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Trade related aspects of IP rights

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) came into force in 1995, as part of the Agreement Establishing the World Trade Organization (WTO). TRIPS incorporates and builds upon the latest versions of the primary intellectual property agreements administered by the World Intellectual Property Organization (WIPO), the Paris Convention for the Protection of Industrial Property, and the Berne Convention for the Protection of Literary and Artistic Works, agreements that go back to the 1880s.

TRIPS is unique among these IPR accords because membership in the WTO is a "package deal," meaning that WTO members are not free to pick and choose among agreements. They are subject to all the WTO's multilateral agreements, including TRIPS. 

TRIPS applies basic international trade principles to member states regarding intellectual property, including national treatment and most-favored-nation treatment. TRIPS establishes minimum standards for the availability, scope, and use of seven forms of intellectual property: copyrights, trademarks, geographical indications, industrial designs, patents, layout designs for integrated circuits, and undisclosed information (trade secrets). It spells out permissible limitations and exceptions in order to balance the interests of intellectual property with interests in other areas, such as public health and economic development. (For the complete text of the TRIPS Agreement, as well as an explanation of its provisions, see the WTO web site at www.wto.org .)

According to TRIPS, developed countries were to have implemented the agreement fully by January 1, 1996. Developing-country members and members in transition to a market economy were entitled to delay full implementation of TRIPS obligations until January 1, 2000. Least-developed members were given until January 1, 2006, to implement their obligations, with the possibility of further transition upon request. Developing countries that did not provide patent protection for particular areas of technology on their date of application were given an additional five years, until January 1, 2005, to provide such protection. In November 2005, the 2006 transition period for least-developed countries was extended to July 1, 2013.

At the 2001 WTO Ministerial Conference in Doha, least-developed countries were given an additional 10 years to implement TRIPS patent and "undisclosed information" provisions as they relate to pharmaceuticals. In July 2002, the WTO General Council agreed to waive the obligations of least-developed countries concerning exclusive marketing rights for pharmaceutical products until January 1, 2016.

Because the TRIPS Agreement is over a decade old, however, it does not address several new developments, such as the Internet and digital copyright issues, advanced biotechnology, and international harmonization, the process of creating uniform global standards of laws or practice. It sets the floor for minimum IPR protection, not the ceiling.

Since the conclusion of the TRIPS Agreement, the World Intellectual Property Organization has addressed digital copyright issues in the so-called Internet Treaties, namely the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT).

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Andrew Mitchell, PhD (Cantab), LLM (Harv), Grad Dip Intl L (Melb), LLB (Hons) (Melb), BCom (Hons) (Melb) is Associate Professor, Faculty of Law, University of Melbourne; Member, WTO indicative list of governmental and non-govern-mental panelists; Fellow, Tim Fischer Centre for Global Trade & Finance, Bond University; Barrister and Solicitor, Supreme Court of Victoria and High Court of Australia; and Advisory Board Member, Melbourne Journal of International Law; Author of Legal Principles in WTO Disputes (Cambridge: Cambridge University Press, 2008).

Tania Voon University of Melbourne. Email: [email protected]

• Published: 18 September 2012
• Cite Icon Cite
• Permissions Icon Permissions

.   The Nature of the TRIPS Agreement   187

.   Developments to Date   189

Dispute Settlement   189

Access to Medicines and Public Health   192

.   Outstanding Issues   195

Exhaustion and Parallel Imports   195

Anti-competitive Practices   197

Geographical Indications   198

.   Beyond the WTO   200

TRIPS-plus in FTAs   201

A Human Rights Approach to TRIPS   203

.   Conclusion   205

I. The Nature of the TRIPS Agreement

During the Uruguay Round of negotiations that finally created the WTO in 1995, the TRIPS Agreement was one of the most controversial new agreements added by the GATT 1947 Contracting Parties. 1 The TRIPS Agreement defines ‘intellectual property’ (IP) as copyright and related rights, trademarks, geographical indications, industrial designs, patents, layout-designs (topographies) of integrated circuits, and undisclosed information (Article 1.2). Thus, this agreement on ‘trade-related aspects’ of IP bears on subjects as wide-ranging as books, computer programs, inventions, and trade secrets. Not surprisingly, given this subject matter, its ‘strongest proponents’ have been the US, the EC, and Japan, along with their IP industries. 2

The TRIPS Agreement establishes minimum standards for the protection of IP rights in each of the seven defined areas of IP, meaning that WTO Members are generally entitled to provide higher but not lower levels of IP protection. The most important way in which the TRIPS Agreement establishes these standards is by incorporating several existing multilateral treaties on IP. In particular, Members must comply with Articles 1 to 12 and 19 of the Paris Convention 1967 (Article 2.1) and with Articles 1 to 21 of the Berne Convention 1971 (excluding Article 6 bis ) (Article 9.1). The TRIPS Agreement builds on these existing treaties by imposing additional substantive obligations while recognizing certain exceptions, such as those regarding security and anti-competitive practices (Articles 73, 40.2).

Like several other WTO agreements, the TRIPS Agreement also creates general obligations of ‘national treatment’ and ‘MFN treatment’. With regard to IP protection, subject to permitted exceptions (again defined in part by reference to existing IP treaties), Members agree to accord to the nationals of other Members ‘treatment no less favourable’ than they accord to their own nationals (Article 3) and to accord immediately and unconditionally to the nationals of all Members ‘any advantage, favour, privilege or immunity’ granted to the nationals of any other country (Article 4).

The TRIPS Agreement also incorporates rigorous requirements concerning the enforcement of IP rights through judicial and administrative proceedings and appropriate remedies (Part IV) and a sophisticated system for resolving disputes between Members pursuant to the DSU (Part V). The TRIPS Council monitors the operation of the TRIPS Agreement and Members’ compliance with it (Article 68).

A frequent criticism of the TRIPS Agreement is that it has no place in the WTO because it entails harmonizing laws (positive integration) rather than removing or prohibiting barriers to international trade (negative integration). Moreover, the grant of exclusive or monopoly rights pursuant to the TRIPS Agreement may itself constitute a trade barrier. 3 Cottier responds that other aspects of the WTO agreements are ‘equally harmonizing’ and that the recognition of IP rights does not of itself conflict with the goals of trade liberalization; rather, the impact on trade and global welfare depends on the balance struck between providing incentives to innovate and protecting investment, on the one hand, and safeguarding competitive opportunities, on the other. 4 The TRIPS Agreement does recognize (under the explicit heading ‘Objectives’) the relevance of IP rights to ‘social and economic welfare’ and the need to achieve ‘a balance of rights and obligations’ (Article 7). 5

Another, perhaps more serious, challenge to the TRIPS Agreement arises from ‘the strong and widespread perception that [it] is against the interests of developing countries’. 6 Notwithstanding the variation in interests among developing country Members, their eventual acceptance during the Uruguay Round of WTO obligations concerning IP is generally regarded as having been a necessary sacrifice in order to achieve broader liberalization objectives, 7 though they arguably received a poor bargain given the relatively limited disciplines agreed in sectors such as agriculture and textiles. 8 The TRIPS Agreement does allow developing country and LDC Members longer transition periods to implement their obligations and also provides for developed country Members to assist them with technical and financial cooperation in this regard (Articles 65–67). However, like many special and differential treatment provisions, these were insufficient to address the difficulties faced by many developing countries in implementing the TRIPS Agreement, 9 and they did little to change the fact that the main beneficiaries of stronger IP rights were (at least initially) industrialized countries. 10

In the second part of this chapter, we outline certain significant developments under the TRIPS Agreement since its entry into force in 1995, namely in the course of dispute settlement and in relation to public health. The third part explores some of the issues under the TRIPS Agreement that are yet to be resolved: exhaustion, anticompetitive practices, and geographical indications. In the final part, we address a number of areas in which TRIPS-related issues expand beyond the boundaries of the WTO. In particular, we consider the role of the World Intellectual Property Organization (WIPO), the increasing frequency of ‘TRIPS-plus’ provisions in preferential trade agreements, and the call for greater acknowledgement of human rights concerns in interpreting and applying the TRIPS Agreement. Due to space constraints, we do not address the many other important subjects arising under the TRIPS Agreement, such as traditional knowledge and biodiversity. The following overview nevertheless exemplifies the wide range of dilemmas arising under the TRIPS Agreement, which is sure to continue as one of the chief battlegrounds in the development of WTO law, even as bilateral trade agreements and other areas of public international law, such as human rights, intervene.

II. Developments to Date

In this section, we examine two areas in which the TRIPS Agreement has undergone major developments: disputes arising under the TRIPS Agreement that have proceeded to formal adjudication in the WTO, and negotiation among WTO Members regarding access to medicines and public health under the TRIPS Agreement.

A. Dispute Settlement

As at the end of 2006, 25 formal complaints had been brought in connection with the TRIPS Agreement: a reasonable number, though not as many as under several other WTO agreements 11 such as the GATT 1994, the SCM Agreement, or the Agreement on Agriculture. In addition, on 10 April 2007, the US requested consultations with China alleging violations of the TRIPS Agreement in relation to the availability of criminal procedures and penalties for IP infringement, the disposal of goods that infringe IP rights, and the denial of copyright protection for works that have not been authorized for publication or distribution within China. 12 To date, nine Panel reports (some related) and three Appellate Body reports in relation to the TRIPS Agreement have been circulated and adopted.

The most recent TRIPS dispute to reach the stage of a final Panel report concerned geographical indications (GIs), which are also the subject of continued negotiations in the Doha Round as discussed below. Indeed, Australia and the US may have decided to challenge the EC’s GIs scheme in part to buttress their position in negotiations on this issue. 13 In this case, which was not appealed, the Panel found that several aspects of the EC’s scheme violated the national treatment (NT) obligations in the TRIPS Agreement and the GATT 1994. For example, the Panel found that such violations stemmed from the prima facie case made by Australia and the US (not successfully rebutted by the EC) that a GI located in another WTO Member could be registered under the relevant EC regulation only if the Member had adopted an equivalent system for GIs protection and provided reciprocal protection to EC products. 14

The US and EC have also played prominent roles in several other TRIPS disputes. In two cases, the EC challenged the US, once regarding its protection of trademarks used in connection with a business or assets that were confiscated by the Cuban government, 15 and once regarding its limitations on performers’ copyright for certain broadcasts. 16 The US has not yet implemented the adverse rulings in either of these cases, 17 much to the annoyance of other Members, particularly given the US role in championing the TRIPS Agreement. 18 Other TRIPS disputes have explored matters such as the term of patent protection required under Article 33, 19 the limited exceptions to patent protection allowed under Article 30, 20 the transition period for developing country Members, 21 and the provision of a ‘mailbox’ filing system for patent applications pending the availability of a patent protection system. 22

The TRIPS Agreement has given rise to two other developments in WTO dispute settlement. First, developing countries have often considered the TRIPS Agreement a useful instrument in responding to another Member’s failure to implement an adverse ruling by the DSB, even when the original violation was in respect of goods or services rather than IP rights. This generally requires the retaliating developing country Member to establish that ‘it is not practicable or effective to suspend concessions or other obligations with respect to the same’ sector or agreement and that ‘the circumstances are serious enough’ to warrant suspension under the TRIPS Agreement instead. 23 For example, Brazil proposed suspending concessions under the TRIPS Agreement rather than increasing tariffs on imports in response to US violations of the SCM Agreement because, ‘[g]iven the asymmetries between the two economies, additional import duties would have a much greater negative impact on Brazil than on the [US]’. 24

Whether ‘cross-retaliation’ of this kind is allowed in the WTO depends on the circumstances of the case. If the implementing Member does not object to the proposed suspension, the DSB authorizes it by reverse consensus. If the implementing Member does object, arbitrators (usually the original panel) determine whether it accords with the relevant dispute settlement provisions. 25 One such arbitration approved Ecuador’s request to suspend concessions to the EC under the TRIPS Agreement following EC violations regarding banana imports, noting that ‘the considerable economic differences between a developing WTO Member and the world’s largest trader … confirm … that it may not be practicable or effective for Ecuador to suspend concessions or other obligations under the [GATS] or with respect to all product categories under the GATT’. 26 The utility of this approach for a developing country Member may nevertheless be limited by constraints under its domestic law or other IP conventions to which the Member is a party, as well as economic considerations. 27

A second noteworthy feature of the TRIPS Agreement in connection with WTO dispute settlement is that ‘non-violation’ and ‘situation’ complaints as described respectively in Article XXIII:1(b) and (c) of the GATT 1994 were precluded under Article 64.2 TRIPS Agreement until 1 January 2000 and since that date have remained inapplicable by agreement between the Members. 28 In the GATT 1994 context, violation complaints are much more common (under Article XXIII:1(a)), but a Member may also bring a WTO dispute where it considers that, as a result of a Member’s measure that does not necessarily violate WTO law or some other situation, its WTO benefits are being nullified or impaired, or the attainment of any objective of the agreement is being impeded. Special dispute settlement provisions apply to these complaints under Article 26 DSU. The Council for TRIPS continues to work on the scope and modalities for complaints of this type under the TRIPS Agreement, 29 which could cover, for example, a patent regime imposing ‘an excessively high level of inventive step’ for pharmaceutical products that effectively preclude patent protection for these products without banning it outright. 30 Some regard non-violation complaints as unnecessary in the TRIPS context, given that the agreement is less concerned with market access and tariff concessions than the GATT 1994; others regard it as crucial in preventing Members from circumventing their TRIPS obligations. The impact of such complaints on security and predictability of trade is debated. 31

B. Access to Medicines and Public Health

The TRIPS Agreement recognizes the relationship between IP rights and public health, 32 allowing Members to ‘adopt measures necessary to protect public health and nutrition … provided that such measures are consistent with the provisions of this Agreement’ (Article 8.1). Patent protection for pharmaceutical products as mandated in the TRIPS Agreement represents one possible obstacle to public health measures and provides the setting for some of the most crucial advances made under the TRIPS Agreement and, indeed, the WTO agreements as a whole, since their enactment.

Subject to certain limited exceptions, 33 Members must make patents available for pharmaceuticals, and owners of these patents have exclusive rights to prevent others from making, selling, or importing the relevant products (Articles 27–28). These rights tend to elevate the prices of patented medicines (as compared to ‘generic’ or ‘off-patent’ medicines), 34 creating a potential difficulty particularly for developing countries seeking to manufacture or import them to deal with serious public health concerns, such as HIV/AIDS crises. Without further discussion, this difficulty would have crystallized when the transition period for pharmaceutical patents ended on 1 January 2005 for many developing countries such as India, and on 1 January 2006 for LDCs (Articles 65.1, 65.2, 65.4, 66.1).

Exceptions in Articles 30 and 31 might have assisted, in particular, by allowing the grant of compulsory licences to manufacture patented pharmaceuticals subject to conditions such as the payment of adequate remuneration and prior attempts to negotiate a voluntary licence on reasonable commercial terms and conditions (which condition could be waived ‘in the case of a national emergency or other circumstances of extreme urgency or in cases of public non-commercial use’) (Article 31(b)). However, under Article 31(f), this kind of ‘use of the subject matter of a patent without the authorization of the right holder’ is to be ‘authorized predominantly for the supply of the domestic market of the Member authorizing such use’, meaning that a Member without sufficient capacity to manufacture the requisite pharmaceuticals could not take advantage of a compulsory licence to import these products from another Member. These Members might have been able to rely on the principle of international exhaustion (as discussed further below) to import products made under compulsory licence, but on one view parallel imports invariably violate the patent owner’s rights unless they are imports of products made under voluntary licence. 35

In recognition of this predicament, the WTO Members at the Fourth Ministerial Conference (MC) in Doha in 2001 issued a declaration ‘affirm[ing] that the Agreement can and should be interpreted and implemented in a manner supportive of WTO members’ right to protect public health and, in particular, to promote access to medicines for all’. 36 Among other things, this Ministerial Declaration on the TRIPS Agreement and Public Health noted Members’ freedom to determine the grounds for granting compulsory licences and acknowledged that ‘public health crises, including those relating to HIV/AIDS, tuberculosis, malaria and other epidemics, can represent a national emergency or other circumstances of extreme urgency’. 37 It also provided the setting for several more substantive changes. First, LDC Members were granted an additional transition period until 1 January 2016 in relation to certain obligations regarding pharmaceutical patents. 38 Second, Members agreed on a waiver of Article 31(f) so that LDC Members and other Members lacking sufficient manufacturing capacity may import pharmaceutical products created under compulsory licence, subject to certain conditions. 39 This waiver will become permanent through an amendment to the TRIPS Agreement after two-thirds of the Members accept it; this would be the first ever formal amendment to the WTO agreements, introducing a new Article 31 bis into the TRIPS Agreement. 40

Although these steps are very welcome, their practical implications have been limited to date. At the time of writing, only 18 of the 153 WTO Members 41 have accepted the amendment, 42 and a handful of Members have implemented legislation to enable them to issue compulsory licences in accordance with the waiver. 43 At the end of 2007, the GC noted that acceptance of the amending protocol by two-thirds of the Members was ‘taking longer than initially foreseen’ and therefore decided, on the recommendation of the TRIPS Council, to extend the deadline for acceptance from 1 December 2007 to 31 December 2009 ‘or such later date as may be decided by the Ministerial Conference’. 44

One positive development stands out. On 17 July 2007, Rwanda (an LDC) became the first Member to notify the TRIPS Council of its intention to use the waiver of Article 31(f) as an importing Member. The notification concerned the HIV/AIDS drug TriAvir, manufactured in Canada by generic pharmaceutical company Apotex, Inc. 45 In turn, Canada notified the TRIPS Council in early October 2007 of its grant of a compulsory licence as an eligible exporting Member to enable the manufacture and export of TriAvir to Rwanda. 46 The successful outcome of this arrangement may encourage further use of the flexibilities on which the Members have agreed.

III. Outstanding Issues

We now consider three areas under the TRIPS Agreement raising questions that the Members are yet to resolve: the exhaustion of IP rights associated with a product through the sale of that product with the right holder’s authority, the relationship between IP rights and anti-competitive conduct, and the category of GIs. Of these, only GIs are currently subject to negotiation under the Doha Round.

