treatment of human or animal body by surgery or
therapy and diagnostic methods practiced on human or animal body

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 Other grounds for Non-Grant of a Patent

◦ “Prejudicial to the interest or security of the nation”,

s.30A(1) and (3);
◦ “Contrary to public order and morality”: Riddlesbarger
Application (1936)
◦ Regulations made by the Minister, s.85.

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 Utility Innovation System, s.17 & 17A

◦ To protect minor inventions called utility innovations in the statute

◦ Lower level of patentability criteria needs to be satisfied: Defined
as “any innovation which creates a new product or process, or any
new improvement of a known product or process, which can be
made or used in any kind of industry, and includes an invention,
s.17.
◦ For a certificate to be granted for utility innovation: requirement of
novelty (s.14) and industrial application has to be met. No need
for there to be an inventive step;

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Utility Innovation System, s.17 & 17A
◦ Same procedure as for patent application but cannot have more than one claim
per application unlike for patents.
◦ Cannot be granted patent and certificate for utility invention for the same
invention, s.17C
◦ However can convert an application for a patent into an application for a utility
innovation and vice-versa. This has to be done within 6 months of the
issuance of the Examination Report under section 30.
◦ Certificate expires ten years after the date of filing of the application.

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 Grant of patent
◦ Right arising from grant of a patent is not indefeasible (like other
property grants which cannot be challenged). Patent grants can be
challenged;
◦ Upon grant, the patentee or certificate owner has the right to institute
court proceedings against any person using the invention/utility
innovation without his permission
◦ To keep the patent/certificate in force, the owner is required to pay
annual renewal fees.

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 Ownership of the patent, s.20

◦ (1) Inventions made by an employee or pursuant to a commission:

◦ In the absence of any provisions to the contrary in any contract of
employment or for the execution of work, the rights to a patent for an
invention made in the performance of such a contract of employment or in
the execution of such work, shall be deemed to accrue to the employer, or
the person who commissioned the work, as the case may be:
◦ Provided that the invention acquires an economic value much greater than was foreseen
by the parties when concluding the contract or execution of work, the inventor shall be
entitled to equitable remuneration which may be fixed by the Court in the absence of
agreement between the parties

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 Ownership of the patent, s.20
◦ (2) Where an employee whose contract of employment does not
require him to engage in any inventive activity makes, in the field of
activities of his employer, an invention using data or means placed
at his disposal by his employer:
◦ the right to the patent for such invention shall be deemed to accrue to the
employee, in the absence or any provision to the contrary in the contract of
employment:
◦ Provided that the employee shall be entitled to equitable remuneration which, in the
absence of any agreement between the parties, may be fixed by the Court taking into
account his emoluments, the economic value of the invention and any benefit derived
from it by the employer
◦ (3) The right conferred on the inventor under subsection (1) and (2)
shall not be restricted by contract.

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 Filing date
◦ Very important in Malaysia be cause a patent grant given to
“who files first”;
◦ This differs from the practice in USA and UK where grant of
patent is based on “who invents first”;
◦ Malaysian invention must first be filed in Malaysia but if
one desires to file in another country, need permission from
Patent office under section 23(A).

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 Exclusive rights of the owner of a patent, s.36

◦ Once a patent is granted, the owner is able to prevent anyone from exploiting his invention, even against
independent devisers of the same invention for a duration of 20 years calculated from the date of
application (s.35).
◦ Section 36 of the Act provides that the owner shall have exclusive rights to:
◦ Exploit the patent invention: right to make,import, offer for sale, sell or use the product. As for process
patents, it means the right to use the process and commercially exploit any products obtained directly by
means of the process.
◦ To assign or transmit the patent: must be in writing and signed by or on behalf of the contracting parties.
To be effective against third parties, all assignment/transmission must be recorded in the Register kept by
the Registrar of Patents.
◦ To conclude license contracts: must also be in writing and signed by or on behalf of the contracting
parties. Compulsory license can also be issued by the Registrar on application (3 yrs after grant of patent or
4 yrs from filing date) without permission of the owner (if non-working, unmet demand, excessive pricing
and interdependent patents)

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Infringement, s.58
◦ A Patent will be infringed if any person, other than the owner,
without his agreement, exploit his exclusive right.
◦ The owner has the right to institute Court Proceedings against any
person:
◦ who has infringed or is infringing his patent;
◦ for threatened or imminent infringement
◦ Limitation period of 5 years from the act of infringement, after
which the action is statute barred

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Patent Classification System

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Patent Protection in USA
◦ Constitutional protection for patents via Article 1, Section 8, clause 8
and Patent Act 1952
◦ 3 types of patent : utility patents, design patents and plant patents.
◦ Elements necessary for validity of patent:
◦ must be novel
◦ must be useful and
◦ must not be obvious

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Dr.Lekha Laxman, AHIBS UTM 20
What’s wrong with patents?

