Preserving Trade Secrets in International Arbitration – Intellectual Property

With the growing importance of data and Intangible assets, adequate protection of a company’s trade secrets is now a top priority for many legal services and business advisers. A trade secret is confidential information that holds commercial value and gives its owner a business advantage. It can be a process, formula, algorithm, or customer list. Unlike other intellectual property rights such as a patent or copyright, a trade secret does not expire as long as it remains a secret.

What does this mean for parties involved in arbitration proceedings and the practice of international arbitration?

Arbitration offers the possibility of settling disputes behind closed doors and often involves very sensitive information relating to the identity of the parties, the underlying transaction or the subject of the dispute. However, not all documents will be kept confidential. Arbitration documents produced or generated during an arbitration may become public if they are part of the files of legal proceedings incidental to the arbitration, including actions for execution and annulment.

Arbitration awards, which may or may not refer to the sensitive information in question, are particularly
subject to inevitable disclosures of this type. However, these situations are typically recognized as exceptions to the duties of confidentiality attached to an arbitration, and to the protection of business secrets, by means of a seal for example,
may not be available in the competent court. Moreover, despite the fact that many arbitrations take place behind closed doors, there remains the risk of an involuntary or malicious leak. Ultimately, whether it is the result of a cyber attack or an opponent’s fault, trade secret owners need to be aware of the ramifications of a potential breach of confidentiality. Any breach of confidentiality may result in irreparable harm and affect their ability to enforce a trade secret, although steps have been taken to protect this trade secret.

In addition to protecting sensitive information from entering the public domain, parties involved in an arbitration proceeding may need to completely avoid disclosure of such information in the arbitration. In some cases, this may be for the preservation of broader trade secrets held by a party to the dispute, as part of the company’s internal policy. In addition, there may also be legitimate concerns that another party involved in the proceeding may use the valuable information for purposes other than arbitration and dispute resolution. It is not uncommon for parties involved in arbitration proceedings to operate in the same industry or to compete directly with each other. In the same way, fact witnesses and experts may have an interest in the trade secret in question.

Controversies over trade secrets can arise at different times during an arbitration. These steps include the initial phase of arbitration, when the parties and the arbitral tribunal can discuss confidentiality and implement measures in the form of a protective order or a cybersecurity protocol. The voluntary disclosure of sensitive information for the purpose of detailing a party’s case or providing evidence required to meet that party’s burden of proof may also be considered.

Questions relating to the protection of trade secrets arise more frequently during the production of documents, following a request for a document made by one party against another. In international arbitration, the parties generally have the right to request documents from the other party. Arbitral tribunals tend to allow requests as long as the documents sought are relevant to a matter in dispute and important to its outcome. Before the arbitral tribunal makes a decision, the party receiving the request usually has the opportunity to present the reasons why the request is not appropriate or should not be upheld by the arbitral tribunal. One of the grounds on which a party may oppose a request and an arbitral tribunal may reject such a request is that of
“Commercial or technical confidential”. This is reflected in Rule 9.2 (b) of the IBA Rules on the Taking of Evidence in International Arbitration (2020).

Insofar as they concern sensitive information or trade secrets, the decisions of an arbitral tribunal almost always include a protective order specifying the conditions under which the information allegedly sensitive or confidential must be shared. Preservation orders, including those implementing a ‘confidential club’ or ‘lawyer eyes’ only’ limitation are important tools for preserving trade secrets in international arbitration. The powers of arbitrators to issue a protective order are part of their general procedural powers, but some arbitration rules expressly refer to this solution. For example,
ICC Rule 22 (3) (2021) provides“[U]At the request of any party, the arbitral tribunal may make orders regarding the confidentiality of the arbitration proceeding or any other matter relating to the arbitration and may take measures to protect trade secrets and confidential information. Article 54 (c) of the WIPO Arbitration Rules (2021) Predicts that “[i]If the Tribunal so decides, it decides under what conditions and to whom the confidential information may be disclosed in whole or in part and asks any person to whom the confidential information is to be disclosed to sign an appropriate confidentiality agreement “.

It is also possible for arbitral tribunals to appoint a
third-party expert who determines whether the allegedly confidential documents or data should be produced and, if so, under what conditions. For exemple, Article 54 (d) of the WIPO Rules allows, “in exceptional circumstances” for a “confidentiality advisor” to
“Determine whether the information should be so classified and, if so, decide under what conditions and to whom it may be disclosed in part or in whole”.

WIPO Rules 54 (e) also allows the arbitral tribunal to “appoint the confidentiality adviser as an expert in accordance with Article 57 to report to him, on the basis of the confidential information, on specific matters designated by the Tribunal without disclosing the confidential information or to the party from which the confidential information does not originate or to the Tribunal. Further away, Article 3.8 of the IBA Rules provides that the arbitral tribunal may, after consultation with the parties, “appoint an independent and impartial expert, bound by secrecy” to examine a document which is the subject of an objection on the grounds of commercial or technical secrecy.

Another practice of striking the right balance between allowing the disclosure of relevant information and upholding genuine trade secret claims has emerged from arbitrations involving intellectual property issues. This practice consists of submitting
production of documents or data provided that the requesting party establishes a prima facie case of infringement or breach.

There may be instances where the strategy of the litigant concerned with respect to a particular arbitration clashes with other global considerations. This can happen if there is a tension between the steps necessary to win a case and those required to preserve a trade secret. Disclosure of the information in question may be necessary to strengthen a party’s position in the arbitration, but may also be detrimental to the company in terms of its market position, performance or value.. In these cases, not only the confidentiality of the arbitration, but also its flexibility can prove beneficial. As it is possible to tailor the arbitration process to the specific needs of the parties, the arbitration has the potential to serve other considerations of primary importance to the parties, such as the preservation of their trade secrets, while still providing a confidential means. efficient and fair resolution of cross-border disputes.

Originally posted by Lawyers of impact.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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