A. Exhaustion and Parallel Imports

In his seminal work, Warwick Rothnie describes parallel imports as follows:

They are lawfully put on the market in the place of export , the foreign country. But, an owner of the [IP] rights in the place of importation , the domestic country, opposes their importation … [S]ome enterprising middleman buys stock in the cheaper, foreign country and imports them into the dearer, domestic country. Hence, the imports may be described as being imported in ‘parallel’ to the authorised distribution network. 47

Under a rule or system of ‘national exhaustion’, by authorizing the first sale of a product in a given country, the owner of IP rights in that product exhausts those rights in that country only, such that a parallel import of the product into another country may infringe the IP owner’s rights in the second country. Under a system of ‘international exhaustion’, the first sale exhausts the IP rights associated with the product worldwide, allowing parallel imports of the product after that sale. A country’s choice of which system to adopt in relation to any given category of IP (as the considerations may differ for each) 48 raises the same balancing questions as determining the extent of protection of IP rights more generally. International exhaustion may encourage lower-priced parallel imports and promote competition, benefiting consumers and industrial users of the relevant products, while national exhaustion may advance the interests of IP owners and creators. 49 Jayashree Watal cautions against assuming that developing countries would necessarily benefit from international exhaustion. 50

Article 6 TRIPS Agreement provides that, ‘[f]or the purposes of dispute settlement under this Agreement, subject to the provisions of Articles 3 and 4 nothing in this Agreement shall be used to address the issue of exhaustion of [IP] rights’. This provision reflects a failure to agree on the treatment of exhaustion and parallel imports and, consequently, a degree of discretion for WTO Members. Nevertheless, whatever approach a Member chooses, it must apply this on a non-discriminatory basis, that is, in accordance with the principles of NT and MFN treatment as set out in Articles 3 and 4. The choice for patents may affect the Member’s ability to respond to public health crises as discussed above. 51 Accordingly, the ‘Doha Declaration on TRIPS and Public Health’ confirms that ‘[t]he effect of the provisions in the TRIPS Agreement that are relevant to the exhaustion of [IP] rights is to leave each member free to establish its own regime for such exhaustion without challenge, subject to the MFN and national treatment provisions’. 52 This makes clear that Article 6 is not to be interpreted as being limited to dispute settlement such that, for example, the substantive TRIPS Agreement provisions on patents could be read as mandating international exhaustion. 53

Although Members are not examining exhaustion in the Doha Round, given the absence of agreement to date as to a uniform approach on this issue, it may resurface to be resolved in future.

B. Anti-competitive Practices

Article 8.2 TRIPS Agreement allows Members to take ‘[a]ppropriate measures, provided that they are consistent with the provisions of this Agreement, … to prevent the abuse of [IP] rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology’. The scope of this allowance therefore depends on how other TRIPS Agreement provisions are interpreted in relation to anti-competitive practices. In addition, Article 40.1 TRIPS Agreement recognizes that ‘some licensing practices or conditions pertaining to [IP] rights which restrain competition may have adverse effects on trade and may impede the transfer and dissemination of technology’. Accordingly, Members are entitled to ‘specif[y] in their legislation licensing practices or conditions that may in particular cases constitute an abuse of [IP] rights having an adverse effect on competition in the relevant market’ (Article 40.2). 54 Article 40.2 provides examples of the kinds of practices that may be anti-competitive (‘exclusive grantback conditions, conditions preventing challenges to validity and coercive package licensing’) but not an exhaustive or binding list. Indeed, apart from an obligation to enter consultations on request in relation to these matters (Article 40.3), the provisions regarding anticompetitive conduct are ‘permissive rather than mandatory’. 55

The question whether WTO Members should adopt additional, mandatory rules aimed at harmonizing competition laws or producing an overarching international competition law goes beyond the TRIPS Agreement, 56 and, potentially, the WTO itself. 57 It concerns numerous aspects of the WTO agreements, including goods, services, and dispute settlement. The WTO’s Working Group on the Interaction between Trade and Competition Policy was previously discussing the ‘interaction between trade and competition policy, including anti-competitive practices, in order to identify any areas that may merit further consideration in the WTO framework’. 58 However, this so-called ‘Singapore issue’ has now been excised from the Doha Work Programme and is no longer under negotiation. 59 Nevertheless, the absence of a multilateral competition framework is problematic and will need to be addressed at some point. ‘Although competition law has traditionally dealt with private action within the border, while trade law has traditionally dealt with public action at the border’, 60 this dichotomy is weakening. In relation to IP rights as in other areas, the effects of domestic competition laws and anti-competitive practices frequently extend across national borders, increasing the risk of conflict and unnecessary costs on consumers and firms. 61

C. Geographical Indications

The TRIPS Agreement defines GIs as indications that ‘identify a good as originating in the territory of a Member, or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin’ (Article 22.1). The WTO website offers the examples of Champagne, Tequila, and Roquefort. 62 Members have a general obligation to provide the legal means for interested parties to prevent the use of GIs for goods (for example in a trademark) in such a way as to mislead the public about the origin of the good or to constitute unfair competition (Articles 22.2–22.4). Members must provide greater protection in relation to GIs for wines and spirits—that is, preventing their use in relation to wines or spirits not originating in the relevant place ‘even where the true origin is indicated or the [GI] is used in translation or accompanied by expressions such as “kind”, “type”, “style”, “imitation” or the like’ (Article 23.1). Some exceptions apply, such as for GIs that are generic terms, or where a GI was used continuously in good faith before 15 April 1994 (when the WTO agreements were signed) or was included in a trademark registered in good faith (Articles 24.4–24.6).

GIs provide one issue that remains under negotiation in the Doha Round. At Doha in 2001, Members agreed, in accordance with Article 23.4 TRIPS Agreement, ‘to negotiate the establishment of a multilateral system of notification and registration of [GIs] for wines and spirits’. 63 Members have since ‘agree[d] to intensify these negotiations’. 64 Members are currently negotiating on the basis of three main proposals in this regard. 65 In addition, although Members disagree as to the link with the wines and spirits negotiations and the Doha Round more generally, they are discussing the extension of the higher level of GI protection to products other than wines and spirits, as arguably envisaged in Article 24.1 TRIPS Agreement. 66

The alignment of Members on both sides of the GI debate is illustrated by existing proposals regarding the register for wines and spirits. The EC, long an advocate for GIs, calls for the higher levels of protection for wines and spirits to be simply extended to all products, along with a multilateral register for all products whereby registration of a particular GI would create, for participating Members not having lodged a reservation in respect of that GI, ‘a rebuttable presumption of the eligibility for protection of that [GI]’. 67 Hong Kong, China has submitted a proposal under which registration of an indication would provide prima facie evidence of ownership and that the indication is a GI protected in the country of origin. 68 In contrast, under a third proposal, participating Members would have much greater flexibility: they would merely have to ensure that they provide for consultation of the register when making domestic decisions regarding trademarks and GIs for wines and spirits. This proposal is endorsed by Argentina, Australia, Canada, Chile, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Japan, Mexico, New Zealand, Nicaragua, Paraguay, Chinese Taipei, and the US. 69 In many of these ‘New World’ countries, terms that the EC regards as GIs are already considered generic. 70

This is an extremely sensitive area of negotiations, made more complex by the uncertain effects that GI protection may have on different Members. For instance, Evans and Blakeney suggest that, whereas ‘large, commodity-dependent developing countries, such as India, Egypt, or Kenya, are well placed to take advantage of an extension of additional protection for agricultural products, foodstuffs, and traditional handicrafts’, other developing countries may lack ‘the financial resources, the technical expertise and the institutional capacity’ necessary to commercialize goods that could benefit from GI protection and to provide that protection. 71 Ultimately, a link exists between negotiations on the extension of GIs beyond wines and spirits, the multilateral register, and agriculture more generally. Failure in any one of these areas may necessitate failure in the other two. 72

IV. Beyond the WTO

In this final section, we identify three ways in which the TRIPS Agreement is influenced by outside forces and consider how these forces are changing international IP law. We first consider WIPO before turning to IP provisions in preferential, regional, or free trade agreements (FTAs) 73 and then the growing drive for a human rights approach to the TRIPS Agreement.

WIPO is a specialized agency of the United Nations (UN) established by a treaty signed in 1967 ‘to promote the protection of [IP] throughout the world through cooperation among States and, where appropriate, in collaboration with any other international organization’. 74 It has 184 contracting parties, 75 as compared with the WTO’s 153 Members. 76 The preamble to the TRIPS Agreement records the Members’ desire ‘to establish a mutually supportive relationship between the WTO and [WIPO] as well as other relevant international organizations’. Certain other TRIPS Agreement provisions also refer to WIPO, including Article 68, which directs the TRIPS Council to ‘seek to establish … appropriate arrangements for cooperation with bodies of that Organization’. The two organizations entered a cooperation agreement in 1995, pursuant to which, among other things, they provide access to each other’s collection of countries’ IP laws and regulations and cooperate in technical assistance activities. 77 WIPO has observer status in meetings of the GC, 78 the TRIPS Council and certain other WTO bodies. 79

The locus for multilateral IP negotiations shifted from WIPO to the GATT 1947 with the Uruguay Round of negotiations leading to the WTO, largely on the initiative of the US and the EC, though WIPO ‘continues to function as a critically important venue for [IP] lawmaking by all of its member states in a post-TRIPs environment’. 80 Since the WTO was established, WIPO has concluded several treaties expanding international IP coordination. 81 These newer treaties are not incorporated into the TRIPS Agreement leading some WTO Members to suggest their inclusion either in the TRIPS Agreement 82 or through the alternative route of FTAs, as discussed in the following section.

B. TRIPS-plus in FTAs

A common feature in the proliferation of FTAs 83 in recent years 84 (and particularly those of the US) has been the insertion of so-called ‘TRIPS-plus’ provisions, requiring FTA partners to impose higher standards of IP protection than those set in the TRIPS Agreement. 85 This tends to increase IP protection not only between the FTA partners but more broadly across the WTO Membership, because the TRIPS Agreement does not include a general exemption from the MFN rule for FTAs. Because of the US push to align others’ IP laws with its own, it also continues the process of international harmonization of IP laws supported by the TRIPS Agreement. 86 Here, too, the TRIPS Agreement may be seen as having failed developing countries in particular, who remain prey to bilateral pressures to accept and impose higher standards because the TRIPS Agreement imposes minimum but not maximum thresholds of protection. 87

As foreshadowed above, in some instances, TRIPS-plus is achieved by requiring FTA partners to become party to certain WIPO treaties not incorporated in the TRIPS Agreement. For example, Article 17.1.4 Australia — United States Free Trade Agreement 88 provides that ‘[e]ach Party shall ratify or accede to the WIPO Copyright Treaty (1996) and the WIPO Performances and Phonograms Treaty (1996) by the date of entry into force of this Agreement, subject to the fulfilment of their necessary internal requirements’.

Other FTA provisions remove the flexibility maintained under the TRIPS Agreement. Thus, the Agreement between the United States of America and the Hashemite Kingdom of Jordan on the Establishment of a Free Trade Area 89 restricts the circumstances in which a party may permit the use of the subject matter of a patent without the patent owner’s authority. Whereas the TRIPS Agreement does not prescribe the circumstances in which a WTO Member may grant a compulsory licence, for example to address a public health concern (provided that certain conditions are met such as payment of adequate remuneration) (Article 31(h)), the FTA between the US and Jordan precludes such licences except to remedy anti-competitive practices, where the patent owner has not sufficiently worked the patent, or ‘in cases of public non-commercial use or in the case of a national emergency or other circumstances of extreme urgency, provided that such use is limited to use by government entities or legal entities acting under the authority of a government’. 90 Several commentators regard these and other common TRIPS-plus provisions put forward by the US as reducing access to medicines in developing countries and ‘negat[ing] the letter and spirit of the Doha Declaration’. 91 Some even query whether they may violate WTO law. 92

TRIPS-plus approaches in FTAs, as highlighted above, are closely linked to US trade policies and negotiating strategies and are therefore subject to change. For instance, in May 2007, the Bush Administration reached a conceptual agreement with Congress regarding IP protections in pending FTAs that would (particularly for developing countries) increase flexibility in relation to pharmaceuticals and public health. 93 Nevertheless, the general trend towards strengthening TRIPS through FTAs remains apparent. 94

C. A Human Rights Approach to TRIPS

Since the creation of the WTO, various UN bodies have commented on the relationship between human rights and WTO law. 95 The resulting work includes several statements regarding the relationship between human rights and the TRIPS Agreement in particular. The UN Sub-Commission on the Promotion and Protection of Human Rights has warned that an ‘actual or potential conflict exists between the implementation of the TRIPS Agreement and the realization of economic, social and cultural rights, in particular the rights to self-determination, food, housing, work, health and education, and in relation to transfers of technology to developing countries’. 96

In 2001, the UN High Commissioner for Human Rights expressed support for the notion of a ‘human rights approach’ to the TRIPS Agreement, which ‘would explicitly place the promotion and protection of human rights … at the heart of the objectives of intellectual property protection, rather than only as permitted exceptions that are subordinated to the other provisions of the Agreement’. 97 The High Commissioner referred specifically to Article 15 International Covenant on Economic, Social and Cultural Rights (ICESCR) 98 as requiring States, in protecting IP rights, to balance the public interest in accessing new knowledge with the interests of knowledge creators. 99 On one view, Members already have suffi cient discretion to take a human rights approach to the TRIPS Agreement, for example, by using domestic competition rules to avert practices that infringe the right to health. 100

More recently, the Committee on Economic, Social and Cultural Rights, which monitors the implementation of the ICESCR, issued a general comment on Article 15(1)(c), distinguishing IP rights from the right recognized under that provision (‘to benefit from the protection of the moral and material interests resulting from any scientific, literary or artistic production of which he or she is the author’). 101 Among other things, the Committee called on States parties to the ICESCR to ‘exclud[e] inventions from patentability whenever their commercialization would jeopardize the full realization of … human rights and dignity, including the rights to life, health and privacy’, in some contrast to the TRIPS Agreement’s exception for excluding inventions from patentability. 102

Concerns relating to the impact of the TRIPS Agreement on the right to health have been partially addressed by the WTO’s work in relation to compulsory licensing as discussed above. 103 One might even argue that paragraph 4 of the Declaration on the TRIPS Agreement and Public Health embodies a limited human rights approach to the TRIPS Agreement in affirming that ‘the Agreement can and should be interpreted and implemented in a manner supportive of WTO Members’ right to protect public health’. However, as already mentioned, 104 some FTAs threaten to undermine this progress. 105

V. Conclusion

The TRIPS Agreement raises an array of complex questions and its implications for development, trade, and competition are difficult to identify in the abstract. On the one hand, it risks favouring IP owners, traditionally residing in developed countries, at the expense of vigorous competition and open trade. On the other hand, as the scope of IP expands (for example in the context of GIs), it offers potential benefits to at least some developing countries. In addition, it provides developing country Members with the possibility of cross-retaliation as an effective means of inducing compliance of other Members with their WTO obligations following adverse rulings in WTO dispute settlement. The Members’ ultimate response to the public health problems of developing countries (especially those with limited pharmaceutical manufacturing capacity) is also a significant achievement, although this would be best consolidated through the passing of a formal amendment to the TRIPS Agreement and the use of the available flexibilities in practice.

Moving beyond the first decade of the TRIPS Agreement, and even beyond Doha, WTO Members may need to reinvigorate discussions on areas of disagreement such as non-violation complaints, exhaustion, and anti-competitive practices. At the same time, they must recognize that the TRIPS Agreement is not operating in a vacuum. Especially in the absence of progress under the TRIPS Agreement from the perspective of all Members, IP laws including those relevant to international trade will continue to advance outside of the WTO. This is already evident in the work of WIPO and several FTAs, most often in the direction of strengthening IP rights, which may upset the balance achieved in the TRIPS Agreement (if indeed it is regarded as having struck an appropriate balance to begin with). On the opposite side, UN calls for greater appreciation of human rights in the TRIPS Agreement and its application should remind Members of the need to consider the wider ramifications of stronger IP protection in the longer term. While many debated the propriety of including the TRIPS Agreement in the WTO to begin with, it need not be a one-sided document in future.

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AD Mitchell , ‘ A Legal Principle of Special and Differential Treatment for WTO Disputes ’ 2006   World Trade Review 5(3) 445

K Nowak , ‘ Staying Within the Negotiated Framework: Abiding by the Non-Discrimination Clause in TRIPs Article 27 ’ 2005   Michigan Journal of International Law 26(3) 899

A Pacón , ‘What Will TRIPs Do For Developing Countries’ in FK Beier and G Schricker (eds), From GATT to TRIPs: The Agreement on Trade-Related Aspects of Intellectual Property Rights (Munich: Max Planck Institute, 1996 ) 329

S Picciotto , ‘ Is the International Trade Regime Fair to Developing States?: Private Rights v Public Interests in the TRIPS Agreement ’ 2003   American Society of International Law Proceedings (97) 167

D Rangnekar , ‘Geographical Indications: A Review of Proposals at the TRIPs Council’ UNCTAD/ICTSD Capacity Building Project on Intellectual Property Rights and Sustainable Development Paper (2002)

M Rimmer , ‘ The Jean Chrétien Pledge to Africa Act: Patent Law and Humanitarian Aid ’ 2005   Expert Opinion on Therapeutic Patents 15(7) 889

W Rothnie , Parallel Imports (London: Sweet & Maxwell, 1993 )

FM Scherer and J Watal , ‘ Post-TRIPS Options for Access to Patented Medicines in Developing Nations ’ 2002   Journal of International Economic Law 5(4) 913

D Shanker , ‘ The Vienna Convention on the Law of Treaties, the Dispute Settlement System of the WTO and the Doha Declaration on the TRIPs Agreement ’ 2002   Journal of World Trade 36(4) 721

H Sun , ‘ The Road to Doha and Beyond: Some Reflections on the TRIPS Agreement and Public Health ’ 2004   European Journal of International Law 15(1) 123

M Taylor , International Competition Law: A New Dimension for the WTO? (Cambridge: Cambridge University Press, 2006 )

M Vincent , ‘ Extending Protection at the WTO to Products Other Than Wines and Spirits: Who Will Benefit? ’ 2007   Estey Centre Journal of International Trade Law and Policy 8(1) 57

E Vranes , ‘Cross Retaliation under GATS and TRIPS — An Optimal Enforcement Device for Developing Countries?’ in F Breuss , S Griller , and E Vranes (eds), The Banana Dispute: An Economic and Legal Analysis (Vienna: Springer, 2003 ) 113

J Watal , Intellectual Property Rights in the WTO and Developing Countries (Boston: Kluwer Academic Publishers, 2001 )

World Bank, Global Economic Prospects: Trade, Regionalism, and Development (Washington DC: World Bank, 2005 )

See, generally, chapters 2 and 3 of this Handbook.

L Helfer , ‘Regime Shifting: The TRIPs Agreement and New Dynamics of International Intellectual Property Lawmaking’ 2004 Yale Journal of International Law 29(1) 1, at 2 .