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The “hot button” issues in Cyberspace – the Internet
patent/business method patents
◦ In essence, Internet patents protect a particular way of doing business online. 
Indeed, they are more generically referred to as “business method patents.” 
◦ The recent interest being generated by this subject is, in part, brought on by the fact
that the U.S. Patent and Trademark Office is seeing a dramatic increase in the number
of Internet-related applications mostly from corporations looking to protect their
intellectual assets. 
◦ Business methods patents are considered to include any process involving data
processing, calculations, conversions, and so on, used for business operations and
management.

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Business Methods Patents
◦ Estimates differ depending on how patents are classified, some experts estimate that the
number of Internet-related patents granted by the patent office rose from 165 in 1995 to 2,193
in 1998. 
◦ By way of example, one such patent was granted to Priceline.com, an Internet retailer who
was one of the first on the scene, securing protection for its buyer-driven, “name your price”
business model. 
◦ Additionally, Sightsound.com had originally held a patent that covers the entire concept of
selling music through digital downloads.  Later on Sightsound.com had begun demanding a 1
percent royalty from anyone, including the online music store CDNow, who is selling music in
digital form online.  This indicates the monopoly potential with what is already a highly
competitive online arena.
◦ Nevertheless, the fact remains that these Internet patents keep getting filed for and the Patent
and Trademark Office keeps issuing them.

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AMAZON.COM, INC v BARNESANDNOBLE.COM, INC (1999)
◦ Facts: Plaintiff sued for infringement of its ‘411 patent which concerns “a method and
system for placing a purchase order via a communications network”. It is a method by
which potential customers can place an order for merchandise using only a single action
or mouse click once certain identifying information is displayed to the customer.
This “Express Lane” feature was used by Amazon’s competitor Barnes and Noble.
◦ Issue: Whether the patent is invalid on the basis of obviousness and anticipation?
◦ Decision: The Court found the patent to be valid and granted the injunction against the
name defendants. On appeal, the court of appeals reversed the grant of a preliminary
injunction in favor of Amazon although it did agree that Amazon would most likely
prevail. Nevertheless it sent the case back to the trial court for a full trial on the merits of
the action

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 Business Method Exception
◦ Facts: In State Street Bank v Signature Financial Group Inc (1999), Signature held a patent entitled
“Data Processing System for Hub and Spoke Financial Services Configuration” that allows an
administrator of a financial services organization to monitor and record the system’s information flow
and make calculations for the maintenance of a partner fund financial services configuration. A partner
fund consists of a number of mutual funds, or Spokes, which pool their funds into a single portfolio
known as a Hub. The system provides means for a daily allocation of assets for a number of Spokes
invested in the same Hub. The system then determines the percentage share each spoke maintains in the
Hub and other calculations.
◦ Issue arising: Whether the process was patentable?
◦ Decision: When a claim containing a mathematical formula implements or applies that formula thereby
performs a function which the patent laws were designed to protect, then the claim satisfies the
requirement for patentability (s.101). The focus should be the practical suitability of the subject matter.
The Hub and Spoke software does produce a “useful, concrete, and tangible” result. It satisfies the
Patent Act even if the useful result is expressed in numbers such as price, profit, percentage, cost or
loss.

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Problems with patent system – How to fix it?

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International Protection of Patents

◦ The Paris Convention for the Protection of Industrial

Property: March 20 1883—first major convention for
protection of industrial property;
◦ Agreement on Trade related Aspects of Intellectual
Property Rights (TRIPS)
◦ North American Free Trade Agreement (NAFTA)

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Confidential Information
◦ Covers secrets of all kinds including secrets of :
◦ Personal nature
◦ Commercial/industrial nature
◦ National concerns
◦ Trade secrets can be defined as “confidential information” of
commercial nature and is based on common law
◦ In determining whether certain information is a trade secret, one
has to look at all the surrounding circumstances

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Patents vs Trade Secrets
◦ A patent is an invention or process that is novel, useful and non-
obvious; It has the least duration of protection by law, namely 20
years;
◦ A trade secret is the protection that the law gives to confidential
information relating to person’s business, usually generated at
considerable expense and effort by the concern. There is no time
limit to its protection so long as it remains a secret as defined by
law

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 Protection of Trade Secrets
◦ Companies engage in vast expenditures for R&D to have a
competitive edge in the marketplace by discovering ways to go
beyond existing technology.
◦ They need to protect their trade secrets from industrial spying;
◦ Processes, formulas and other secretive data are closely
guarded by the companies.

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Protection of Trade Secrets
◦ Disadvantage with patent protection:
◦ limited period of protection;
◦ when one files a patent, the secret process or make up of the invention is necessarily revealed.
◦ Many items of inventiveness come within the exceptions to patent and trademark protection.
◦ Thus the option of “retaining the secrecy” of such inventions or processes is
chosen—this option is then given legal protection. No registration required for
protection as the main reason for having a trade secret is to prevent its disclosure
beyond a select few persons

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 Protection of Trade Secrets
◦ In Malaysia Trade Secrets and Confidential Information are based on
common law which are independent of the statute law in copyrights,
trademarks, patents and the newly enacted Industrial Design laws.
◦ In USA, trade secrets are protected by statute—The Uniform Trade
Secrets Act which defines trade secret as “information, including a
formula, pattern, compilation, program, device, method, technique or
process that:
◦ Derives independent economic value
◦ Is the subject of efforts that are reasonable under the circumstances to maintain
its secrecy

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 Requirements to establish liability
◦ To succeed in action it was established in Coco v Clarke [1969] that the
following elements are necessary:

◦ It must be shown that the information in question has the necessary quality (of confidential
information): objective test
1. Information must be such that the owner believes that its release will be injurious to him or would be
advantageous to his rivals or to others
2. Owner of info believes it to be confidential/secret and not already in public domain
3. Owner’s belief in 1 & 2 above must be reasonable;
4. The info must be judged in the light of usage and practices of the particular trade or industry
concerned.

