21 June 2018
Article, News

Trade war and the importance of protecting company secrets

How import tariffs underline the importance of protecting company secrets.

Tariffs and trade anxiety
Escalation of the trade conflict between the USA and the EU (among others) will have an impact on our economy, warns the Netherlands Bureau for Economic Policy Analysis (Centraal Planbureau") [1]. On the 19th of June, the stock markets in Europe opened lower due to new threats regarding trade measures between China and the USA [2]. The Financieel Dagblad of 20 June 2018 reported that the threat alone from the USA of levying additional import tariffs on Chinese goods has resulted worldwide in the sale of risky investments [3]. The increasing trade anxiety will have an impact on all segments of the economy.

In this context, it is interesting to note the opinion of former Hoogovens/Corus/Tata Steel director Rob de Brouwer in the Volkskrant of 18 June 2018 [4]. He spoke about the American steel company Thomas Steel Strip (‘TSS’), a subsidiary of Corus/Tata Steel. Among other products, TSS produces basic materials for batteries. Exceptionally high technical standards are imposed on this material. The raw material for that purpose must also meet these standards, although it is not produced in the USA, but by Tata Steel in IJmuiden. Consequently, the American consumer will ultimately pay the price for the import tariff on steel; the increased steel price will lead to higher production costs and lower buying power for families. This will weigh down on consumption, investments and employment [5].

Copying by the competition
Rob de Brouwer writes that during the past decade, various steel producers in the USA have tried to produce the same product (hot-rolled nickel-plated steel) with the same quality, but have always failed. “There is no reason to think that now – with the intervention of President Trump- it will succeed,” De Brouwer says.

The latter could possibly be realised if indeed, such a factory would discover what precisely enables Tata Steel in IJmuiden to achieve such high technical standards. Averting higher production costs might also be an additional motivation for this.

I can safely assume that the confidential know-how of Tata Steel is what makes the difference between Tata Steel and its American competitors. Such know-how is of great value and demands a high degree of protection, moreover because of the aforementioned motivation.

Protecting trade secrets
Breach of trade secrets is not new. In the news or in court cases, we witness many of cases of company espionage, bribing of personnel and former employees who take know-how with them when they leave a company. The damage is usually immense and it is difficult to determine the volume or to obtain compensation. Therefore, protection measures are extremely important.

This importance was also recognised by the implementation of a higher and more uniform degree of protection of trade secrets in the EU by means of the directive for protecting trade secrets, which by 9 June 2018 had to be implemented by the member states [6].

Based on this new regulation, action can be taken against unlawful acquirement, use or publication of trade secrets. In a legal proceeding, the court can impose measures on the participating parties in order to safeguard the confidentiality of trade secrets [7].

To make a claim within these new regulations, it is essential for the damaged trade secret to meet a number of conditions: 1) it must be a secret, 2) it must have a trading value because it is secret, and 3) adequate protection measures must be in place for the sake secrecy.

Where can you profit from this?
Especially regarding the last point, there are often immense profits that can be gained by companies. The company will not only need to identify which valuable trade secrets it holds, but also which protection measures have been put in place and whether these are sufficient.

Companies will have to ask themselves the following questions (to name a few):

  • Is the protection of digitally stored information adequate? (Does the company need more complex IT facilities in order to prevent leakage and/or digital espionage?)
  • Who must have access to specific confidential information and who has de facto access?
  • Are people who have access (or could get access) bound by confidentiality clauses?
  • How is confidentiality regulated in contracts with third parties?

Protecting trade secrets requires constant attention but – in these times of increasing anxiety on the world market – it demands immediate extra attention. The conviction that De Brouwer expresses that Tata Steel’s competitors are currently not in a position to achieve Tata Steel’s high degree of quality indicates that the know-how protection of Tata Steel is safeguarded. Nevertheless, they will need to constantly keep their eyes and ears open to maintain this level of protection.

 

[1] https://nos.nl/artikel/2237229-alleen-maar-verliezers-bij-handelsoorlog-waarschuwt-cpb.html
[2] https://www.nu.nl/economie/5319209/beurzen-flink-omlaag-nieuwe-dreigementen-in-handelsoorlog.html
[3] Financieel Dagblad, 20 juni 2018, “Markten anticiperen op handelsoorlog”, Marcel de Boer.
[4] https://www.volkskrant.nl/columns-opinie/trumps-importheffingen-zijn-contraproductief-ook-de-amerikanen-zullen-er-de-dupe-van-worden~bf4c2f6b/
[5] Vgl. Financieel Dagblad, 20 juni 2018, “Handelsoorlog komt ook VS duur te staan”, Marcel de Boer.
[6] Behandeling in de Eerste Kamer wacht op Memorie van Antwoord. Tot de implementatie kan rechtstreeks verwezen worden naar de Richtlijn. www.eerstekamer.nl/wetsvoorstel/34821_wet_bescherming
[7] Article https://www.arnold-siedsma.nl/nieuws/bedrijfsgeheimen-verbeterde-bescherming-als-quasi-ie-recht

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