See, eg, A Deardorff , ‘What Might Globalization’s Critics Believe?’ 2003 World Economy 26(5) 639, at 653–54 ; E-U Petersmann , ‘From Negative to Positive Integration in the WTO: The TRIPs Agreement and the WTO Constitution’ in T Cottier and P Mavroidis (eds), Intellectual Property: Trade, Competition, and Sustainable Development (Ann Arbor: University of Michigan Press, 2003) 21, at 22–23 ; cf W Davey and W Zdouc , ‘The Triangle of TRIPS, GATT and GATS’ in Cottier and Mavroidis , ibid , 53, at 54 . See also Preamble and Arts 7 and 8.2 TRIPS Agreement.

T Cottier , ‘The Agreement on Trade-Related Aspects of Intellectual Property Rights’ in P Macrory , A Appleton , and M Plummer (eds), The World Trade Organization: Legal, Economic and Political Analysis , Vol I (New York: Springer, 2005) 1041, at 1054 . Cottier refers to ‘safeguards, dumping, subsidies, and agriculture’. Consider also, eg, the SPS Agreement.

See also Art 8 TRIPS Agreement; C Correa , Trade-Related Aspects of Intellectual Property Rights: A Commentary on the TRIPS Agreement (Oxford: Oxford University Press, 2006), at 91–114 .

J Watal , Intellectual Property Rights in the WTO and Developing Countries (Boston: Kluwer, 2001) 363 ; cf F Abbott , ‘Intellectual property rights in world trade’ in A Guzman and A Sykes (eds), Research Handbook in International Economic Law (London: Edward Elgar, 2007) 444, at 453 .

A Pacón , ‘What Will TRIPs Do For Developing Countries’ in FK Beier and G Schricker (eds), From GATT to TRIPs: The Agreement on Trade-Related Aspects of Intellectual Property Rights (Munich: Max Planck Institute, 1996) 329, at 332–33 ; F Abbott , ‘Commentary: The International Intellectual Property Order Enters the 21st Century’ 1996 Vanderbilt Journal of Transnational Law 29(3) 471, at 472–73, 476 ; Petersmann , above fn 3, at 32–33 .

AD Mitchell , ‘A legal principle of special and differential treatment for WTO disputes’ 2006 World Trade Review 5(3) 445, at 449–50 .

See, eg, TRIPS Council, Special and Differential Treatment Proposals Referred to the TRIPs Council: Report to the General Council by the Chair , IP/C/36 (20 July 2005) ; TRIPS Council, Annual Report (2006) , IP/C/44 (4 December 2006), at para 9 .

F Abbott , ‘Toward a New Era of Objective Assessment in the Field of TRIPS and Variable Geometry for the Preservation of Multilateralism’ 2005 Journal of International Economic Law 8(1) 77, at 80–83 .

K Leitner and S Lester , ‘WTO Dispute Settlement 1995–2006—A Statistical Analysis’ 2007 Journal of International Economic Law 10(1) 165, at 171 .

WTO, China — Intellectual Property Rights: Request for Consultations by the United States , WT/DS362/1, IP/D/26, G/L/819 (16 April 2007) .

M Handler , ‘The WTO Geographical Indications Dispute’ 2006 Modern Law Review 69(1) 70, at 79 .

Panel Report, EC — Trademarks and Geographical Indications (Australia) , at paras 7.89, 7.152, 7.249, 7.272, 8.1(e), 8.1(f)(i), 8.1(i)(i) ; Panel Report, EC — Trademarks and Geographical Indications (US) , at paras 7.38, 7.102, 7.213, 7.238, 8.1(c), 8.1(d)(i), 8.1(h)(i) .

US — Section 211 Appropriations Act .

US — Section 110(5) Copyright Act .

WTO, United States — Section 211 Omnibus Appropriations Act of 1998: Status Report by the United States — Addendum , WT/DS176/11/Add.53 (13 April 2007) ; WTO, United States — Section 110(5) of the US Copyright Act: Status Report by the United States — Addendum , WT/DS160/24/Add.28 (13 April 2007) .

DSB, Minutes of Meeting Held on 20 February 2007 , WT/DSB/M/226 (26 March 2007), at paras 4–13, 22 .

Canada — Patent Term .

Canada — Pharmaceutical Patents .

Indonesia — Autos .

India — Patents (EC); India — Patents (US) .

Art 22.3 DSU.

WTO, United States — Subsidies on Upland Cotton: Recourse to Article 7.9 of the SCM Agreement and Article 22.2 of the DSU by Brazil , WT/DS267/26 (7 October 2005), at 2 .

Art 22.6 DSU.

Decision by the Arbitrators, EC — Bananas III (Ecuador) (Article 22.6 — EC) , at paras 126, 138, 173(d).

E Vranes , ‘Cross Retaliation under GATS and TRIPS — An Optimal Enforcement Device for Developing Countries?’ in F Breuss , S Griller , and E Vranes (eds), The Banana Dispute: An Economic and Legal Analysis (Vienna: Springer, 2003) 113, at 124–28 .

MC, Doha Work Programme: Ministerial Declaration Adopted on 18 December 2005 , WT/MIN(05)/DEC (22 December 2005) (Hong Kong Declaration), at para 45 .

TRIPS Council, Minutes of Meeting Held on 13 February 2007 , IP/C/M/53 (22 March 2007), at paras 62–64 .

K Lee and S von Lewinski , ‘The Settlement of International Disputes in the Field of Intellectual Property’ in Beier and Schricker , above fn 7, 278, at 313 .

TRIPS Council, Non-Violation and Situation Complaints: Summary Note by the Secretariat — Revision , IP/C/W/349/Rev.1 (24 November 2004), at paras 10–12 .

See also chapter 21 of this Handbook.

These include excluding inventions from patentability where ‘necessary to protect ordre public or morality, including to protect human, animal or plant life or health’, but ‘provided that such exclusion is not made merely because the [commercial exploitation of the invention] is prohibited by their law’: Art 27.2 TRIPS Agreement.

F Abbott , ‘The Doha Declaration on the TRIPS Agreement and Public Health: Lighting a Dark Corner at the WTO’ 2002 Journal of International Economic Law 5(2) 469, at 472 .

Ibid at 495–97 .

MC, Declaration on the TRIPS Agreement and Public Health Adopted on 14 November 2001 , WT/MIN(01)/DEC/2 (20 November 2001), at para 4 .

Ibid at para 5 .

TRIPS Council, Extension of the Transition Period under Article 66.1 of the TRIPS Agreement for Least-Developed Country Members for Certain Obligations with Respect to Pharmaceutical Products: Decision of 27 June 2002 , IP/C/25 (1 July 2002), at para 1 ; GC, Least-Developed Country Members — Obligations Under Article 70.9 of the TRIPS Agreement with Respect to Pharmaceutical Products: Decision of 8 July 2002 , WT/L/478 (12 July 2002), at para 1 .

GC, Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health: Decision of 30 August 2003 , WT/L/540 (1 September 2003) . A waiver of Article 31(h) is also included so that an importing Member need not pay adequate remuneration where it has already been paid in the exporting Member.

GC, Amendment of the TRIPS Agreement: Decision of 6 December 2005 , WT/L/641 (8 December 2005), at para 4 .

< http://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm > (last visited 24 August 2008).

< http://www.wto.org/english/tratop_e/trips_e/amendment_e.htm > (last visited 24 August 2008). See also latest revisions of TRIPS Council, Protocol Amending the TRIPS Agreement — Status of acceptances: Note from the Secretariat (Revision) , IP/C/W/490/Rev.1 (19 October 2007) .

Council for TRIPS, Annual Review of the Decision on the Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health: Report to the General Council , IP/C/46 (1 November 2007), at para 19 (Switzerland) ; TRIPS Council, Annual Review of the Decision on the Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health: Report to the General Council , IP/C/42 (2 November 2006), at para 5 (European Communities) ; TRIPS Council, Annual Review of the Decision on the Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health: Report to the General Council , IP/C/37 (3 November 2005), at para 5 (Canada) , at para 6 (India), at para 7 (Korea); TRIPS Council, Annual Review of the Decision on the Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health: Report to the General Council , IP/C/33 (8 December 2004), at para 4 (Norway) .

GC, Amendment of the TRIPS Agreement — Extension of the Period for the Acceptance by Members of the Protocol Amending the TRIPS Agreement: Decision of 18 December 2007 , WT/L/711 (21 December 2007) . See also TRIPS Council, Amendment of the TRIPS Agreement: Proposal for a Decision on an Extension of the Period for the Acceptance By Members of the Protocol Amending the TRIPS Agreement , IP/C/45 (29 October 2007) .

TRIPS Council, Rwanda — Notification under Paragraph 2(A) of the Decision of 30 August 2003 on the Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health , IP/N/9/RWA/1 (19 July 2007) .

TRIPS Council, Canada — Notification under Paragraph 2(C) of the Decision of 30 August 2003 on the Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health , IP/N/10/CAN/1 (8 October 2007) .

W Rothnie , Parallel Imports (London: Sweet & Maxwell, 1993), at 1 (original emphasis) .

F Abbott , ‘First Report (Final) to the Committee on International Trade Law of the International Law Association on the Subject of Parallel Importation’ 1998 Journal of International Economic Law 1(4) 607, at 614 .

V Chiappetta , ‘The Desirability of Agreeing to Disagree: The WTO, TRIPS, International Exhaustion and a Few Other Things’ 2000 Michigan Journal of International Law 21(3) 333, at 336, 341, 350–53 ; Rothnie , above fn 47, at 3 . See also above section I .

Watal , above fn 6, at 303 .

See above section II.B .

MC , Declaration on the TRIPS Agreement and Public Health Adopted on 14 November 2001 , WT/MIN(01)/DEC/2 (20 November 2001), at para 5(d) .

Watal , above fn 6, at 296–97 .

See also Arts 17, 22–4, 30, 39 TRIPS Agreement; A Heinemann , ‘Antitrust Law of Intellectual Property in the TRIPs Agreement of the World Trade Organization’ in Beier and Schricker , above fn 7, 239, at 240, 244 .

R Anderson , ‘Intellectual Property Rights, Competition Policy and International Trade: Reflections on the Work of the WTO Working Group on the Interaction between Trade and Competition Policy (1996–1999)’ in Cottier and Mavroidis , above fn 3, 235, at 240 .

See generally M Taylor , International Competition Law: A New Dimension for the WTO? (Cambridge: Cambridge University Press, 2006) . See also chapter 23 of this Handbook.

W Fikentscher , ‘Historical Origins and Opportunities for Development of an International Competition Law in the TRIPs Agreement of the World Trade Organization (WTO) and Beyond’ in Beier and Schricker , above fn 7, 226 ; ‘OECD Committee Lacks Enthusiasm for Draft International Antitrust Code’ (1993) 65 ATRR 771; M Desta and N Barnes , ‘Competition Law and Regional Trade Agreements: An Overview’ in L Bartels and F Ortino (eds), Regional Trade Agreements and the WTO Legal System (Oxford: Oxford University Press, 2006) 239, at 243 .

MC, Ministerial Declaration adopted on 13 December 1996 , WT/MIN(96)/DEC (18 December 1996), at para 20 . See also MC, Ministerial Declaration adopted on 14 November 2001 , WT/MIN(01)/DEC/1 (20 November 2001) (Doha Declaration), at paras 23–25 .

GC, Decision Adopted by the General Council on 1 August 2004 , WT/L/579 (2 August 2004), at para 3 .

AD Mitchell , ‘Broadening the Vision of Trade Liberalisation: International Competition Law and the WTO’ 2001 World Competition 24(3) 343, at 346 .

Ibid at 347–51 ; A Guzman , ‘International competition law’ in Guzman and Sykes , above fn 6, 418, at 428–32 .

< http://www.wto.org/english/tratop_e/trips_e/gi_e.htm > (last visited 14 January 2008).

Doha Declaration, at para 18.

Hong Kong Declaration, at para 29.

See TRIPS Council, Side-by-Side Presentation of Proposals: Prepared by the Secretariat , TN/IP/W/12 (14 September 2005), TN/IP/W/12/Add.1 (4 May 2007), TN/IP/W/12/Add.1/Corr.1 (10 May 2007) .

See TNC, Issues Related to the Extension of the Protection of Geographical Indications Provided for in Article 23 of the TRIPS Agreement to Products Other Than Wines and Spirits: Compilation of Issues Raised and Views Expressed — Note by the Secretariat , WT/GC/W/546, TN/C/W/25 (18 May 2005) . See also Doha Declaration, at paras 12, 18; Hong Kong Declaration, at para 39.

TRIPS Council, Special Session, Geographical Indications: Communication from the European Communities , WT/GC/W/547, TN/C/W/26, TN/IP/W/11 (14 June 2005), at paras 2–3, 16 .

TRIPS Council, Special Session, Multilateral System of Notification and Registration of Geographical Indications under Article 23.4 of the TRIPS Agreement: Communication from Hong Kong, China , TN/IP/W/8 (23 April 2003), at para 4(iv) .

TRIPS Council, Special Session, Proposed Draft TRIPS Council Decision on the Establishment of a Multilateral System of Notification and Registration of Geographical Indications for Wines and Spirits , TN/IP/W/10 (1 April 2005), at para 4, TN/IP/W/10/Add.1 (18 November 2005), TN/IP/W/10/Add.2 (7 April 2006), TN/IP/W/10/Add.3 (20 April 2006) .

J Martín , ‘The WTO TRIPS Agreement: The Battle between the Old and the New World over the Protection of Geographical Indications’ 2004 Journal of World Intellectual Property 7(3) 287, at 288 .

G Evans and M Blakeney , ‘The Protection of Geographical Indications After Doha: Quo Vadis?’ 2006 Journal of International Economic Law 9(3) 575, at 607–08 .

Ibid at 575, 606–07 .

We use the term ‘free trade agreements’ to refer to bilateral and regional agreements between States or customs territories that focus at least in part on liberalizing trade between the parties, as distinct from the multilateral system established under the WTO. ‘FTAs’ therefore include free-trade areas and customs unions within the meaning of Art XXIV GATT 1994.

Convention Establishing the World Intellectual Property Organization , done at Stockholm, 14 July 1967, 828 UNTS 3, Art 3(i).

See < http://www.wipo.int/treaties/en/ShowResults.jsp?lang=en&treaty_id=1 > (last visited 14 January 2008).

See above fn 41.

Agreement Between the World Intellectual Property Organization and the World Trade Organization , signed 22 December 1995, entered into force 1 January 1996, Arts 2, 4.

See Art V:1 WTO Agreement.

See < http://www.wto.org/english/thewto_e/igo_obs_e.htm#trips > (last visited 18 May 2007); WTO, Rules of Procedure for Sessions of the Ministerial Conference and Meetings of the General Council , WT/L/161 (25 July 1996) Annex 3 .

Helfer , above fn 2, at 20–23, 26 ; see also Watal , above fn 6, at 400–02 .

See, eg, WIPO Copyright Treaty , done at Geneva, 20 December 1996, 36 ILM 65; WIPO Performances and Phonograms Treaty , done at Geneva, 20 December 1996, 36 ILM 76; Patent Law Treaty , done at Geneva, 1 June 2000, 39 ILM 1047; Singapore Treaty on the Law of Trademarks , done at Singapore, 27 March 2006 (not yet in force at time of writing).

See, eg, TRIPS Council, Work Programme on Electronic Commerce: Communication from Australia , IP/C/W/144 (6 July 1999), at para 21 ; TRIPS Council, Work Programme on Electronic Commerce: Communication by the European Communities and their Member States , IP/C/W/140 (7 May 1999), at para 12 .

See, generally, chapter 10 of this Handbook.

See, eg, Consultative Board, The Future of the WTO: Addressing Institutional Challenges in the New Millennium (Geneva: WTO, 2004), at para 76 ; World Bank, Global Economic Prospects: Trade, Regionalism, and Development (Washin gton DC: World Bank, 2005), at 28–30 .

See, generally, C Fink and P Reichenmiller , ‘Tightening TRIPS: The Intellectual Property Provisions of Recent US Free Trade Agreements’, World Bank Trade Note 20 (7 February 2005), at < http://www.siteresources.worldbank.org/INTRANETTRADE/Resources/Pubs/TradeNote20.pdf > (last visited 27 March 2008) .

B Mercurio , ‘TRIPS-Plus Provisions in FTAs: Recent Trends’ in Bartels and Ortino , above fn 57, 215, at 220–23 .

S Picciotto , ‘Is the International Trade Regime Fair to Developing States?: Private Rights v Public Interests in the TRIPS Agreement’ 2003 American Society of International Law Proceedings (97) 167, at 168 ; see also A Endeshaw , ‘Free Trade Agreements as Surrogates for TRIPs-Plus’ 2006 European Intellectual Property Review (28) 374, at 379–80 ; Art 1.1 TRIPS Agreement.

Signed 18 May 2004, entered into force 1 January 2005.

Signed 24 October 2000, entered into force 17 December 2001.

Art 4.19. In contrast, Article 31(b) TRIPS Agreement provides that in cases of public noncommercial use, national emergency, or other circumstances of extreme urgency, the Member may waive the requirement to ‘ma[k]e efforts to obtain authorization from the right holder on reasonable commercial terms and conditions’. These circumstances are not a prerequisite to compulsory licensing per se .

C Correa , ‘Implications of Bilateral Free Trade Agreements on Access to Medicines’ 2006 Bulletin of the World Health Organization 84(5) 399, at 402 ; see also J Kuanpoth , ‘TRIPS-Plus Intellectual Property Rules: Impact on Thailand’s Public Health’ 2006 Journal of World Intellectual Property 9(5) 573, at 584–89 ; above section II.B.

F Abbott , ‘Intellectual Property Provisions of Bilateral and Regional Trade Agreements in Light of U.S. Federal Law’, UNCTAD-ICTSD Capacity Building Project on Intellectual Property Rights and Sustainable Development, Issue Paper No 12 (2006) 18–19 .

See, eg, Office of the United States Trade Representative, Bipartisan Agreement on Trade Policy: Intellectual Property Provisions (May 2007) ; ‘Peru IPR Text Reflects FTA Template, Shows Reduced PhRMA Sway’ Inside US Trade (6 July 2007) 27 .

See, eg, ‘U.S. Seeks New Anti-Counterfeiting Treaty With Key Trading Partners’ Inside US Trade (26 October 2007) 42 ; ‘Baucus Calls for Stronger TRIPS Deal As Part of New Trade Policy’ Inside US Trade (12 October 2007) 40 .

See also chapter 20 of this Handbook.

United Nations High Commissioner for Human Rights, Sub-Commission on the Promotion and Protection of Human Rights, Intellectual Property and Human Rights: Sub-Commission on Human Rights Resolution 2001/21 , Preamble.

