The Protection of Trade Secrets and Confidential Information in Nigeria

INTRODUCTION

Think about Coca-Cola’s recipe for their signature drink, Kentucky Fried Chicken’s (KFC) secret blend of 11 herbs and spices, and Google’s search algorithm.

At the turn of the 19th Century, Coca Cola was faced with an interesting choice: Patent the recipe for its popular soft drink, which would mean disclosing its ingredients, OR brand it a trade secret and keep things under wraps. They chose the latter[1]. For generations, corporations and businesses have continued to protect their trade secrets, in order to enhance prospects of their long-term sustainability, profitability and market relevance.

The formula for the Coca Cola recipe, also referred to by the code name “Merchandise 7X”,[2] is known to only a few people and kept in the vault of a bank in Atlanta, Georgia. The individuals who know the secret formula have signed non-disclosure agreements, and it is rumoured that they are not allowed to be on the same plane when they travel.

In the past, one could not buy Coca Cola in India because Indian law then, required the disclosure of trade secret information. In 1991, India changed its laws regarding trademarks, and Coca-Cola can now be sold in that country[3].

This disquisition is on the protection of trade secrets and confidential information in Nigeria, which is a subset of Intellectual property rights. It will define trade secrets and confidential information, state the rationale behind the protection, as well as the scope of confidential information and trade secrets. This work will also consider the misappropriation of trade secrets, remedies, defences, and some legislations that protect confidentiality and trade secrets in Nigeria.

THE DEVELOPMENT, DEFINITION AND SCOPE OF TRADE SECRETS AND CONFIDENTIAL INFORMATION

The concept of Trade secrets and confidential information began to develop with the rise of industrial capitalism in the middle of the 19th century, but went dormant until the late 1940s, when it was realized that this was an extremely useful area of law[4].

One of the earliest case laws that helped in the development of this area of law was Prince Albert v Strange.[5] Here, the Queen and Prince Albert made etchings for their own amusement, intended only for their private entertainment, but they sometimes had prints made to give to friends. The defendant had made unauthorized copies which he had intended to put on public display. An injunction was granted to restrain him.

While Patents had helped to restrain third parties from reaping the fruit of others’ research, invention and development efforts, Trade secrets, on the other hand, do not have to be innovations or inventions but valuable information (on processes, finance, technical know-how, etc.), that are not generally available to the public[6]. Trade secret encompasses commercially valuable, sensitive and confidential information.

Article 39 of Trade-Related Aspects of Intellectual Property Rights (TRIPS) has classified trade secrets as undisclosed information that needs to be protected so long as “such information:

  1. Is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
  2. Has commercial value because it is secret; and
  3. Has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.”

Since Nigeria lacks a working definition of trade secrets, one of the best working definitions of trade secrets is found in the Uniform Trade Secrets Act (UTSA) adopted by most States of the United States of America. UTSA defines a trade secret as:

“… information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

  1. Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means, other persons who can obtain economic value from its disclosure or use, and
  2. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. ”[7]

So, basically, a Trade secret is any information that allows you to make money because it is not generally known. In other words, a Trade secret is valuable because it is kept secret.

RATIONALE FOR THE PROTECTION OF TRADE SECRETS

One of the recurring questions in the world of Intellectual property rights is– why protect trade secret when it is in fact a secret? This author’s answer is that protecting the trade secrets of a business preserves the ingenuity of such a secret that has real economic value for such a business. According to the World Intellectual Property Organization (WIPO), protecting trade secrets will help to:

  1. Maintain and promote standards of commercial ethics and fair dealing;
  2. Provide an incentive for businesses to innovate by safeguarding the substantial time and capital invested to develop competitively advantageous innovations, both technical and commercial, and especially those that are not patentable or do not merit the cost of patenting; and
  3. Prevent competitors from using these innovations without having to shoulder the burden of costs or risks faced in developing the innovations[8].

As a matter of fact, Trade secret being an intangible property, can also be used as collateral in the event of debt financing[9].

How are trade secrets protected?

