Trade Secrets Practice in Business

Trade Secrets is a type of intellectual property that is protected in Indonesia. The protection for Trade Secrets was first contained in the Law No. 3 of 2000 regarding Trade Secrets (Trade Secrets Law). The enactment of the Trade Secrets Law was mainly initiated and motivated by Indonesia joining the World Trade Organization (WTO) in the year 1994, which also included the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs Agreement). Indonesia joining WTO is regulated in the Law No. 7 of 1994 regarding the Ratification of the Agreement Establishing the World Trade Organization.

As part of the numerous protected intellectual properties, Trade Secrets is still quite an unfamiliar term for many Indonesians. In fact, many businesses in Indonesia aren’t fully aware of the importance of protection of Trade Secrets, and the rules and regulations contained in the Trade Secrets Law that can be used to their advantage.

In the Trade Secrets Law, it is stated that Trade Secrets is information in the field of technology and/or business that is not known to the public, has economic value because it is profitable to be utilized in business, and its confidentiality is protected by the owner of the Trade Secrets. It means that Trade Secrets holds an important role in business. With the existence of such secret, the business maintains an added value that cannot be copied and its competitors don’t have. That is why in the definition of Trade Secrets according to the Trade Secret Law, Trade Secrets is information that is not known to the public.

The information contained in Trade Secrets can be in the form of a composition, production methods, business methods, processing methods, sales methods, and various other methods that have economic value. With the added value obtained from holding Trade Secrets, companies with certain Trade Secrets with certain characteristics that are not easily imitated by other companies, will excel in the competition occurring in the business world, thus translates into the improvement of economic profitability for the company.

One example of success due to Trade Secret that is fairly well-known is the Coca Cola Group. The production composition of Coca Cola is included in the protection of Trade Secret. This is due to the fact that no one knows the compositions and production methods of Coca Cola except for the owner and a select few of trusted individuals. As a result, up to this day, no one person or company has been able to make a drink that has the exact same taste as Coca Cola. Therefore Coca Cola has become a drink that has its own characteristics and has a clear market segment or regular customers throughout the world.

Unlike other intellectual property objects, Trade Secret does not have a set time period of protection. As long as the information related to the Trade Secrets is still a well-kept secret properly maintained with appropriate means, that Trade Secrets is still protected by law.

It is not an offence if a company’s Trade Secret is obtained or discovered through research by another party. The secret automatically no longer becomes an exclusive secret that can only be used by the company holding the Trade Secret, but it can also be used by the company or person who has succeeded in discovering the Trade Secret. This means that no company can file lawsuits against people who have knowledge of and utilize the company’s Trade Secrets that were obtained in a proper manner.

The leakage of company-owned Trade Secrets generally is caused by people who have worked at the company, be it executives/management, or field workers. Therefore, the initial preventive measure taken by a company to protect its Trade Secret from leaking is usually to include a Non-Disclosure Agreement clause in their employment contracts.

One interesting case related to Trade Secret is the case of PT. Hitachi Construction Machinery Indonesia (PT. HCMI) in 2008. PT. HCMI was striked by a lawsuit because it was using Trade Secrets owned by PT. Basuki Pratama Engineering (PT. BPE). The production and sales method of boiler engines which turned out to be PT. BPE’s Trade Secret was obtained and used by PT. HCMI through several former employees of PT. BPE that had moved to work at PT. HCMI, which triggered PT. BPE to file a lawsuit against PT. HCMI for the violation.

Taking a lesson from the case between PT. HCMI and PT. BPE, we can conclude that the information regarding a company’s Trade Secret should only be knows to select trusted people, and as few as possible. On top of that, employees who work in a company with Trade Secret must be bound by a work contract containing clauses related to Trade Secret/information that may not be disclosed and used outside of the company. Even though it does not guarantee that the Trade Secret will not be leaked and spread, but it can at least minimize the possibility and mitigate the risk as much as possible.

From the PT. HCMI and PT. BPE case, it can already be proven that Trade Secret in the form of production method and sales method has economic value in advancing a business. By using Trade Secrets of others that are proven to be successful, a business can actually save time, energy, as well as money in conducting research to find a way to make products or build efficient sales methods. That is way companies with Trade Secrets in general will object strongly to the usage of its Trade Secret by other parties in the same business field.

Like other intellectual property, Trade Secret is an intangible movable object with economic benefits. It is an object that can be transferred in many ways such as inheritance, grants, wills, written agreements, and other reasons permitted by law.

Indonesia must start the utilization as well as extensive and deep knowledge related to Trade Secret, so that owners of Trade Secret realise the importance of protecting Trade Secret and applying it in the business world. This is done so that owners and researchers discovering Trade Secret can enjoy the benefits of the intellectual property rights. With a deep awareness related to the importance of Trade Secret, the business climate can see sustainable growth. As a result, a healthy and conducive business competition will arise.

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