ECOSOC, Commission on Human Rights, Sub-Commission on the Promotion and Protection of Human Rights, The impact of the Agreement on Trade-Related Aspects of Intellectual Property Rights on human rights: Report of the High Commissioner , E/CN.4/Sub.2/2001/13 (27 June 2001), at para 22.

Done at New York, 16 December 1966, 993 UNTS 3.

ECOSOC, above fn 97, at para 10.

F Abbott , ‘The “Rule of Reason” and the Right to Health: Integrating Human Rights and Competition Principles in the Context of TRIPS’ in T Cottier , J Pauwelyn , and E Bürgi (eds), Human Rights and International Trade (Oxford: Oxford University Press, 2005) 279, at 291, 297, 300 .

ECOSOC, Committee on Economic, Social and Cultural Rights, General Comment No 17 (2005): The right of everyone to benefit from the protection of the moral and material interests resulting from any scientific, literary or artistic production of which he or she is the author (article 15, paragraph 1(c), of the Covenant) , E/C.12/GC/17 (12 January 2006), at paras 2–3.

See above fn 33 and corresponding text.

See above fn 87 and corresponding text.

ECOSOC, Commission on Human Rights, Sub-Commission on the Promotion and Protection of Human Rights, Economic, Social and Cultural Rights: Globalization and its impact on the full enjoyment of human rights , E/CN.4/Sub.2/2001/10 (2 August 2001), at paras 21, 25.

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Enhancing TRIPS: Trade Secrets and Reverse Engineering

Cite this chapter.

• Gintarė Surblytė 8  

Part of the book series: MPI Studies on Intellectual Property and Competition Law ((MSIP,volume 25))

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1 Citations

Twenty years after TRIPS, the European Commission has raised an initiative to harmonize trade secret protection throughout the EU. Due to having set minimum requirements, TRIPS has not achieved uniform trade secret protection. Importantly, it remained silent in Article 39 TRIPS on such concepts as reverse engineering. As a result, national laws and/or case-law on this issue diverge not only on both sides of the Atlantic, but also within the EU. Yet, drawing the limits of trade secret protection and the boundaries of reverse engineering is of highest importance for innovation. The Proposal for the Directive which aims at harmonizing trade secret protection in the EU explicitly addresses reverse engineering as a legitimate means to discover information. However, it simultaneously provides for a possibility to restrict it on the basis of a contract. The question thereby arises of the legitimacy of such contractual restrictions and possibly of the limits of a freedom of contract. A further issue to be discussed is whether the Proposal for the Trade Secrets Directive goes beyond TRIPS in a way that it could be considered as an enhanced, “TRIPS-plus” model to be followed not only within the EU, but also outside its borders.

Dr. Gintarė Surblytė, LL.M. (München) is Senior Research Fellow at the Max Planck Institute for Innovation and Competition, Munich.

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C. Ann (2007), Know-How – Stiefkind des Geistigen Eigentums?, GRUR 2007, 39.

S.K. Sandeen (2007), The Cinderella of Intellectual Property Law: Trade Secrets, in P.K. Yu (Ed.), Intellectual Property and Information Wealth: Issues and Practices in the Digital Age, pp. 399-420 .

M.F. Schultz & D.C. Lippoldt (2014), Approaches to Protection of Undisclosed Information (Trade Secrets) – Background Paper, TAD/TC/WP(2013)21/FINAL, OECD Trade Policy Paper No. 162 of 22 January 2014 (hereinafter: OECD Trade Policy Paper No. 162), p. 13.

Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) of 15 April 1994 (Annex to the Agreement Establishing the World Trade Organization (WTO)).

J. Brammsen (2014), in P.W. Heermann & J. Schlingloff (Eds.), Münchener Kommentar zum Lauterkeitsrecht, Vor § 17, para. 10; D. Gervais (2012), The TRIPS Agreement: Drafting History and Analysis, p. 541. This was considered to be “one of the most significant innovations brought about by the TRIPS Agreement” (C.M. Correa (2007), Trade Related Aspects of Intellectual Property Rights, p. 366).

European Commission, Proposal for a Directive of the European Parliament and of the Council on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure, 28 November 2013 (COM(2013) 813 final) (hereinafter: Proposal for the Trade Secrets Directive).

Proposal for the Trade Secrets Directive, supra fn. 6, recital 5.

OECD Trade Policy Paper No. 162, supra fn. 3, pp. 5, 17-20, 24.

R.P. Merges, S.P. Menell & M.A. Lemley (2012), Intellectual Property in the New Technological Age, p. 84.

Peabody v. Norfolk, 98 Mass. 452 (1868).

See R. Knaak, A. Kur & R.M. Hilty (2014), Comments of the Max Planck Institute for Innovation and Competition of 3 June 2014 on the Proposal of the European Commission for a Directive on the Protection of Undisclosed Know-How and Business Information (Trade Secrets) Against Their Unlawful Acquisition, Use and Disclosure of 28 November 2013, COM(2013) 813 Final, 45 IIC 2014, 953, 955, point 8. See also OECD Trade Policy Paper No. 162, supra fn. 3, p. 20.

Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 476 (1974).

P. Samuelson & S. Scotchmer (2001-2002), The Law and Economics of Reverse Engineering, 111 Yale L.J. 2001–2002, 1575, 1584.

“While the reconstruction of a patented product may infringe the patent, the reverse analysis as such does not” (A. Ohly (2009), Reverse Engineering: Unfair Competition or Catalyst for Innovation?, in W. Prinz zu Waldeck und Pyrmont et al. (Eds.), Patents and Technological Progress in a Globalized World, pp. 543-544).

See K.J. Strandburg (2004), What Does the Public Get? Experimental Use and the Patent Bargain, Wis. L. Rev. 2004, 81.

P. Samuelson & S. Scotchmer (2001-2002), The Law and Economics of Reverse Engineering, 111 Yale L.J. 2001–2002, 1575, 1650.

A. Ohly (2009), Reverse Engineering: Unfair Competition or Catalyst for Innovation?, in W. Prinz zu Waldeck und Pyrmont et al. (Eds.), Patents and Technological Progress in a Globalized World, p. 546.

R.P. Merges, S.P. Menell & M.A. Lemley (2012), Intellectual Property in the New Technological Age, p. 33.

J. Brammsen (2014), in P.W. Heermann & J. Schlingloff (Eds.), Münchener Kommentar zum Lauterkeitsrecht, Vor § 17, para. 1.

Ibid., para. 4.

Ibid., para. 6.

Vickery v. Welch, 36 Mass. 523 (1837).

See, for example, the Communication from India, MTN.GNG/NG11/W/37 of 10 July 1989, p. 18, para. 47: “Since trade secret cannot be regarded as an intellectual property, it is beyond the mandate of the Negotiating Group to consider this matter”. See also the Communication from Peru, MTN.GNG/NG11/W/45 of 27 October 1989, p. 5; the Communication from Brazil, MTN.GNG/NG11/W/57 of 11 December 1989, p. 8.

F. Dessemontet (2008), Protection of Trade Secrets and Confidential Information, in C.M. Correa & A. Yusuf (Eds.), Intellectual Property and International Trade: The TRIPS Agreement, p. 272; M. Peter & A. Wiebe (2013), in J. Busche, P.-T. Stoll & A. Wiebe (Eds.), TRIPs, Artikel 39, paras. 3-6, 9.

S.P. Ladas (1975), Patents, Trademarks, and Related Rights, p. 1686.

On the discussion on the scope of Article 10 bis of the Paris Convention and on Article 39 TRIPS see M. Peter & A. Wiebe (2013), in J. Busche, P.-T. Stoll & A. Wiebe (Eds.), TRIPs, Artikel 39, paras. 5, 10. On the “Paris-Plus” approach and on the question of the scope of application of Article 10 bis in the overall framework of TRIPS see F. Henning-Bodewig (2015), TRIPS and Corporate Social Responsibility: Unethical Equals Unfair Business Practices? in H. Ullrich, R.M. Hilty, M. Lamping & J. Drexl (Eds.), TRIPS plus 20: From Trade Rules to Market Principles, p. 701 (this volume), see also F. Henning-Bodewig (2013), International Protection against Unfair Competition, in F. Henning-Bodewig (Ed.), International Handbook on Unfair Competition, pp. 9–39; C. Wadlow (2011), The Law of Passing-off: Unfair Competition by Misrepresentation, paras. 2-009 et seq., in particular, paras. 2-060 et seq.

O. Brand (2013), in J. Busche, P.-T. Stoll & A. Wiebe (Eds.), TRIPs, Artikel 2, para. 111.

Footnote 10 of Article 39(2) TRIPS stipulates that “for the purpose of this provision, ‘a manner contrary to honest commercial practices’ shall mean at least practices such as breach of contract, breach of confidence and inducement to breach, and includes the acquisition of undisclosed information by third parties who knew, or were grossly negligent in failing to know, that such practices were involved in the acquisition”.

H. Ullrich (1995), Technologieschutz nach TRIPS: Prinzipien und Probleme, GRUR Int. 1995, 623, 630 fn. 63.

M. Peter & A. Wiebe (2013), in J. Busche, P.-T. Stoll & A. Wiebe (Eds.), TRIPs, Artikel 39, para. 27.

“Members may, but shall not be obliged to, implement in their law more extensive protection than is required by this Agreement, provided that such protection does not contravene the provisions of this Agreement” (Article 1(1) 2 nd sentence TRIPS). Ullrich argues that a TRIPS standard set, for instance, for trade secret protection was not a minimum standard, but rather the standard for protection (H. Ullrich (1995), Technologieschutz nach TRIPS: Prinzipien und Probleme, GRUR Int. 1995, 623, 630).

M. Peter & A. Wiebe (2013), in J. Busche, P.-T. Stoll & A. Wiebe (Eds.), TRIPs, Artikel 39, paras. 11, 13.

For more see the following two studies: Hogan Lovells International LLP (2012), Study on Trade Secrets and Parasitic Copying (Look-alikes), Report on Trade Secrets for the European Commission of 13 January 2012; Baker & McKenzie (2013), Study on Trade Secrets and Confidential Business Information in the Internal Market of April 2013.

Commission Regulation (EU) No 316/2014 of 21 March 2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements, OJ [2014] L 93/17, Article 1(1)(i). See also the Guidelines on the application of Article 101 of the Treaty on the Functioning of the European Union to technology transfer agreements, [2014] OJ C 89/03, para. 45.

Article 1(1)(g) of the Commission Regulation (EC) No 772/2004 of 27 April 2004 on the application of Article 81(3) of the Treaty to categories of technology transfer agreements, [2004] OJ L 123/11: “‘intellectual property rights’ includes industrial property rights, know-how, copyright and neighbouring rights”.

Commission Regulation (EU) No 316/2014 of 21 March 2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements, OJ [2014] L 93/17, Article 1(1)(h): “‘intellectual property rights’ includes industrial property rights, in particular patents and trademarks, copyright and neighbouring rights”.

See, for example, Federal Supreme Court of Germany, 27 April 2006 (Kundendatenprogramm), GRUR 2006, 1044, 1046. Interestingly, Harte-Bavendamm notes that part of such intent can be a contractual restriction on reverse engineering (H. Harte-Bavendamm (1990), Wettbewerbsrechtliche Aspekte des Reverse Engineering von Computerprogrammen, GRUR 1990, 657, 662).

W. Cornish, D. Llewelyn & T. Aplin (2013), Intellectual Property, p. 320. See also A. Coleman (1992), The Legal Protection of Trade Secrets; R.G. Toulson & C.M. Phipps (2012), Confidentiality.

Trade secrets in Italy are protected under the Italian Code on Industrial Property as unregistered industrial property. For a critical view on a broad scope of trade secret protection in Italy see G. Ghidini & V. Falce (2011), Trade Secrets as Intellectual Property Rights: A Disgraceful Upgrading – Notes on an Italian “Reform”, in R.C. Dreyfuss & K.J. Strandburg (Eds.), The Law and Theory of Trade Secrecy, pp. 140-151.

See W. Cornish, D. Llewelyn & T. Aplin (2013), Intellectual Property, p. 351: “Is it then, in any meaningful sense, ‘property’? The root difficulty of such a question is the flexibility of the property notion in English law and the many ends to which it is employed.”

See Hogan Lovells International LLP (2012), Study on Trade Secrets and Parasitic Copying (Look-alikes), Report on Trade Secrets for the European Commission of 13 January 2012, supra fn. 33, p. 1.

The Explanatory Memorandum of the Proposal for the Trade Secrets Directive (hereinafter: Explanatory Memorandum), p. 7.

National Conference of Commissioners on Uniform State Laws, Uniform Trade Secrets Act with 1985 Amendments.

Theft of Trade Secrets Clarification Act of 2012 (Pub. L. 112-236, 28 December 2012), amending Section 1832 of title 18, United States Code; Foreign and Economic Espionage Penalty Enhancement Act of 2012 (Pub. L. 112-269, 14 January 2013), amending Section 1831 of title 18, United States Code.

S. 2267 – Defend Trade Secrets Act of 2014 and H.R. 5233 - Trade Secrets Protection Act of 2014, amending chapter 90 of title 18, United States Code. See also the “Defend Trade Secrets Act of 2015” (S. 1890, H.R. 3326).

Explanatory Memorandum, supra fn. 42, pp. 6–7: “Existing national rules thus render cross-border network R&D and innovation less attractive and more difficult”. See also the Proposal for the Trade Secrets Directive (supra fn. 6), recital 7.

Council of the European Union, Proposal for a Directive of the European Parliament and of the Council on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure, No 9870/14 of 19 May 2014 (hereinafter: Proposal of the Council of the European Union), Introduction, para. 2: “This proposal is within the context of the flagship initiative ‘Council of Union’, one of the pillars of the ‘EU 2020 strategy’, under which the Commission undertook to create an innovation-friendly environment”. See also the Explanatory Memorandum, supra fn. 42, p. 2.

See European Commission (2010), Communication from the Commission, Europe 2020: A strategy for smart, sustainable and inclusive growth, 3 March 2010 (COM(2010) 2020 final), p. 13.

Proposal of the Council of the European Union, supra fn. 47, Article 1, second subparagraph. See also ibid., State of Play, point 6.

M. Peter & A. Wiebe (2013), in J. Busche, P.-T. Stoll & A. Wiebe (Eds.), TRIPs, Artikel 39, para. 19.

One of the incentives said to be provided by trade secret law is that “it encourages businesses to engage in wider (albeit limited) dissemination of information than they otherwise would, thus increasing the likelihood of knowledge spillovers” (OECD Trade Policy Paper No. 162, supra fn. 3, pp. 10-11).

As stated by the U.S. Supreme Court in Kewanee Oil : “Trade secret law promotes the sharing of knowledge, and the efficient operation of industry; it permits the individual inventor to reap the rewards of his labor by contracting with a company large enough to develop and exploit it” (Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 493 (1974)).

M.J. Madison (2011), Open Secrets, in R.C. Dreyfuss & K.J. Strandburg (Eds.), The Law and Theory of Trade Secrecy, pp. 222-245.

The importance of trade secrets to SMEs is stressed also by the European Commission (Explanatory Memorandum, supra fn. 42, p. 3).

Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 481 (1974).

Proposal for the Trade Secrets Directive (supra fn. 6), recital 10. See also the Explanatory Memorandum, supra fn. 42, p. 3 (“The holder of a trade secret does not have exclusive rights over the information covered by the trade secret”), p. 6 (“At the same time, competition should not be restricted as no exclusive rights are being granted and any competitor is free to independently acquire the knowledge protected by the trade secret (including by reverse-engineering)”).

Guidelines on the application of Article 101 of the Treaty on the Functioning of the European Union to technology transfer agreements, [2014] OJ C 89/03, para. 7; U.S. Department of Justice and the Federal Trade Commission, Antitrust Guidelines for the Licensing of Intellectual Property of 6 April 1995, para. 1. See also J. Drexl (2008), Is there a “More Economic Approach” to Intellectual Property and Competition Law?, in J. Drexl (Ed.), Research Handbook on Intellectual Property and Competition Law, pp. 35–36.

CFI, Microsoft v. Commission, T-201/04, EU:T:2007:289.

See G. Surblytė (2011), The Refusal to Disclose Trade Secrets as an Abuse of Market Dominance – Microsoft and Beyond, pp. XLVII+263.

See, for example, Baker & McKenzie (2013), Study on Trade Secrets and Confidential Business Information in the Internal Market of April 2013, supra fn. 33, pp. 85–108.

The Explanatory Memorandum, supra fn. 42, p. 3. The European Commission stresses the role of trade secrets, which goes beyond patent protection to include “non-technological innovation” (ibid.).

J.H. Reichman (2011), How Trade Secrecy Law Generates a Natural Semicommons of Innovative Know-How, in R.C. Dreyfuss & K.J. Strandburg (Eds.), The Law and Theory of Trade Secrecy, p. 187.

Ministerial Declaration on the Uruguay Round (MIN.DEC as of 20 September 1986): “In order to reduce the distortions and impediments to international trade, and taking into account the need to promote effective and adequate protection of intellectual property rights, and to ensure that measures and procedures to enforce intellectual property rights do not themselves become barriers to legitimate trade, the negotiations shall aim to clarify GATT provisions and elaborate as appropriate new rules and disciplines” (p. 7).

See also C.R. McManis (1996), Taking TRIPS on the Information Superhighway: International Intellectual Property Protection and Emerging Computer Technologies, 41 Vill. L. Rev. 1996, 207, 287: “… TRIPS contributes little of substance to either the ongoing ‘interoperability’ debate or the emerging debate over the protection of intellectual property on the information superhighway”.

C.M. Correa (2007), Trade Related Aspects of Intellectual Property Rights, p. 372: “… there was no attempt in the negotiation of the TRIPS Agreement to go beyond the Paris Convention in determining minimum standards with regard to unfair competition. Article 39 relies on the Convention for the determination of which conducts may be deemed commercially unfair.”

The requirements for a trade secret under TRIPS are secrecy (Article 39(2)(a) TRIPS), commercial value because of secrecy (Article 39(2)(b) TRIPS) and reasonable steps taken by a trade secret holder to maintain secrecy (Article 39(2)(c) TRIPS).

I. Meitinger (2011), TRIPS Agreement, Article 39, in T. Cottier & P. Véron (Eds.), Concise International and European IP Law, p. 115.

N.P. de Carvalho (2008), The TRIPS Regime of Antitrust and Undisclosed Information, p. 233.

R. Kraßer (1970), Der Schutz des Know-How nach deutschem Recht, GRUR 1970, 587, 588.

According to Carvalho , both terms should be understood as synonymous (N.P. de Carvalho (2008), The TRIPS Regime of Antitrust and Undisclosed Information, p. 231).