Trade secrets, which is another name for confidential information in some jurisdictions, are lost once the secret becomes public knowledge. Once lost, the protection is gone forever. The law relating to trade secrets is scrappy in nature in Nigeria. Despite the increase in the number of technology-driven start-ups in Nigeria, the regulation of Intellectual property is still limited to Patents, Designs, Copyright and Trademark[10].

In the absence of any definite legislation protecting or regulating trade secrets in Nigeria, the originator of such trade secrets has to put in extra effort to protect such from being disclosed to a third party or the entire world[11]. This author would advise a Colonel Sanders’ move; the founder of KFC, who kept the secret ingredient of the original recipe in the safest place in the world – his head. He eventually wrote the recipe down, and the original handwritten copy is in a safe in Kentucky[12].

Another way to protect Trade secrets is through confidentiality/non-disclosure and non-compete agreements. The employer/licensor of the trade secret executes a Confidentiality/Non-disclosure Agreement (CNDA) with every employee and contractor of the business, most especially those exposed to or who come in contact with and may have knowledge of such trade secret[13]. Alternately, a properly worded non-compete clause could be included in the employment, service or other contracts (as the case may be), to protect the interest of the originator of the trade secret, in the event of disengagement by resignation or dismissal from service.

This was the case in Andreas Koumolis v Levantis Motors Limited[14], where the Supreme Court held that it could reasonably be inferred from the surrounding circumstances, that the appellant (a former employee of the respondent) had utilized the trade secrets of his ex-employer upon his assuming duties with a competitor company, located in the proximity of the respondent’s address. The apex Court further held that the restrictive clause which read that the former employee will not for “a period of one year undertake to carry on either alone or in partnership nor be employed or interested directly or indirectly in any capacity whatever in the business of Merchants Engineers or any other business carried on by the Company within a radius of fifty miles from any Trading Station in West Africa” was reasonably necessary for the protection of the business interest of the respondents (former employer) and therefore valid and enforceable in law.

THE MISAPPROPRIATION OF TRADE SECRETS

Obtaining secret information, which is the subject matter of a trade secret, without proper authorization or through unlawful means, constitutes the tort of misappropriation[15]. On the one hand, an action for misappropriation can be maintained by the licensor based on assumed contractual obligations; On the other hand, an action in tort can only be predicated on an ongoing confidential relationship with the licensee.

Generally, misappropriation of trade secrets occurs when there is a breach of a duty or obligation to maintain secrecy. It can also happen when there is theft, bribery or electronic and corporate espionage.

REMEDIES FOR MISAPPROPRIATION OF TRADE SECRETS

The Courts, mindful of the foundational legal principle of ubi jus ibi remedium (where there is a wrong, there must be a remedy), will intervene in order for justice to come to the aid of an injured or likely to be injured party.

The two most important remedies for misappropriation of trade secrets are damages and the equitable remedy of injunction – applied where there is a prima facie case, insufficiency of damages to remedy the wrong done, the balance of convenience tilts in favour of the applicant and undertaking as to damages by the Applicant[16].

DEFENCES TO A MISAPPROPRIATION CLAIM

A claim for trade secret misappropriation may be rebutted by establishing that the information was obtained via proper means and/or independent effort, availability of the information in the public domain, reverse engineering, or through published literature[17].

SOME NIGERIAN LEGISLATIONS THAT BORDER ON TRADE SECRETS

The most significant reassuring provision for the protection of trade secrets in Nigeria can be found in section 15(1)(a) Freedom of Information Act 2011 (FOIA)[18]. It mandates public institutions to deny applications for information that contains “trade secrets and commercial or financial information obtained from a person or business where such trade secrets or information are proprietary, privileged or confidential, or where disclosure of such trade secrets or information may cause harm to the interests of the third party.” Section 15(1)(a) is thus, a welcome curtailment of the section 1 right of an applicant to request information in the custody of any public official, agency or institution.

There are other legislations that affect the protection of trade secrets. For instance, the Revised Guidelines for Registration and Monitoring of Technology Transfer Agreements in Nigeria (Guidelines) made pursuant to the National Office for Technology Acquisition and Promotion Act[19] (NOTAPA) mandates the submission of relevant technology transfer (service) agreements (which could implicate disclosure of trade secrets), as part of documentation requirements for NOTAPA‘s registration of such agreement. However, there is no corresponding provision for protection in both the Revised Guidelines and the NOTAPA.