◦ The information was communicated or imparted in circumstances importing

an obligation of confidence on the part of the recipient
◦ There has been or may be an unauthorized use of the information to the
detriment or prejudice of the owner

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Objective Test: Summary
“If the circumstances are such that any reasonable person standing
in the shoes of the recipient of the information would have realized
that upon reasonable grounds the information was being given to
him in confidence, then this should suffice to impose upon him the
equitable obligation of confidence.”

Dr.Lekha Laxman, AHIBS UTM 34

Patents in the Cyber Age with Whiteford, Taylor
& Preston | Cybrary | BlackHat 2019

Dr.Lekha Laxman, AHIBS UTM 35

 Revelation of trade secrets

◦ The revelation of the trade secret to another does not destroy the
element of secrecy in certain circumstances:
◦ Licensees of the holder must be given the protected information that is part of
the license.
◦ Employees must know the trade secret in order to fulfill their duties within the
limited range of persons who may be told the confidential data without loss of
legal protection
◦ Persons who wrongfully obtain or utilize trade secrets may be
liable for the ‘tort of misappropriation’.

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 Employees & Trade Secrets
◦ Trade secrets are almost always acquired by senior executives of a
company who eventually leave for a new company with experience,
knowledge from the former employer’s company;
◦ The problem arises when the new company expects disclosure of
secrets acquired previously—higher income paid for employees of rival
companies due to the expectancy of the revelation of such secrets.
◦ Litigation may be the end result where the prior employer brings an
action to prevent such disclosure

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 EARTHWEB,INC. v. SCHLACK (1999)
◦ Facts: A senior employee was allegedly in possession of a number of trade secrets
who left his position to join a company in an allied field. The former employer,
Earthweb sued to prevent him from being employed with International Data Group
and to prevent him from disclosing trade secrets acquired from Earthweb. It sought
preliminary injunction to prevent Schlack from commencing employment.
◦ Issue arising:
◦ Whether Earthweb established that it would be irreparably harmed by the alleged “inevitable
disclosure of trade secrtes”?
◦ Whether Schlack breached the non-compete agreement with Earthweb by becoming employed
with a company in a similar business?
◦ Decision: Court refused preliminary injunction as plaintiff was unable to prove
irreparable harm. The non-compete agreement was overbroad and unenforceable

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 Trade Secrets vs Restraint of Trade

◦ In Malaysia s.28 of the Contracts Act 1950 provides that every agreement by which
anyone is restrained from exercising a lawful profession, trade or business of any kind is to
that extent void unless one sells the goodwill of a business or are partners in anticipation of
dissolution, or partners who carry on business during the continuance of partnership and
therefore agreed not to carry out business within such local limits.
◦ General Rule: The Restraint of Trade Clause is void (Wrigglesworth v Wilson Anthony
[1964]) but the Courts will enforce it thereby restraining an ex-employee from joining a
competitor provided that the clause is not too broad in terms of defined geographical limits
and specific period of time.
◦ Irrespective of the Restraint of Trade Clause, the Court will prevent an employee or ex-
employee from disclosing or utilizing trade secrets of his employer or ex-employer.
◦ A Confidentiality Clause is normally incorporated for this purpose ; if not this will be
implied by the Courts.

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 Protection of Information
◦ Balance of interests of the employer and the employee:
◦ Freedom of employee to dispose of his labour where and when he pleases
◦ Protect the employer with regards valuable pieces of information that an
employee may possess over the employer’s competitors or may use himself in
competition;
◦ While in employment, employee must observe his duty of fidelity but once he
leaves his employment the balance rests largely in his favour, when he is
entitled to make use of all the skill and knowledge he has acquired.

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 Protection of Information

◦ Protection of Confidential information—basically protects the “know how”;

◦ Protection of copyrights and patents—protection of information related to “show how”
◦ For technical information, confidence cannot play a long term role unless the information can be put to
commercial use without at the same time becoming public. A mechanical devise will always reveal its
workings once marketed but a process of manufacture may not be detectable.
◦ Protection of patent only for limited period of time; to keep his invention secret through obligation of
confidence (know how) is for him an alternative and not an additional form of protection—an alternative
not tied to a specified period of time but which is good only against those who receive information
directly or indirectly from them.
◦ Third party recipients: anyone who receives information from a party who acts in breach of confidence
and who is proposing to use it will be restrained if he is aware of the confidentiality of the information
and knowledge in this sense can be actual, imparted, or constructive.

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Remedies
◦ Injunction
◦ Damages
◦ An account of profits
◦ Order for destruction of articles

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