National Conference of Commissioners on Uniform State Laws, Uniform Trade Secrets Act with 1985 Amendments, p. 6.

R.P. Merges, S.P. Menell & M.A. Lemley (2012), Intellectual Property in the New Technological Age, pp. 60–61.

See T. Aplin (2013), Reverse Engineering and Commercial Secrets, 66 CLP 2013, 341, 347-355.

H. Harte-Bavendamm (1990), Wettbewerbsrechtliche Aspekte des Reverse Engineering von Computerprogrammen, GRUR 1990, 657, 660; M. Peter & A. Wiebe (2013), in J. Busche, P.-T. Stoll & A. Wiebe (Eds.), Artikel 39, para. 20 (with further references to relevant case-law).

A. Ohly (2014), in A. Ohly & O. Sosnitza (Eds.), Gesetz gegen den unlauteren Wettbewerb, § 17, paras. 9-10. See also H. Harte-Bavendamm (1990), Wettbewerbsrechtliche Aspekte des Reverse Engineering von Computerprogrammen, GRUR 1990, 657, 660 (“Nicht geheim ist, was von jedem Interessenten ohne größere Schwierigkeiten und Opfer in Erfahrung gebracht werden kann”), see also p. 661; M. Peter & A. Wiebe (2013), in J. Busche, P.-T. Stoll & A. Wiebe (Eds.), TRIPs, Artikel 39, para. 20.

C.R. McManis (1996), Taking TRIPS on the Information Superhighway: International Intellectual Property Protection and Emerging Computer Technologies, 41 Vill. L. Rev. 1996, 207, 250.

Trandes Corp. v. Guy F. Atkinson Co., 798 F.Supp. 284, 288 (D. Md. 1992). “Even those who obtained MV/ADEX and were able to use MV/ADEX were unable to discover its trade secrets because MV/ADEX was distributed only in its object code form, which is essentially unintelligible to humans. An infringer may be liable for misappropriating trade secrets when it loads and runs a computer program in its object code form, even if the infringer never understands exactly how the program works.” (emphasis in original) (Data General Corp. v. Grumman Systems Support Corp., 825 F. Supp. 340, 359 (D. Mass. 1993) citing Trandes Corp. v. Guy F. Atkinson Co., 798 F.Supp. 284, 288 (D. Md. 1992)).

See e.g. Chicago Lock Co. v. Fanberg, 676 F.2d 400 (9 th Cir. 1982).

H. Harte-Bavendamm (1990), Wettbewerbsrechtliche Aspekte des Reverse Engineering von Computerprogrammen, GRUR 1990, 657, 658.

A. Ohly (2009), Reverse Engineering: Unfair Competition or Catalyst for Innovation?, in W. Prinz zu Waldeck und Pyrmont et al. (Eds.), Patents and Technological Progress in a Globalized World, p. 538; P. Samuelson & S. Scotchmer (2001-2002), The Law and Economics of Reverse Engineering, 111 Yale L.J. 2001–2002, 1575, 1577. See also J.H. Reichman (2011), How Trade Secrecy Law Generates a Natural Semicommons of Innovative Know-How, in R.C. Dreyfuss & K.J. Strandburg (Eds.), The Law and Theory of Trade Secrecy, pp. 185-200 (“Unfortunately, the drafters of Article 39, which tracked the Uniform Trade Secrets Act (UTSA) in the United States, failed expressly to mention lawful reverse engineering”, ibid., p. 186).

M. Peter & A. Wiebe (2013), in J. Busche, P.-T. Stoll & A. Wiebe (Eds.), TRIPs, Artikel 39, para. 7. The scope of protection afforded to software is not implied by Article 39 TRIPS (C.R. McManis (1996), Taking TRIPS on the Information Superhighway: International Intellectual Property Protection and Emerging Computer Technologies, 41 Vill. L. Rev. 1996, 207, 221, 225-226).

Conference on Trade and Development (2005), Resource Book on TRIPS and Development, p. 521; M. Peter & A. Wiebe (2013) in J. Busche, P.-T. Stoll & A. Wiebe (Eds.), TRIPs, Artikel 39, para. 7.

C.M. Correa (2007), Trade Related Aspects of Intellectual Property Rights, p. 368.

A. Ohly (2009), Reverse Engineering: Unfair Competition or Catalyst for Innovation?, in W. Prinz zu Waldeck und Pyrmont et al. (Eds.), Patents and Technological Progress in a Globalized World, p. 538.

National Conference of Commissioners on Uniform State Laws, Uniform Trade Secrets Act with 1985 Amendments, p. 5.

For further reading see F. Schweyer (2012), Die rechtliche Bewertung des Reverse Engineering in Deutschland und den USA.

Section 17(2) No. 1 stipulates: “Anyone who, without authorization, for competitive purposes, or for his personal gain, or for the benefit of a third party, or with the intent of causing damage to the entrepreneur procures or secures for himself a commercial or industrial secret by the: a) utilization of technical devices or means, b) physical reproduction of the secret information or c) misappropriation of an object or device incorporating the secret …” (Translation from M. Knospe (2014), Chapter 15: Germany, in M.F. Jager (Ed.), Trade Secrets Throughout the World, Volume 2, pp. 77–78).

J. Brammsen (2014), in P.W. Heermann & J. Schlingloff (Eds.), Münchener Kommentar zum Lauterkeitsrecht, Vor § 17, para. 88; H. Harte-Bavendamm (2013), in H. Harte-Bavendamm & F. Henning-Bodewig (Eds.), UWG, § 17, para. 22; for a critical approach see A. Ohly (2014), in A. Ohly & O. Sosnitza (Eds.), Gesetz gegen den unlauteren Wettbewerb, § 17, paras. 26-26a. Harte-Bavendamm notes that, whereas reverse engineering can be captured by Section 17(2) No. 1 of the Act Against Unfair Competition, so-called “forward programming” can fall under Section 17(2) No. 2 (H. Harte-Bavendamm (1990), Wettbewerbsrechtliche Aspekte des Reverse Engineering von Computerprogrammen, GRUR 1990, 657, 663). Harte-Bavendamm furthermore points out that reverse engineering of software can possibly fall also under Section 18 of the Act Against Unfair Competition (ibid., p. 664).

Stiefeleisenpresse (22 November 1935), GRUR 1936, 183 (149 RGZ (1936), 329).

For a critical view see A. Ohly (2014), Der Geheimnisschutz im deutschen Recht: Heutiger Stand und Perspektiven, GRUR 2014, 1, 7; A. Ohly (2009), Reverse Engineering: Unfair Competition or Catalyst for Innovation?, in W. Prinz zu Waldeck et al. (Eds.), Patents and Technological Progress in a Globalized World, pp. 541-543, 550-551.

See T. Aplin (2013), Reverse Engineering and Commercial Secrets, 66 CLP 2013, 341, 346.

Ibid., 356 et seq.

Ibid., 341.

Ibid., in particular 341, 363 et seq.

The Explanatory Memorandum, supra fn. 42, p. 6. Although the second part of this sentence shows a positive development in terms of expressing legitimacy of reverse engineering, the first part of the sentence needs to be criticized for a too simplistic view that non-exclusive rights do not pose a danger to competition. The Microsoft case has shown the contrary (CFI, Microsoft v. Commission, T-201/04, EU:T:2007:289; see also G. Surblytė (2011), The Refusal to Disclose Trade Secrets as an Abuse of Market Dominance – Microsoft and Beyond, pp. XLVII+263).

Proposal for the Trade Secrets Directive, supra fn. 6.

Proposal of the Council of the European Union, supra note 47.

P. Samuelson & S. Scotchmer (2001-2002), The Law and Economics of Reverse Engineering, 111 Yale L.J. 2001–2002, 1575, 1583.

Mars UK Ltd v. Teknowledge Ltd., [2000] F.S.R. 138, 149.

This is, for example, explicitly mentioned, in the comment on Section 1 of the UTSA, which explains that the acquisition of the product which is reverse-engineered “must, of course, also be by a fair and honest means, such as purchase of the item on the open market for reverse engineering to be lawful” (National Conference of Commissioners on Uniform State Laws, Uniform Trade Secrets Act with 1985 Amendments, p. 5). For a broader discussion on what constitutes a legal acquisition of a product see T. Aplin (2013), Reverse Engineering and Commercial Secrets, 66 CLP 2013, 341, 375-376.

For the historical background on creating a legal construct for licensing software instead of selling it see M.A. Lemley (1994-1995), Intellectual Property and Shrinkwrap Licenses, 68 S. Cal. L. Rev. 1994–1995, 1239, 1241 et seq. As mentioned by the author, the roots of software licensing go back to the willingness of software vendors to protect their trade secrets (pp. 1244-1245). Lemley thereby concludes that “perhaps at one time shrinkwrap licenses were necessary to make it clear that software vendors owned intellectual property rights in their products. That is no longer true, if it ever was.” (p. 1291).

Directive 2009/24/EC of the European Parliament and of the Council on the legal protection of computer programs of 23 April 2009, OJ L 111/16.

For example, in cases when those ideas and principles cannot “be determined by studying the mere performance of a program” (T. Dreier (1991), The Council Directive of 14 May 1991 on the Legal Protection of Computer Programs, 13 EIPR 1991, 319, 323, 324).

Article 5(3) of the Software Directive stipulates: “The person having a right to use a copy of a computer program shall be entitled, without the authorization of the right holder, to observe, study or test the functioning of the program in order to determine the ideas and principles which underlie any element of the program if he does so while performing any of the acts of loading, displaying, running, transmitting or storing the program which he is entitled to do”.

T. Dreier (1991), The Council Directive of 14 May 1991 on the Legal Protection of Computer Programs, 13 EIPR 1991, 319, 323.

Proposal of the Council of the European Union, supra fn. 47, recital 10.

See T. Dreier (1991), The Council Directive of 14 May 1991 on the Legal Protection of Computer Programs, 13 EIPR 1991, 319, 325: “In this respect, however, one interpretation problem merits particular attention. Since Article 9(1) first sentence leaves trade-secret protection intact [fn. 60: To this Article 9(1) second sentence, which limits the effect of contractual provisions, does not apply], it might be argued that interface information could still be retained, not on the basis of copyright, but as a trade secret by way of contractual restrictions placed on the buyer or licensee of the program.” Article 9(1) first sentence of the Directive 91/250/EEC (14 May 1991) correlates to Article 8, first paragraph, of the Directive 2009/24/EC (23 April 2009); Article 9(1) second sentence of the Directive 91/250/EEC correlates to Article 8, second paragraph, of the Directive 2009/24/EC.

ECJ, SAS Institute Inc. v. World Programming Ltd, C-406/10, EU:C:2012:259.

Ibid., paras. 28, 47.

Ibid., para. 49.

Ibid., paras. 27, 48.

Ibid., para. 44: “… WPL did not have access to the source code of SAS Institute’s program and did not carry out any decompilation of the object code of that program. By means of observing, studying and testing the behaviour of SAS Institute’s program, WPL reproduced the functionality of that program by using the same programming language and the same format of data files”.

Ibid., paras. 50, 54.

Ibid., para. 55.

Ibid., para. 62.

D. Gervais & E. Derclaye (2012), The Scope of Computer Program Protection after SAS: Are We Closer to Answers?, 34 EIPR 2012, 565, 572. They note that “… it is difficult to reconcile how the court can, on the one hand, say that the purpose of Article 5(3) is to ensure that any licensee can discover the ideas behind a program even if the licence agreement says otherwise and, on the other hand, say that the determination of the ideas must be done within the framework of the acts permitted by the licence. It would then be simple for a licensor to prevent such discovery in all cases via the licence agreement but this would be hard to reconcile (teleologically at least) with the Directive.” (Ibid., p. 571). Yet, the authors further discuss whether the judgment of the ECJ should be interpreted in the context of the facts of the case, particularly in the framework of non-production purpose of the licence, but consider it also problematic (see ibid., 571).

SAS Institute Inc. v. World Programming Limited, [2013] R.P.C. 17.

Ibid., para. 64.

Ibid., para. 68.

Ibid., para. 71: “In my view it is also significant that the Court does not say in [54]–[59] that the licensee's entitlement is affected by the purpose for which it carries out the acts of loading, displaying, running, transmitting or storing the program, and in particular whether that is a licensed purpose or an unlicensed purpose. Consistently with the reading of those paragraphs that I have suggested above, this indicates that the answer to the question posed at [49] is no.” However, the judgment of the ECJ could also be read the other way, since, for example, Gervais and Derclaye reached exactly the opposite conclusion: “the question the court had to answer was whether the purpose of the study or observation of the functioning of the computer program has an effect on whether the person who has obtained the licence may invoke Article 5(3). In short, the answer is yes.” (D. Gervais & E. Derclaye (2012), The Scope of Computer Program Protection after SAS: Are We Closer to Answers?, 34 EIPR 2012, 565, at 570).

SAS Institute Inc. v. World Programming Limited, [2013] R.P.C. 17, para. 73. “I therefore conclude that WPL’s use of the Learning Edition was within Article 5(3), and to the extent that such use was contrary to the licence terms they are null and void by virtue of Article 9(1), with the result that none of WPL’s acts complained of was a breach of contract or an infringement of copyright” (Ibid., para. 79).

See M.A. Lemley (2006-2007), Terms of Use, 91 Minn. L. Rev. 2006–2007, 459, 460, 467-470; M.A. Lemley (1994-1995), Intellectual Property and Shrinkwrap Licenses, 68 S. Cal. L. Rev. 1994–1995, 1239, 1248-1259; C.R. McManis (1996), Taking TRIPS on the Information Superhighway: International Intellectual Property Protection and Emerging Computer Technologies, 41 Vill. L. Rev. 1996, 207, 239 et seq.; R.P. Merges, S.P. Menell & M.A. Lemley (2012), Intellectual Property in the New Technological Age, p. 80; P. Samuelson & S. Scotchmer (2001-2002), The Law and Economics of Reverse Engineering, 111 Yale L.J. 2001–2002, 1575, 1626 et seq.

Vault Corporation v. Quaid Software Limited, 847 F.2d 255 (5 th Cir. 1988).

Ibid., 270.

C.R. McManis (1996), Taking TRIPS on the Information Superhighway: International Intellectual Property Protection and Emerging Computer Technologies, 41 Vill. L. Rev. 1996, 207, 241-244.

Davidson & Associates v. Jung, 422 F.3d 630 (8 th Cir. 2005): “In Vault , plaintiffs challenged the Louisiana Software License Enforcement Act, which permitted a software producer to impose contractual terms upon software purchasers provided that the terms were set forth in a license agreement comporting with the statute. … Unlike in Vault , the state law at issue here neither conflicts with the interoperability exception under 17 U.S.C. § 1201(f) nor restricts rights given under federal law. Appellants contractually accepted restrictions on their ability to reverse engineer by their agreement to the terms of the TOU and EULA. … By signing the TOUs and EULAs, Appellants expressly relinquished their rights to reverse engineer.” (638–639).

Bowers v. Baystate Technologies, Inc., 320 F.3d 1317 (Fed. Cir. 2003).

Ibid., 1325–1326.

Ibid., 1327, 1334.

Ibid., 1335.

Ibid., 1337.

Ibid., 1337–1338.

ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7 th Cir. 1996).

Ibid., 1455.

Ibid., 1454. Cited in Bowers v. Baystate Technologies, Inc., 320 F.3d 1317 (Fed Cir. 2003), 1325.

Bowers v. Baystate Technologies, Inc., 320 F.3d 1317, 1337–1338 (Fed. Cir. 2003).

ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1455 (7th Cir. 1996). Cited in Bowers v. Baystate Technologies, Inc., 320 F.3d 1317, 1338 (Fed. Cir. 2003).

Aqua Connect, Inc. v. Code Rebel, LLC, 2012 WL 469737 (C.D. Cal., 2012).

Ibid., 2 (citing DVD Copy Control Ass'n, Inc. v. Bunner, 31 Cal. 4th 864, 901 n. 5 (2003) (Moreno, J., concurring)). In the words of the Court, “… from the plain language of the statute, reverse engineering must be combined with some other improper action in order for it to form the basis of a cognizable misappropriation claim. … reverse engineering is not an improper means of acquiring trade secret information when defendants acquire the item, from which the information is derived, through fair and honest means. … Though a breach of the EULA may support a cognizable breach of contract claim, the Court finds that the mere presence of the EULA does not convert reverse engineering into an ‘improper means’ within the definition of California trade secret law.” (Ibid., 2).

See M.A. Lemley (1994-1995), Intellectual Property and Shrinkwrap Licenses, 68 S. Cal. L. Rev. 1994–1995, 1239, 1283 et seq. As pointed out by the author, “shrinkwraps are not contracts at all in any meaningful sense of the word” (Ibid., p. 1291). See also M.A. Lemley (2006-2007), Terms of Use, 91 Minn. L. Rev. 2006–2007, 459.

In similar lines discussing the overlap of copyright and trade secret protection in software see T. Aplin (2013), Reverse Engineering and Commercial Secrets, 66 CLP 2013, 341, 372-373.

Samuelson and Scotchmer point out that such a risk would not be high due to a low incentive of a reverse-engineer to disclose information in order to preserve the competitive advantage provided by keeping information secret (P. Samuelson & S. Scotchmer (2001-2002), The Law and Economics of Reverse Engineering, 111 Yale L.J. 2001–2002, 1575, 1658).

P. Samuelson & S. Scotchmer (2001-2002), The Law and Economics of Reverse Engineering, 111 Yale L.J. 2001–2002, 1575, 1650-1651. See also T. Aplin (2013), Reverse Engineering and Commercial Secrets, 66 CLP 2013, 341, 342.

See T. Dreier (2013), in T. Dreier & G. Schulze (Eds.), Urheberrechtsgesetz, Einl., para. 37, § 69a, para. 10; I.M. Harlacher (2012), Schutz vor Reverse Engineering im deutschen Recht, 11 ReWir 2012, 1, 23.

Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 146 (1988).

“In some cases reverse engineering is a necessary or at least useful step in the process of further innovation, in other cases it may only enable imitation” (A. Ohly (2009), Reverse Engineering: Unfair Competition or Catalyst for Innovation?, in W. Prinz zu Waldeck und Pyrmont et al. (Eds.), Patents and Technological Progress in a Globalized World, p. 538). See also T. Aplin (2013), Reverse Engineering and Commercial Secrets, 66 CLP 2013, 341, 342: “Competitors may seek to reverse engineer in order to replicate the same or similar product at a cheaper price, while others may be more interested in producing an improved or complementary product” (case-law examples omitted).

P. Samuelson & S. Scotchmer (2001-2002), The Law and Economics of Reverse Engineering, 111 Yale L.J. 2001–2002, 1575, 1613.