CONCLUSION

The need to protect trade secrets in Nigeria cannot be overemphasized. With the increase in technology-driven start-ups, coupled with the adoption of remote working, and the entrepreneurial underpinnings of business impacting technological innovations and other non-technical ideas, there must be a comprehensive legal framework to protect trade secrets.

The National Assembly should enact subject-specific legislation like the UTSA, which provides for injunctive reliefs against propagation or dissemination of trade secrets, protective measures[20] in trials, and for materials seized and remedies in case of actual or attempted prejudicial disclosure like injunction and damages, and award of cost of attorney’s fees where an injunction was obtained unduly.

REFERENCE

  1. ‘Coca-Cola’s secret formula: A trade secret kept for more than a Century’< https://bdjls.org/coca-colas-secret-formula-trade-secret-kept-century/ > Accessed 18 April, 2022.
  2. Md. Moniruzzaman, ‘What is a trade secret, and how is it different from a patent or copyright?’< https://money.howstuffworks.com/question625.htm > Accessed 17 April, 2022.
  3. Kylie Obermeier, ‘When India kicked out Coca-Cola, local sodas thrived< https://www.google.com/amp/s/www.atlasobsura.com/articles/what-is-thums-up.amp > Accessed 18 April, 2022.
  4. National Open University of Nigeria, ‘Law of intellectual property’ 435 (p 89)
  5. (1849) 1 Mac & G 25
  6. Peter S. Menell, ‘Tailoring a public policy exception to trade secret protection’, California Law Review, 2017 vol. 105 No. 1, p.8.
  7. S. 1(4), 14 U.L.A, 372 (Supp.1989).
  8. WIPO, ‘Trade Secrets’, Module 4, < https://www.wipo.int/export/sites/www/sme/en/documents/pdf/ip_panorama_4_learning_points > Accessed 19 April, 2022.
  9. Daniel P. Saredau, et al, ‘The Legal Regime for protection of trade secrets in Nigeria: Breach of Confidence Claim as Gap-Filler’, NAUJCPL (2020) Vol. 7No. 1, p.3: < https://journals.unizik.edu.ng/index.php/jcpl/article/view/355/330 > Accessed 19 April, 2022.
  10. See the PDA, Copyright Act Cap C28, LFN 2004 and the Trademarks Act Cap. T13, LFN 2004.
  11. Gabriel Omoniyi, ‘Protections: A commentary on Trade Secrets in Nigeria’ < https://www.mondaq.com/nigeria/trademark/1041406/protections-a-commentary-on-trade-secrets-in-nigeria? > Accessed 17 April, 2022.
  12. By the Associated Press, ‘KFC moves Colonel Sanders’ secret fried chicken recipe to new, safer vault’ < https://www.nydailynews.com/life-style/eats/kfc-moves-colonel-sanders-secret-fried-chicken-recipe-new-safer-vault-article-1.389489 > Accessed 18 April, 2022.
  13. “Factory owners and other innovative businesses came to use physical security around their facilities, nondisclosure agreements, and other techniques to secure protection for the broader range of technological advances and strategic information driving their competitive advantage.” Peter S. Menell, (supra).
  14. (1973) LPELR-1710(SC).
  15. SPA Ajibade, ‘A Review of Contemporary Legal Trends in Nigerian Law: Intellectual property law and litigation in Nigerian Courts’, p 91-92.
  16. See Obeya Memorial Hospital v. A-G Federation [1985] 3 NWLR (pt. 60), 325 SC.
  17. S.1 UTSA 1995 Amendments.
  18. No. 4 of 2011.
  19. Cap. N62, LFN 2004.
  20. Section 36(1) and (3) of the 1999 Constitution of the Federal Republic of Nigeria (as amended) must be first amended to grant the Heads of Courts the allowance for ‘secret trials’ in civil proceedings that involves trade secrets.

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