Ibid., 1590.

“On the positive side, a right to reverse-engineer has a salutary effect on price competition and on the dissemination of know-how that can lead to new and improved products” (P. Samuelson & S. Scotchmer (2001-2002), The Law and Economics of Reverse Engineering, 111 Yale L.J. 2001–2002, 1575, 1590).

Ibid., 1589, 1650.

On reverse engineering in the markets characterized by interoperability see P. Samuelson & S. Scotchmer (2001-2002), The Law and Economics of Reverse Engineering, 111 Yale L.J. 2001–2002, 1575, 1613 et seq. According to the authors, “… in markets for products heavily dependent on intellectual property rights, such as computer software, there is reason to worry about contractual restrictions of reverse engineering” (ibid., 1660).

I.M. Harlacher (2012), Schutz vor Reverse Engineering im deutschen Recht, 11 ReWir 2012, 1, 20; H. Harte-Bavendamm (1990), Wettbewerbsrechtliche Aspekte des Reverse Engineering von Computerprogrammen, GRUR 1990, 657, 659. See also P. Samuelson & S. Scotchmer (2001-2002), The Law and Economics of Reverse Engineering, 111 Yale L.J. 2001–2002, 1575, 1580, 1613, 1615, 1654.

See also P. Samuelson & S. Scotchmer (2001-2002), The Law and Economics of Reverse Engineering, 111 Yale L.J. 2001–2002, 1575, 1653: “Our advice to policymakers is: Before banning a means of reverse engineering, require convincing evidence that this means has market-destructive consequences. Realize that existing market participants may want a ban mainly because they wish to protect themselves against competitive entry. Any restriction on reverse engineering should be tailored so that it does not reach more than parasitic activities.”

On Article 40(2) TRIPS see O. Brand (2013), in J. Busche, P.-T. Stoll & A. Wiebe (Eds.), TRIPs, Artikel 40, paras. 24 et seq.

Proposal for the Trade Secrets Directive, supra fn. 6, recital 27.

See also P. Samuelson & S. Scotchmer (2001-2002), The Law and Economics of Reverse Engineering, 111 Yale L.J. 2001–2002, 1575, 1630.

Ibid., 1621. They, however, still do not argue that “reverse engineering should be made illegal in order to protect platform developers” (p. 1622).

Explanatory Memorandum, supra fn. 42, p. 2.

See W. Cornish, D. Llewelyn & T. Aplin (2013), Intellectual Property, p. 322: “in actual practice, patents are often secured for a central invention, while much that is learned in the process of bringing it into commercial production is tied up as secret ‘know-how’ by means of confidence undertakings”.

Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 490 (1974).

Ibid., 489-490: “Trade secret law provides far weaker protection in many respects than the patent law. [footnote omitted] While trade secret law does not forbid the discovery of the trade secret by fair and honest means, e.g., independent creation or reverse engineering, patent law operates ‘against the world’, forbidding any use of the invention for whatever purpose for a significant length of time. The holder of a trade secret also takes a substantial risk that the secret will be passed on to his competitors, by theft or by breach of a confidential relationship, in a manner not easily susceptible of discovery or proof.”

P. Samuelson & S. Scotchmer (2001-2002), The Law and Economics of Reverse Engineering, 111 Yale L.J. 2001–2002, 1575, 1649–1650. On the tension between the “incentive to invent” theory and the “incentive to disclose” theory see K.J. Strandburg (2004), What Does the Public Get? Experimental Use and the Patent Bargain, Wis. L. Rev. 2004, 81, 104–107.

National Conference of Commissioners on Uniform State Laws, Uniform Trade Secrets Act with 1985 Amendments, p. 5. From a historic point of view, it is interesting to observe that a different formulation was used in the Restatement (First) of Torts published by the American Law Institute. Section 757, Comment (b) (1939) stated that “a substantial element of secrecy must exist, so that, except by the use of improper means , there would be difficulty in acquiring the information” (emphasis added).

On the origins of the wording of this provision in the framework of the negotiations of TRIPS see N.P. de Carvalho (2008), The TRIPS Regime of Antitrust and Undisclosed Information, p. 231.

Ibid., p. 232. See also J. Brammsen (2014), in P.W. Heermann & J. Schlingloff (Eds.), Münchener Kommentar zum Lauterkeitsrecht, § 17, para. 15: “Geheim sind demnach nur Tatsachen, die nicht offenkundig, dh. weder allgemein noch dergestalt zugänglich sind, dass für jeden an ihr Interessierten die tatsächliche Möglichkeit besteht, sie unter Zuhilfenahme lauterer Mittel auf normalem Weg ohne nennenswerte Mühen kennen zu lernen”.

P. Samuelson & S. Scotchmer (2001-2002), The Law and Economics of Reverse Engineering, 111 Yale L.J. 2001–2002, 1575, 1582, 1650, 1653.

See also A. Ohly (2014), in A. Ohly & O. Sosnitza (Eds.), Gesetz gegen den unlauteren Wettbewerb, § 17, para. 10.

The ease or difficulty of reverse engineering may play a role in strategic decisions on whether to patent the invention or whether to keep information secret. On self-disclosing and non-self-disclosing inventions and the role of the theories on “the incentive to invent” and “the incentive to disclose” see K.J. Strandburg (2004), What Does the Public Get? Experimental Use and the Patent Bargain, Wis. L. Rev. 2004, 81, 107 et seq.

For example, as early as 1939, the Restatement (First) of Torts , published by the American Law Institute, listed several factors for assessing the existence of a trade secret. Among these factors were the following: “iii) the extent of measures taken by the owner to guard the secrecy of the information; … v) the amount of effort or money expended by him in developing the information; and vi) the ease or difficulty with which the information could properly be acquired or duplicated by others” ( Restatement (First) of Torts , Section 757, Comment (b) (1939)).

M. Peter & A. Wiebe (2013), in J. Busche, P.-T. Stoll & A. Wiebe (Eds.), TRIPs, Artikel 39, para. 23.

Ibid., para. 9.

See the Proposal of the Council of the European Union, supra fn. 47, Article 3(2), Article 3(3), Article 3(4).

M.A. Lemley (1994-1995), Intellectual Property and Shrinkwrap Licenses, 68 S. Cal. L. Rev. 1994–1995, 1239: “Contracts involving intellectual property frequently attempt to alter this balance, normally in favor of the intellectual property owners. Each of these contracts, however, affects not only the immediate parties, but also a host of potential third parties – users, subsequent inventors, and the general public. In other words, agreements to vary intellectual property law create externalities.” (p. 1286). See also ibid., p. 1291: “[N]o two parties should be allowed to alter or avoid some aspect of intellectual property law where the result is to disadvantage others who are not a party to the contract”.

C.R. McManis (1996), Taking TRIPS on the Information Superhighway: International Intellectual Property Protection and Emerging Computer Technologies, 41 Vill. L. Rev. 1996, 207, 223-224.

P. Samuelson & S. Scotchmer (2001-2002), The Law and Economics of Reverse Engineering, 111 Yale L.J. 2001–2002, 1575, 1586-1588.

Ibid., 1588 (according to the authors, some of the factors might be a brand of the product, high switching costs, etc.).

T. Aplin (2013), Reverse Engineering and Commercial Secrets, 66 CLP 2013, p. 341.

Ann, C. (2007), Know-How – Stiefkind des Geistigen Eigentums?, GRUR 2007, 39, Munich: C.H. Beck

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Surblytė, G. (2016). Enhancing TRIPS: Trade Secrets and Reverse Engineering. In: Ullrich, H., Hilty, R., Lamping, M., Drexl, J. (eds) TRIPS plus 20. MPI Studies on Intellectual Property and Competition Law, vol 25. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-48107-3_24

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The Role of the TRIPS Agreement in International Intellectual Property Protection

Introduction.

The Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement , established under the auspices of the World Trade Organization (WTO), stands as a pivotal instrument in the realm of international intellectual property (IP) protection. Enacted in 1994, the TRIPS Agreement marked a significant turning point by integrating intellectual property concerns into the framework of global trade. This article delves into the multifaceted role of the TRIPS Agreement, exploring its origins, key provisions, impact on international trade, and its evolving relevance in the contemporary landscape of intellectual property protection.

Historical Context

To comprehend the importance of the TRIPS Agreement, it is crucial to understand the historical context that led to its creation. Before the establishment of the WTO, international trade agreements lacked a comprehensive framework for addressing intellectual property issues. The Uruguay Round of trade negotiations, conducted from 1986 to 1994, sought to rectify this gap by developing a unified approach to intellectual property on a global scale.

The TRIPS Agreement emerged as a landmark achievement during the Uruguay Round, as it marked the first time that intellectual property rights were systematically integrated into the international trading system. The agreement aimed to strike a balance between the interests of developed and developing countries, recognizing the need for protection and the imperative of fostering innovation and economic development.

Key Provisions of the TRIPS Agreement

The TRIPS Agreement comprises a set of provisions that outline the minimum standards for the protection and enforcement of various forms of intellectual property. These standards cover patents, trademarks, copyrights, trade secrets, and other related rights. Some of the key provisions include:

a. Patent Protection

The TRIPS Agreement mandates member countries to provide patent protection for inventions, both products and processes, across all fields of technology. The agreement establishes a minimum patent term of 20 years from the filing date and delineates the criteria for patentability, including novelty, inventiveness, and industrial applicability.

b. Copyright and Related Rights

The agreement addresses copyright protection , requiring member countries to grant authors exclusive rights over their literary, artistic, and musical works. It also covers related rights, such as those of performers, producers of phonograms, and broadcasting organizations. The minimum copyright term is set at 50 years, with flexibility for longer terms.

c. Trademarks

TRIPS mandates the protection of trademarks, requiring member countries to provide a minimum level of protection for registered trademarks. This includes the prohibition of the unauthorized use of identical or similar signs for identical or similar goods and services.

d. Enforcement Mechanisms

The TRIPS Agreement establishes enforcement mechanisms to ensure the effective protection of intellectual property rights. It includes provisions for civil and administrative procedures, provisional measures, and border measures to prevent the entry of counterfeit goods.

Impact on International Trade

The TRIPS Agreement significantly impacts international trade by integrating intellectual property considerations into the broader framework of the WTO. Intellectual property rights have become a vital aspect of global commerce, influencing trade patterns, investment decisions, and technology transfer. The following aspects highlight the impact of the TRIPS Agreement on international trade:

a. Technology Transfer

One of the primary objectives of the TRIPS Agreement is to promote the transfer of technology between developed and developing countries. By establishing a minimum standard of intellectual property protection, the agreement seeks to create a conducive environment for the flow of technology and knowledge across borders.

b. Market Access and Investment

Intellectual property protection, as mandated by the TRIPS Agreement, has become a crucial factor in market access and foreign investment decisions. Countries with robust intellectual property regimes are often perceived as more attractive for foreign investment, as companies seek to protect their innovations and technologies in jurisdictions with effective legal frameworks.

c. Dispute Resolution

The TRIPS Agreement provides a mechanism for dispute resolution within the WTO framework. Member countries can bring disputes related to intellectual property rights violations to the WTO Dispute Settlement Body , fostering a rules-based approach to resolving conflicts and ensuring compliance with TRIPS obligations.

Challenges and Criticisms

While the TRIPS Agreement has undoubtedly played a pivotal role in harmonizing international intellectual property standards, it has not been without challenges and criticisms. Some of the key issues raised include:

a. Access to Medicines

One of the most contentious issues relates to the impact of the TRIPS Agreement on access to essential medicines, particularly in developing countries. Critics argue that stringent patent protection can hinder the production and availability of affordable generic medicines, posing a barrier to public health initiatives.

b. Technology Transfer Disparities

Despite the intention to promote technology transfer , the TRIPS Agreement has been criticized for exacerbating disparities in technology access between developed and developing nations. The capacity of developing countries to fully engage in research and development may be constrained by the need to adhere to stringent intellectual property standards.

c. Flexibility and Policy Space

Developing countries have advocated for greater flexibility and policy space within the TRIPS framework to address their unique developmental needs. This includes the ability to adopt measures such as compulsory licensing and the limitation of exclusive rights in certain situations to balance public health concerns and industrial development.

Evolving Relevance in the Contemporary Landscape

As the global landscape continues to evolve, the relevance of the TRIPS Agreement remains a subject of ongoing debate. Several factors contribute to its evolving significance:

a. Technological Advancements

Rapid advancements in technology, especially in fields like biotechnology and digital innovation, pose new challenges for intellectual property regimes. The TRIPS Agreement, crafted in the pre-digital era, may need to adapt to address emerging issues such as artificial intelligence, blockchain, and gene editing.

b. Public Health Imperatives

The ongoing global health challenges, such as the COVID-19 pandemic, have reignited discussions about the balance between intellectual property protection and public health imperatives. The TRIPS Agreement has faced calls for temporary waivers of certain intellectual property rights to facilitate widespread access to vaccines and treatments.

c. Sustainable Development Goals

The United Nations’ Sustainable Development Goals (SDGs) emphasize the importance of balancing economic growth with social and environmental considerations. The TRIPS Agreement is increasingly viewed through the lens of its impact on sustainable development, requiring a nuanced approach to intellectual property that considers broader societal goals.

Future Prospects and Potential Reforms

As the international community grapples with the challenges and opportunities presented by the TRIPS Agreement, discussions about potential reforms and future prospects have gained momentum. Some areas of consideration include:

a. Flexibility and Development

Future reforms could focus on enhancing flexibility within the TRIPS framework to accommodate the diverse needs and development priorities of member countries. This may involve revisiting certain provisions to strike a more equitable balance between intellectual property protection and development objectives.

b. Access to Medicines

The debate surrounding access to medicines is likely to persist, with ongoing discussions about the role of intellectual property in responding to public health emergencies. Reforms could explore mechanisms to ensure timely and affordable access to critical medical technologies during health crises.

c. Technology Transfer and Capacity Building

Efforts to facilitate technology transfer and capacity building, especially for developing countries, could be a key area for future reforms. Collaborative initiatives, partnerships, and international cooperation may be promoted to address the technology gap between nations.

The TRIPS Agreement stands as a landmark in the history of international intellectual property protection, reshaping the landscape of global trade and innovation. While it has played a crucial role in establishing minimum standards for the protection of intellectual property, challenges and criticisms persist. As the world grapples with evolving technologies, public health crises, and sustainable development

goals, the TRIPS Agreement faces the imperative of adapting to meet the needs of a rapidly changing global landscape. The ongoing discourse surrounding the agreement underscores the importance of finding a delicate balance between protecting intellectual property rights and addressing broader societal imperatives in the pursuit of a more equitable and sustainable future.

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The WTO Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS Council) monitors implementation of the Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement), provides a forum in which WTO Members can consult on intellectual property matters, and carries out the specific responsibilities assigned to the Council in the TRIPS Agreement.

The TRIPS Agreement sets minimum standards of protection for copyrights and related rights, trademarks, geographical indications (GIs), industrial designs, patents, integrated circuit layout designs, and undisclosed information. The TRIPS Agreement also establishes minimum standards for the enforcement of intellectual property rights (IPRs) through civil actions for infringement, actions at the border and, at least in regard to copyright piracy and trademark counterfeiting, in criminal actions.

The TRIPS Agreement is important to U.S. interests and has yielded significant benefits for U.S. industries and individuals, from those engaged in the pharmaceutical, agricultural chemical, and biotechnology industries to those producing motion pictures, sound recordings, software, books, magazines, and consumer goods.

Additional information on TRIPS issues is available through the WTO website

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Guarding Trade Secrets During Layoffs Requires Quick Thinking

With last year’s surge in layoffs anticipated to linger into this year, companies that are reducing their workforce face risks of unauthorized disclosure or use of trade secrets and other valuable confidential business information.

Understanding these risks is critical to mitigating them. Taking proactive measures to safeguard trade secrets and other confidential information can be an important strategy—because it’s more difficult to remedy disclosure of protected information after the fact.

Misappropriation Risks

Companies also have an array of tools to strengthen their position in litigation, stop further dissemination of confidential information, and recover damages if they suspect an employee has misappropriated or disclosed trade secrets.

Individual employee separations can be more easily planned to safeguard confidential business information. However, larger-scale separations can make it challenging for companies to:

• Identify what trade secrets the impacted employees can access or possess
• Ensure that impacted employees realize their post-employment confidentiality obligations
• Monitor for intentional or unintentional misappropriation or unauthorized access, use, or disclosure of trade secrets

Departing employees may be more motivated to retain or use competitively sensitive or otherwise nonpublic information in approaching a business competitor for new employment, especially if they have been separated involuntarily.

These risks may be heightened if, during an organizational downsizing or restructuring, there are personnel gaps in departments responsible for monitoring and preventing unauthorized access and external transfer of company data.

The growing prevalence of remote work arrangements and technologies that allow employees remote access to employer systems and data makes safeguarding sensitive information more challenging.

For example, employees who work remotely may be maintaining hard copy work files containing confidential information at home, and they may not be disposing those files securely.

Risk Mitigation

When preparing for a reduction in force, first identify the universe of trade secrets and other confidential business information that may be affected. Assess the company’s rights to enforce post-employment confidentiality obligations, and take proactive steps to minimize inadvertent or intentional retention, unauthorized access, or use.

Businesses may want to review internal policies and relevant employee contracts that govern the definition and authorized use of trade secrets and confidential information and that describe employees’ post-employment confidentiality obligations.

A focused assessment can reveal the types of trade secrets and confidential information to which impacted employees have access and ensure a company can secure this information before and after the layoff.

A robust exit interview process can allow companies to confirm that departing employees have not retained company information inappropriately. Companies can use these sessions to remind departing employees of confidentiality obligations that continue after their separation from the company, as well as to assess the risk of violation.

A checklist of company devices, databases, or systems can help determine which employees’ access must be fully and promptly terminated. The list may include the company’s physical and digital document repositories and databases, email, instant messaging and IT systems, devices, and equipment—both company-issued and “bring your own device”—and passwords to the company’s internal and external accounts.

IT professionals can establish protocols for securing company information on remote devices and monitor for signs of misappropriation before and after termination. This can include forwarding information to a personal email address, downloading data onto cloud or external storage devices, and monitoring company systems for any attempts at data theft or other unusual activity.

Separation agreements can provide extra protection if they include provisions requiring employees to certify compliance with obligations to catalog, return and/or destroy confidential information, and provide an economic incentive for continued compliance with post-employment confidentiality obligations.

The National Labor Relations Board’s 2023 decision in McLaren Macomb may prompt companies to ensure their separation agreements don’t interfere with employees’ right to discuss labor conditions protected by law. Employers also must provide notice of the federal Defend Trade Secrets Act of 2016 in any agreement governing the use of a trade secret or other confidential information.

The Defend Trade Secrets Act protects whistleblowers who disclose trade secrets to government officials or an attorney solely to report a suspected legal violation, or in a legal proceeding under seal, and in connection with a lawsuit alleging retaliation for reporting a suspected legal violation. Failure to provide this notice precludes an employer from recovering damages.

Cases for Enforcement

If trade secret misappropriation is suspected, companies considering legal action to recover damages and prevent further harm may want to take certain actions to strengthen their litigation position.

Be prepared to show reasonable and diligent measures to protect trade secrets. Policies and protocols that limit and restrict access to trade secrets, and demonstrated enforcement of those prohibitions, are critical to any successful trade secret enforcement action.

Preserve and gather evidence of misappropriation. Review and gather evidence about the departing employee’s job responsibilities, access to trade secrets, any restrictive covenants, and conduct showing the misappropriation of trade secrets. The evidence gathering process may include a forensic analysis of the individual’s emails, devices, accounts, or access history.

Assess and establish harm . Companies may want to gather evidence concerning the harm caused by the trade secret misappropriation, realizing the different theories under which damages could be established and recovered. For example, recoverable damages could include lost profits, loss of competitive advantage or business opportunities, unjust enrichment, and the costs of legal action.

Promptly seek injunctive relief where unauthorized disclosure or misuse is imminent. In addition to seeking damages, companies may want to consider seeking injunctive relief to prevent imminent harm. In certain cases, failing to act promptly could be viewed as undermining the company’s claim that the misappropriated information constitutes a trade secret.

Understanding trade secret-related risks that accompany downsizing, and planning to mitigate these risks, can help companies safeguard their most valuable information assets.

Even after misappropriation has occurred, companies that act quickly to preserve evidence, establish damages and, in appropriate cases, seek injunctive relief are in the best position for a successful enforcement action.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Melinda Haag is litigation partner at Paul Weissand co-chairs the white collar and regulatory defense group.

Liza M. Velazquez is litigation partner at Paul Weiss and chairs the employment law, workplace investigations, and trade secrets litigation practice group.

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To contact the editors responsible for this story: Rebecca Baker at [email protected] ; Melanie Cohen at [email protected]

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• Tips on Protecting Trade Secrets after FTC Bans Non-competes

On April 23, the Federal Trade Commission issued its final rule banning non-compete agreements nationwide, with the aim of “protecting the fundamental freedom of workers to change jobs, increasing innovation, and fostering new business formation.”

The fall of non-competes removes one of the more effective tools businesses have to protect their trade secrets by stopping employees from taking confidential information straight to a competitor. How, then, should companies with intellectual property to protect respond?

First, Sit Tight

This legislation has yet to be tested in the courts. Less than 24 hours after the FTC established the rule, lawsuits have been filed to challenge it.

However, the end of the non-compete is not just a federal matter. Many states are considering their own bans, with California, Colorado, Minnesota, North Dakota and Oklahoma having already signed them into law.

Whether or not the federal rule stands, businesses have other tools available – that could avoid overreliance on any one of them to the exclusion of others – to protect their trade secrets.

Limit Access

If one cannot prevent an employee from going to a competitor, the next best protection for trade secrets is to limit who has access to them. The fewer employees to know the trade secrets, the less likely a competitor can misappropriate them by hiring away an employee. Generally, few employees are on a need-to-know basis with the most sensitive commercial information, though that obviously depends on what that information is. The accounting or finance team will always have access to financial information, along with management. Businesses that rely on scientific or engineering knowhow may be able to limit access to only the scientists and engineers. Customer lists may be limited to the sales people who service those specific customers. Regardless of the information, it can be kept electronically secure rather than open to the whole enterprise. Essentially, compartmentalization can limit the exposure, but cannot eliminate it.

Actively Protect Information

Outside of limiting access, it is essential to arrange one’s affairs so that a court will ultimately uphold the business’s claim to trade secret protection. The hope is to never have to sue a former employee or competitor for misappropriating trade secrets, but if the need arises, it is important to account for what courts consider in determining whether particular information is even entitled to protection. While different courts may use slightly different tests or language in their analysis, there are common factors. Limiting access, as discussed in the prior paragraph, is almost always step one. A court is far more likely to protect trade secrets if the business can show that it is actively trying to protect the information. The non-compete may have prevented employees from going over to competitors, but the confidentiality provisions in those agreements were doing a lot of the heavy lifting. The prohibition on non-competes is not a prohibition on confidentiality agreements, which should remain a key part of any trade secret protection program.

Employ Every Tool

Aside from confidentiality agreements with employees, vendors, and customers, other methods of keeping information confidential from those outside and within the organization are essential. Written information policies put employees on notice of the ways in which they are required to assist in maintaining confidentiality. Electronic sequestration of sensitive information within the organization keeps information on a need-to-know basis. Strong network protection against those outside the organization prevent exposure to hacks. And regularly reviewing or auditing these measures to ensure compliance and effectiveness will help a court recognize that the organization has identified and values the information it claims to be trade secrets and convince the court to hold former employees and their new employers accountable for misappropriation.

Prior to the FTC’s actions, non-competes should have only been one piece of a larger program of trade secret protection. After the non-compete ban, businesses must invest in a more multilayered approach.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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FTC bans noncompete agreements, making it easier for workers to quit. Here's what to know.

By Kate Gibson

Edited By Alain Sherter

Updated on: April 24, 2024 / 10:17 AM EDT / CBS News

Federal regulators on Tuesday enacted a nationwide ban on new noncompete agreements, which keep millions of Americans — from minimum-wage earners to CEOs — from switching jobs within their industries.

The Federal Trade Commission on Tuesday afternoon voted 3-to-2 to approve the new rule , which will ban noncompetes for all workers when the regulations take effect in 120 days. For senior executives, existing noncompetes can remain in force. For all other employees, existing noncompetes are not enforceable.

The antitrust and consumer protection agency heard from thousands of people who said they had been harmed by noncompetes, illustrating how the agreements are "robbing people of their economic liberty," FTC Chair Lina Khan said. 

The FTC commissioners voted along party lines, with its two Republicans arguing the agency lacked the jurisdiction to enact the rule and that such moves should be made in Congress. 

Within hours of the vote, the U.S. Chamber of Commerce said it would sue to block "this unnecessary and unlawful rule and put other agencies on notice that such overreach will not go unchecked." The new rule would "undermine American businesses' ability to remain competitive," the trade group, which advocates for U.S. corporations and businesses, said in a statement.

Why it matters

The new rule could impact tens of millions of workers, said Heidi Shierholz, a labor economist and president of the Economic Policy Institute, a left-leaning think tank. 

"For nonunion workers, the only leverage they have is their ability to quit their job," Shierholz told CBS MoneyWatch. "Noncompetes don't just stop you from taking a job — they stop you from starting your own business."

Since  proposing the new rule , the FTC has received more than 26,000 public comments on the regulations. The final rule adopted "would generally prevent most employers from using noncompete clauses," the FTC said in a statement.

The agency's action comes more than two years after President Biden directed the agency to "curtail the unfair use" of noncompetes, under which employees effectively sign away future work opportunities in their industry as a condition of keeping their current job. The president's executive order urged the FTC to target such labor restrictions and others that improperly constrain employees from seeking work.

"The freedom to change jobs is core to economic liberty and to a competitive, thriving economy," Khan said in a statement making the case for axing noncompetes. "Noncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand."

A threat to trade secrets?

An estimated 30 million people  — or one in five U.S. workers — are bound by noncompete restrictions, according to the FTC.  The new rule could boost worker wages by a total of nearly $300 billion a year, according to the agency.

Employers who use noncompetes argue that they are needed to protect trade secrets or other confidential information employees might learn in the course of their jobs. 

"It'll represent a sea change," said Amanda Sonneborn, a partner at King & Spalding in Chicago who represents employers that use noncompetes. "They don't want somebody to go to a competitor and take their customer list or take their information about their business strategy to that competitor."

Yet corporations concerned about protecting their intellectual assets can use restraints such as confidentiality agreements and trade secret laws, and don't need to resort to noncompete agreements, the FTC staff determined. 

The commission's final rule does not nullify existing noncompetes with senior executives, who are defined as those earning more than $151,164 a year and who hold a policy-making position. Those execs are much more likely to negotiate the terms of their compensation, according to regulators.  

Still, the FTC is banning new noncompetes for senior executives on the grounds that the agreements stifle competition and discourage employees from creating new businesses, potentially harming consumers.

The idea of using noncompetes to keep business information out of the hands of rivals has proliferated, noted Shierholz, citing a notorious case  involving Jimmy John's eateries .

Low-paid workers are now the hardest hit by restrictive work agreements, which can forbid employees including janitors,  security guards  and  phlebotomists  from leaving their job for better pay even though these entry-level workers are least likely to have access to trade secrets.

Real-life consequences

In laying out its rationale for banishing noncompetes from the labor landscape, the FTC offered real-life examples of how the agreements can hurt workers.

In one case, a single father earned about $11 an hour as a security guard for a Florida firm, but resigned a few weeks after taking the job when his child care fell through. Months later, he took a job as a security guard at a bank, making nearly $15 an hour. But the bank terminated his employment after receiving a letter from the man's prior employer stating he had signed a two-year noncompete.

In another example, a factory manager at a textile company saw his paycheck dry up after the 2008 financial crisis. A rival textile company offered him a better job and a big raise, but his noncompete blocked him from taking it, according to the FTC. A subsequent legal battle took three years, wiping out his savings. 

—The Associated Press contributed to this report.

Kate Gibson is a reporter for CBS MoneyWatch in New York.

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Trade secrets, what is a trade secret.

Trade secrets are intellectual property (IP) rights on confidential information which may be sold or licensed.

What qualifies as a trade secret?

In general, to qualify as a trade secret, the information must be:

• commercially valuable because it is secret,
• be known only to a limited group of persons , and
• be subject to reasonable steps taken by the rightful holder of the information to keep it secret, including the use of confidentiality agreements for business partners and employees.

The unauthorized acquisition, use or disclosure of such secret information in a manner contrary to honest commercial practices by others is regarded as an unfair practice and a violation of the trade secret protection.

In general, any confidential business information which provides an enterprise a competitive edge and is unknown to others may be protected as a trade secret.

Trade secrets encompass both technical information , such as information concerning manufacturing processes, pharmaceutical test data, designs and drawings of computer programs, and commercial information , such as distribution methods, list of suppliers and clients, and advertising strategies.

A trade secret may be also made up of a combination of elements , each of which by itself is in the public domain, but where the combination, which is kept secret, provides a competitive advantage.

Other examples of information that may be protected by trade secrets include financial information, formulas and recipes and source codes.

Depending on the legal system, the legal protection of business secrets forms part of the general concept of protection against unfair competition or is based on specific provisions or case law on the protection of confidential information .

While a final determination of whether trade secret protection is violated or not depends on the circumstances of each individual case, in general, unfair practices in respect of secret information include industrial or commercial espionage , breach of contract and breach of confidence .

A trade secret owner, however, cannot stop others from using the same technical or commercial information, if they acquired or developed such information independently by themselves through their own R&D, reverse engineering or marketing analysis, etc. Since trade secrets are not made public, unlike patents, they do not provide “defensive” protection, as being prior art. For example, if a specific process of producing Compound X has been protected by a trade secret, someone else can obtain a patent or a utility model on the same invention, if the inventor arrived at that invention independently.

Companies should take preventive measures to protect trade secrets against theft or misappropriation, including:

• Non-disclosure agreement (NDA): employees and business partners should sign a non-disclosure agreement that prevent them from disclosing a company’s confidential information.
• Non-compete agreement (NCA): employers should ask employees, contractors and consultants to sign a non-compete agreement to prevent them from entering in competition when their employment/service agreement ends.
• Robust IT security infrastructure
• Controlling the accessibility of important documents

Explore more information on trade secrets’ protection .

Read the full list of trade secrets FAQs .

Video: What is a trade secret?

WIPO COVID-19 Response: Launch of a discussion paper on the interplay between patents and trade secrets in medical technologies

Access the meeting documents

WIPO Symposia on Trade Secrets and Innovation

The WIPO Symposia on Trade Secrets and Innovation provide fora for exchanging ideas and perspectives on issues relating to the interface between trade secrets and innovation.  They address new challenges and opportunities for both technological and service innovation sectors, as well as potential impacts of emerging technologies on the integration of trade secrets in the modern innovation ecosystem.

The Symposia bring together panelists from across the globe to share their insights in the aspects related to policy, law, economics and businesses.

The next WIPO Symposium on Trade Secrets and Innovation is due to take place in May and will discuss how trade secret systems support innovation and knowledge sharing in a fast-paced innovation ecosystem.

Find out more

• WIPO Symposium on Trade Secrets and Innovation (2019), Geneva

WIPO Symposium on Trade Secrets and Innovation

May 23 and 24, 2022, real world examples of trade secrets.

Trade secrets are a key component of IP portfolios helping businesses protect their secret formulas, know-how and other key information that gives them a competitive edge. Read our real-world trade secret cases for examples of how companies have used trade secrets to protect their intellectual property.

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Laws and treaties

International treaties.

The Paris Convention for the Protection of Industrial Property (Paris Convention) administered by WIPO deals partly with the protection of trade secrets as does the World Trade Organization’s (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement).

IP laws and treaties (WIPO Lex)

The WIPO Lex database is a comprehensive search tool that allows you to search national laws and international treaties on intellectual property.

WIPO Symposium on Trade Secrets and Innovation (November 2019) – Exchanging ideas and perspectives on issues relating to the interface between trade secrets and innovation.

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FTC Announces Rule Banning Noncompetes

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Today, the Federal Trade Commission issued a final rule to promote competition by banning noncompetes nationwide, protecting the fundamental freedom of workers to change jobs, increasing innovation, and fostering new business formation.

“Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned,” said FTC Chair Lina M. Khan. “The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”

The FTC estimates that the final rule banning noncompetes will lead to new business formation growing by 2.7% per year, resulting in more than 8,500 additional new businesses created each year. The final rule is expected to result in higher earnings for workers, with estimated earnings increasing for the average worker by an additional $524 per year, and it is expected to lower health care costs by up to $194 billion over the next decade. In addition, the final rule is expected to help drive innovation, leading to an estimated average increase of 17,000 to 29,000 more patents each year for the next 10 years under the final rule.

Noncompetes are a widespread and often exploitative practice imposing contractual conditions that prevent workers from taking a new job or starting a new business. Noncompetes often force workers to either stay in a job they want to leave or bear other significant harms and costs, such as being forced to switch to a lower-paying field, being forced to relocate, being forced to leave the workforce altogether, or being forced to defend against expensive litigation. An estimated 30 million workers—nearly one in five Americans—are subject to a noncompete.

Under the FTC’s new rule, existing noncompetes for the vast majority of workers will no longer be enforceable after the rule’s effective date. Existing noncompetes for senior executives - who represent less than 0.75% of workers - can remain in force under the FTC’s final rule, but employers are banned from entering into or attempting to enforce any new noncompetes, even if they involve senior executives. Employers will be required to provide notice to workers other than senior executives who are bound by an existing noncompete that they will not be enforcing any noncompetes against them.

In January 2023, the FTC issued a  proposed rule which was subject to a 90-day public comment period. The FTC received more than 26,000 comments on the proposed rule, with over 25,000 comments in support of the FTC’s proposed ban on noncompetes. The comments informed the FTC’s final rulemaking process, with the FTC carefully reviewing each comment and making changes to the proposed rule in response to the public’s feedback.

In the final rule, the Commission has determined that it is an unfair method of competition, and therefore a violation of Section 5 of the FTC Act, for employers to enter into noncompetes with workers and to enforce certain noncompetes.

The Commission found that noncompetes tend to negatively affect competitive conditions in labor markets by inhibiting efficient matching between workers and employers. The Commission also found that noncompetes tend to negatively affect competitive conditions in product and service markets, inhibiting new business formation and innovation. There is also evidence that noncompetes lead to increased market concentration and higher prices for consumers.

Alternatives to Noncompetes

The Commission found that employers have several alternatives to noncompetes that still enable firms to protect their investments without having to enforce a noncompete.

Trade secret laws and non-disclosure agreements (NDAs) both provide employers with well-established means to protect proprietary and other sensitive information. Researchers estimate that over 95% of workers with a noncompete already have an NDA.

The Commission also finds that instead of using noncompetes to lock in workers, employers that wish to retain employees can compete on the merits for the worker’s labor services by improving wages and working conditions.

Changes from the NPRM

Under the final rule, existing noncompetes for senior executives can remain in force. Employers, however, are prohibited from entering into or enforcing new noncompetes with senior executives. The final rule defines senior executives as workers earning more than $151,164 annually and who are in policy-making positions.

Additionally, the Commission has eliminated a provision in the proposed rule that would have required employers to legally modify existing noncompetes by formally rescinding them. That change will help to streamline compliance.

Instead, under the final rule, employers will simply have to provide notice to workers bound to an existing noncompete that the noncompete agreement will not be enforced against them in the future. To aid employers’ compliance with this requirement, the Commission has included model language in the final rule that employers can use to communicate to workers. 

The Commission vote to approve the issuance of the final rule was 3-2 with Commissioners Melissa Holyoak and Andrew N. Ferguson voting no. Commissioners Rebecca Kelly Slaughter , Alvaro Bedoya , Melissa Holyoak and Andrew N. Ferguson each issued separate statements. Chair Lina M. Khan will issue a separate statement.

The final rule will become effective 120 days after publication in the Federal Register.

Once the rule is effective, market participants can report information about a suspected violation of the rule to the Bureau of Competition by emailing  [email protected] . 

The Federal Trade Commission develops policy initiatives on issues that affect competition, consumers, and the U.S. economy. The FTC will never demand money, make threats, tell you to transfer money, or promise you a prize. Follow the  FTC on social media , read  consumer alerts  and the  business blog , and  sign up to get the latest FTC news and alerts .

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URUGUAY ROUND AGREEMENT: TRIPS

Part I — General Provisions and Basic Principles

• PART I General Provisions and Basic Principles
• PART II Standards Concerning the Availability, Scope and Use of Intellectual Property Rights
• 1. Copyright and Related Rights
• 2. Trademarks
• 3. Geographical Indications
• 4. Industrial Designs
• 6. Layout-Designs (Topographies) of Integrated Circuits
• 7. Protection of Undisclosed Information
• 8. Control of Anti-Competitive Practices in Contractual Licences
• PART III Enforcement of Intellectual Property Rights
• 1. General Obligations
• 2. Civil and Administrative Procedures and Remedies
• 3. Provisional Measures
• 4. Special Requirements Related to Border Measures
• 5. Criminal Procedures
• PART IV Acquisition and Maintenance of Intellectual Property Rights and Related Inter-Partes Procedures
• PART V Dispute Prevention and Settlement
• PART VI Transitional Arrangements
• PART VII Institutional Arrangements; Final Provisions

Article 1 Nature and Scope of Obligations

1.  Members shall give effect to the provisions of this Agreement. Members may, but shall not be obliged to, implement in their law more extensive protection than is required by this Agreement, provided that such protection does not contravene the provisions of this Agreement. Members shall be free to determine the appropriate method of implementing the provisions of this Agreement within their own legal system and practice.

2.  For the purposes of this Agreement, the term “intellectual property” refers to all categories of intellectual property that are the subject of Sections 1 through 7 of Part II.

3.  Members shall accord the treatment provided for in this Agreement to the nationals of other Members.  (1) In respect of the relevant intellectual property right, the nationals of other Members shall be understood as those natural or legal persons that would meet the criteria for eligibility for protection provided for in the Paris Convention (1967), the Berne Convention (1971), the Rome Convention and the Treaty on Intellectual Property in Respect of Integrated Circuits, were all Members of the WTO members of those conventions.  (2) Any Member availing itself of the possibilities provided in paragraph 3 of Article 5 or paragraph 2 of Article 6 of the Rome Convention shall make a notification as foreseen in those provisions to the Council for Trade-Related Aspects of Intellectual Property Rights (the “Council for TRIPS”).

Article 2 Intellectual Property Conventions

1.  In respect of Parts II, III and IV of this Agreement, Members shall comply with Articles 1 through 12, and Article 19, of the Paris Convention (1967).

2.  Nothing in Parts I to IV of this Agreement shall derogate from existing obligations that Members may have to each other under the Paris Convention, the Berne Convention, the Rome Convention and the Treaty on Intellectual Property in Respect of Integrated Circuits.

Article 3 National Treatment

1.  Each Member shall accord to the nationals of other Members treatment no less favourable than that it accords to its own nationals with regard to the protection  (3) of intellectual property, subject to the exceptions already provided in, respectively, the Paris Convention (1967), the Berne Convention (1971), the Rome Convention or the Treaty on Intellectual Property in Respect of Integrated Circuits. In respect of performers, producers of phonograms and broadcasting organizations, this obligation only applies in respect of the rights provided under this Agreement. Any Member availing itself of the possibilities provided in Article 6 of the Berne Convention (1971) or paragraph 1(b) of Article 16 of the Rome Convention shall make a notification as foreseen in those provisions to the Council for TRIPS.

2.  Members may avail themselves of the exceptions permitted under paragraph 1 in relation to judicial and administrative procedures, including the designation of an address for service or the appointment of an agent within the jurisdiction of a Member, only where such exceptions are necessary to secure compliance with laws and regulations which are not inconsistent with the provisions of this Agreement and where such practices are not applied in a manner which would constitute a disguised restriction on trade.

Article 4 Most-Favoured-Nation Treatment

  With regard to the protection of intellectual property, any advantage, favour, privilege or immunity granted by a Member to the nationals of any other country shall be accorded immediately and unconditionally to the nationals of all other Members. Exempted from this obligation are any advantage, favour, privilege or immunity accorded by a Member:

(a)  deriving from international agreements on judicial assistance or law enforcement of a general nature and not particularly confined to the protection of intellectual property;  

(b)  granted in accordance with the provisions of the Berne Convention (1971) or the Rome Convention authorizing that the treatment accorded be a function not of national treatment but of the treatment accorded in another country;  

(c)  in respect of the rights of performers, producers of phonograms and broadcasting organizations not provided under this Agreement;  

(d)  deriving from international agreements related to the protection of intellectual property which entered into force prior to the entry into force of the WTO Agreement, provided that such agreements are notified to the Council for TRIPS and do not constitute an arbitrary or unjustifiable discrimination against nationals of other Members.

Article 5 Multilateral Agreements on Acquisition or Maintenance of Protection

  The obligations under Articles 3 and 4 do not apply to procedures provided in multilateral agreements concluded under the auspices of WIPO relating to the acquisition or maintenance of intellectual property rights.

Article 6 Exhaustion

  For the purposes of dispute settlement under this Agreement, subject to the provisions of Articles 3 and 4 nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights.

Article 7 Objectives

  The protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.

Article 8 Principles

1.  Members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that such measures are consistent with the provisions of this Agreement.

2.  Appropriate measures, provided that they are consistent with the provisions of this Agreement, may be needed to prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology.

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• 1. When “nationals” are referred to in this Agreement, they shall be deemed, in the case of a separate customs territory Member of the WTO, to mean persons, natural or legal, who are domiciled or who have a real and effective industrial or commercial establishment in that customs territory.  Back to text
• 2. In this Agreement, “Paris Convention” refers to the Paris Convention for the Protection of Industrial Property; “Paris Convention (1967)” refers to the Stockholm Act of this Convention of 14 July 1967. “Berne Convention” refers to the Berne Convention for the Protection of Literary and Artistic Works; “Berne Convention (1971)” refers to the Paris Act of this Convention of 24 July 1971. “Rome Convention” refers to the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations, adopted at Rome on 26 October 1961. “Treaty on Intellectual Property in Respect of Integrated Circuits” (IPIC Treaty) refers to the Treaty on Intellectual Property in Respect of Integrated Circuits, adopted at Washington on 26 May 1989. “WTO Agreement” refers to the Agreement Establishing the WTO.  Back to text
• 3. For the purposes of Articles 3 and 4, “protection” shall include matters affecting the availability, acquisition, scope, maintenance and enforcement of intellectual property rights as well as those matters affecting the use of intellectual property rights specifically addressed in this Agreement.  Back to text

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How US changes to ‘noncompete’ agreements and overtime pay could affect workers

FILE - The Federal Trade Commission building is seen, Jan. 28, 2015, in Washington. U.S. companies would no longer be able to bar employees from taking jobs with competitors under a rule approved by the FTC on Tuesday, April 23, 2024, though the rule seems sure to be challenged in court. (AP Photo/Alex Brandon, File)

FILE - A hiring sign is displayed in Riverwoods, Ill., Tuesday, April 16, 2024. The Biden administration has finalized a new rule set to make millions of more salaried workers eligible for overtime pay in the U.S. The move marks the largest expansion in federal overtime eligibility seen in decades. (AP Photo/Nam Y. Huh, File)

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NEW YORK (AP) — For millions of American workers, the federal government took two actions this week that could bestow potentially far-reaching benefits.

In one move, the Federal Trade Commission voted to ban noncompete agreements , which bar millions of workers from leaving their employers to join a competitor or start a rival business for a specific period of time. The FTC’s move, which is already being challenged in court, would mean that such employees could apply for jobs they weren’t previously eligible to seek.

In a second move, the Biden administration finalized a rule that will make millions more salaried workers eligible for overtime pay. The rule significantly raises the salary level that workers could earn and still qualify for overtime.

The new rules don’t take effect immediately. And they won’t benefit everyone. So what exactly would these rules mean for America’s workers?

WHAT IS A NONCOMPETE AGREEMENT?

Noncompete agreements, which employers have deployed with greater frequency in recent years, limit an employee’s ability to jump ship for a rival company or start a competing business for a stated period of time. The idea is to prevent employees from taking a company’s trade secrets, job leads or sales relationships to a direct competitor, who could immediately capitalize on them.

Many industries use noncompete agreements, often among their salespeople, said Paul Lopez, managing partner at Tripp Scott, a Florida law firm that has handled more than 100 cases involving noncompete clauses.

“They’re the ones out there generating leads and sales,” Lopez said. “The last thing you as a business will want is for that person to go over to your competition and do the same thing.”

WHO IS TYPICALLY SUBJECT TO THESE AGREEMENTS?

People may assume that noncompete agreements apply only to high-level executives in the technology or finance industries. But many lower-level workers are subject to the restrictions as well. The rules vary by state.

In Florida, one medical sales worker was barred by his employer from joining a competitor for 10 years — and once he left his job, was unemployed for more than five years, said Stefanie Camfield, assistant general counsel with Engage PEO, a Florida company that handles human resources for small and medium-sized businesses.

“He was able to find another sales position in a completely different industry,” Camfield said. “But the learning curve was there, so he wasn’t making the same amount of money.”

In another case, a company in the optical industry that had hired a sales associate was informed by his former employer that it intended to enforce a noncompete agreement. So the optical company terminated the employee, Camfield said.

“They thought they had a qualified sales associate hired and ready to get to work, and all of a sudden now they’re back to square one.”

WHY BAN NONCOMPETE AGREEMENTS?

Some view noncompete agreements as harmful and unfair to workers by limiting their mobility. Career opportunities are often more attractive outside an employee’s current workplace. And with restrictions on the type of work they can do for a competitor, it can be hard to shift into a more suitable or lucrative position.

Many hiring managers, after all, most value job candidates who already have a certain level of experience in the same industry.

“A noncompete would unilaterally ban someone from getting exactly the kind of job that it’s reasonable to want,” said Jennifer Tosti-Kharas, a professor of organizational behavior at Babson College in Massachusetts. “To cut people off from that is overly paternalistic. It’s using a really blunt instrument to limit people’s mobility, when in reality there are other legal mechanisms to prevent trade secrets being disclosed.”

HOW DO I KNOW IF I’M SUBJECT TO A NONCOMPETE?

People are sometimes surprised to learn that they’re bound by such an agreement. They might not even find out until after they’ve left for a new job, and their former employer intervenes and causes them to be fired.

“When you join a company, you’re so focused on the opportunity in front of you, you might not be thinking about what’s that next jump,” Tosti-Kharas said.

Experts suggest that employees consult their human resources department about any noncompete agreements that might exist. If a workplace doesn’t have an HR department, an employee should ask a lawyer for the company.

ARE TRADE SECRETS NOW LIKELY TO BE SPILLED?

There are still laws on the books that protect companies’ trade secrets. The FTC decision doesn’t change that.

And the U.S. Chamber of Commerce has already filed a lawsuit against the Federal Trade Commission, calling its decision a dangerous precedent for government micromanagement of business. Lawsuits could delay any implementation of the FTC’s new rule, potentially for years.

WHAT ABOUT THE NEW OVERTIME RULES?

Starting July 1, employers of all sizes will be required pay overtime — time and a half salary after 40 hours a week — to salaried workers who make less than $43,888 a year in certain executive, administrative and professional roles. That cap will then rise to $58,656 by the start of 2025. Previously, the cap was $35,568.

WHO QUALIFIES?

The Labor Department estimates that 4 million salaried workers who weren’t previously eligible will qualify. Some occupations, though, including teachers, doctors and lawyers are not eligible for overtime pay and thus are not affected by the change. And some states, like California and New York, already have salary thresholds that exceed the federal level.

WHAT’S THE REACTION SO FAR?

Predictably, groups that represent companies have lined up against the new rule. Conversely, worker groups are applauding it as a necessary and long-overdue change.

The National Retail Federation argued that the new rules “curtail retailers’ ability to offer the most flexible, generous and tailored benefits packages to lower-level exempt employees across the industry.”

It also asserted that the new rules don’t give employers adequate time to make the changes needed. And it complained that the inclusion of automatic increases “exceeds the Department’s legal authority and oversteps longstanding Fair Labor Standards Act and Administrative Procedure Act principles.”

On the social media site X, the AFL-CIO labor organization said the rules will “restore and extend overtime protections for hard-working Americans.”

WILL THE CHANGES BE CHALLENGED IN COURT?

Almost certainly so. A 2016 effort by the Obama administration was scuttled in court just days before it was set to take effect. Because the new overtime rules won’t take effect until July 1, groups have time to study the ruling before mounting a challenge.

“I would expect there will be some legal challenges,” said Ted Hollis, a partner at the law firm Quarles & Brady. “When the Obama administration published its proposed rule in 2016, that was almost immediately challenged in court.”

HOW SHOULD BUSINESSES PREPARE FOR THIS?

Companies of all sizes will have to reclassify workers who will now qualify for overtime pay — and make sure they track hours and pay them properly.

Another option is to raise employees’ salaries so they would remain exempt from overtime. But employers should keep in mind that two more increases are coming under the new timetable.

They’ll also have to determine how they will budget for the extra pay for overtime. Small businesses will have the toughest time.

“Some are going to have to cut workers,” Hollis said. “Others will have to cut hours from existing workers.

“Some are going to have to raise prices, and some probably won’t be able to figure out a way to make it economically work and wind up having to shut down, unfortunately.”

How US changes to 'noncompete' agreements and overtime pay could affect workers

NEW YORK — For millions of American workers, the federal government took two actions this week that could bestow potentially far-reaching benefits.

In one move, the Federal Trade Commission voted to ban noncompete agreements , which bar millions of workers from leaving their employers to join a competitor or start a rival business for a specific period of time. The FTC’s move, which is already being challenged in court, would mean that such employees could apply for jobs they weren’t previously eligible to seek.

In a second move, the Biden administration finalized a rule that will make millions more salaried workers eligible for overtime pay. The rule significantly raises the salary level that workers could earn and still qualify for overtime.

The new rules don’t take effect immediately. And they won’t benefit everyone. So what exactly would these rules mean for America’s workers?

WHAT IS A NONCOMPETE AGREEMENT?

Noncompete agreements, which employers have deployed with greater frequency in recent years, limit an employee’s ability to jump ship for a rival company or start a competing business for a stated period of time. The idea is to prevent employees from taking a company’s trade secrets, job leads or sales relationships to a direct competitor, who could immediately capitalize on them.

Many industries use noncompete agreements, often among their salespeople, said Paul Lopez, managing partner at Tripp Scott, a Florida law firm that has handled more than 100 cases involving noncompete clauses.

“They’re the ones out there generating leads and sales,” Lopez said. “The last thing you as a business will want is for that person to go over to your competition and do the same thing.”

WHO IS TYPICALLY SUBJECT TO THESE AGREEMENTS?

People may assume that noncompete agreements apply only to high-level executives in the technology or finance industries. But many lower-level workers are subject to the restrictions as well. The rules vary by state.

In Florida, one medical sales worker was barred by his employer from joining a competitor for 10 years — and once he left his job, was unemployed for more than five years, said Stefanie Camfield, assistant general counsel with Engage PEO, a Florida company that handles human resources for small and medium-sized businesses.

“He was able to find another sales position in a completely different industry,” Camfield said. “But the learning curve was there, so he wasn’t making the same amount of money.”

In another case, a company in the optical industry that had hired a sales associate was informed by his former employer that it intended to enforce a noncompete agreement. So the optical company terminated the employee, Camfield said.

“They thought they had a qualified sales associate hired and ready to get to work, and all of a sudden now they’re back to square one.”

WHY BAN NONCOMPETE AGREEMENTS?

Some view noncompete agreements as harmful and unfair to workers by limiting their mobility. Career opportunities are often more attractive outside an employee’s current workplace. And with restrictions on the type of work they can do for a competitor, it can be hard to shift into a more suitable or lucrative position.

Many hiring managers, after all, most value job candidates who already have a certain level of experience in the same industry.

“A noncompete would unilaterally ban someone from getting exactly the kind of job that it’s reasonable to want,” said Jennifer Tosti-Kharas, a professor of organizational behavior at Babson College in Massachusetts. “To cut people off from that is overly paternalistic. It’s using a really blunt instrument to limit people’s mobility, when in reality there are other legal mechanisms to prevent trade secrets being disclosed.”

HOW DO I KNOW IF I'M SUBJECT TO A NONCOMPETE?

People are sometimes surprised to learn that they’re bound by such an agreement. They might not even find out until after they’ve left for a new job, and their former employer intervenes and causes them to be fired.

“When you join a company, you’re so focused on the opportunity in front of you, you might not be thinking about what’s that next jump,” Tosti-Kharas said.

Experts suggest that employees consult their human resources department about any noncompete agreements that might exist. If a workplace doesn’t have an HR department, an employee should ask a lawyer for the company.

ARE TRADE SECRETS NOW LIKELY TO BE SPILLED?

There are still laws on the books that protect companies’ trade secrets. The FTC decision doesn’t change that.

And the U.S. Chamber of Commerce has already filed a lawsuit against the Federal Trade Commission, calling its decision a dangerous precedent for government micromanagement of business. Lawsuits could delay any implementation of the FTC’s new rule, potentially for years.

WHAT ABOUT THE NEW OVERTIME RULES?

Starting July 1, employers of all sizes will be required pay overtime — time and a half salary after 40 hours a week — to salaried workers who make less than $43,888 a year in certain executive, administrative and professional roles. That cap will then rise to $58,656 by the start of 2025. Previously, the cap was $35,568.

WHO QUALIFIES?

The Labor Department estimates that 4 million salaried workers who weren’t previously eligible will qualify. Some occupations, though, including teachers, doctors and lawyers are not eligible for overtime pay and thus are not affected by the change. And some states, like California and New York, already have salary thresholds that exceed the federal level.

WHAT'S THE REACTION SO FAR?

Predictably, groups that represent companies have lined up against the new rule. Conversely, worker groups are applauding it as a necessary and long-overdue change.

The National Retail Federation argued that the new rules “curtail retailers’ ability to offer the most flexible, generous and tailored benefits packages to lower-level exempt employees across the industry.”

It also asserted that the new rules don’t give employers adequate time to make the changes needed. And it complained that the inclusion of automatic increases “exceeds the Department’s legal authority and oversteps longstanding Fair Labor Standards Act and Administrative Procedure Act principles.”

On the social media site X, the AFL-CIO labor organization said the rules will “restore and extend overtime protections for hard-working Americans.”

WILL THE CHANGES BE CHALLENGED IN COURT?

Almost certainly so. A 2016 effort by the Obama administration was scuttled in court just days before it was set to take effect. Because the new overtime rules won’t take effect until July 1, groups have time to study the ruling before mounting a challenge.

“I would expect there will be some legal challenges,” said Ted Hollis, a partner at the law firm Quarles & Brady. “When the Obama administration published its proposed rule in 2016, that was almost immediately challenged in court.”

HOW SHOULD BUSINESSES PREPARE FOR THIS?

Companies of all sizes will have to reclassify workers who will now qualify for overtime pay — and make sure they track hours and pay them properly.

Another option is to raise employees’ salaries so they would remain exempt from overtime. But employers should keep in mind that two more increases are coming under the new timetable.

They’ll also have to determine how they will budget for the extra pay for overtime. Small businesses will have the toughest time.

“Some are going to have to cut workers,” Hollis said. “Others will have to cut hours from existing workers.

“Some are going to have to raise prices, and some probably won’t be able to figure out a way to make it economically work and wind up having to shut down, unfortunately.”