BEYOND PATENTS: THE ROLE OF TRADE SECRETS IN NIGERIAN BUSINESS INNOVATION

As businesses continuously strive for competitive advantage in today’s dynamic marketplace, the value of intangible assets has skyrocketed. One often overlooked, yet crucial, category of intellectual property is trade secrets. In this newsletter, we will explore the concept of trade secrets as an Intellectual Property right in Nigeria, highlighting how businesses can leverage this tool to safeguard proprietary information and maintain a competitive edge.

What is a Trade Secret?

A trade secret is any confidential business information that provides a company with a competitive advantage. The World Intellectual Property Organization (WIPO) has defined a Trade Secret as information of any type that is actually or potentially valuable to its owner and not generally known or readily ascertainable by the public and which the owner has made a reasonable effort to keep secret.[1] This could include formulas, processes, designs, commercial methods, customer lists, or any strategic business information that is not generally known and is valuable due to its confidentiality.

The Uniform Trade Secrets Act[2] (UTSA) defines a trade secret as:

Information, including a formula, pattern, compilation, program device, method, technique, or process, that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

In other words, a Trade secret is valuable because it is kept secret.

Legal Framework for Trade Secrets in Nigeria

In Nigeria, there is no specific statute dedicated to the protection of trade secrets. However, trade secrets are protected under the general common law principles of breach of confidence and contract law. An essential technique used by entities in Nigeria to safeguard their trade secrets is through confidentiality or non-disclosure agreements (NDA) with employees and partners, most especially those exposed to or who come in contact with and may have knowledge of such Trade Secret. However, the protection provided by these agreements is limited compared to what a well-established legislative framework could offer.

1. Contractual Protection

The most effective way to protect trade secrets in Nigeria is through contractual agreements. Such as:

Confidential or Non-Disclosure Agreements (NDAs): These are legally enforceable contracts that create a confidential relationship between the trade secret proprietor and the person to whom the secret will be disclosed. NDAs are commonly used to bind employees, contractors, and business partners to confidentiality obligations concerning sensitive information.

2. Common Law Protection

The doctrine of breach of confidence under Nigerian common law is another method by which trade secrets can be protected. Under this doctrine, businesses can bring legal action against an individual who improperly discloses or uses confidential information. Nigerian courts often look to English law for guidance on breach of confidence matters. The case of Coco v AN Clark (Engineers) Ltd is one such influential English decision that outlines the three key elements for determining a breach of confidence claim:

1. The information must have the necessary quality of confidence.
2. The information must have been imparted in circumstances importing an obligation of confidence.
3. There must be unauthorized use of that information to the detriment of the party communicating it.

Enforcement and Remedies

When a trade secret is disclosed or used without authorization, the owner of the secret can take legal action. Unlike the United States or Uganda, Nigeria lacks statutory provisions to address the misuse of trade secrets. As a result, the tort of breach of confidence serves as a gap-filler, offering an effective remedy for the unauthorized use of trade secrets in cases where no contractual agreements exist.

The remedies for a breach of confidence involving a trade secret include injunctions, damages, an account of profits, and the return of materials containing confidential information. Damages may cover both actual losses and any unjust enrichment resulting from the misappropriation. If the misappropriation is willful and malicious, the court may also award exemplary damages. Injunctive relief can be granted in cases of both actual and potential misappropriation, and the injunction will remain in effect until the trade secret no longer exists. In certain cases, the court may order affirmative actions to safeguard the trade secret.

From the foregoing, remedies available under Nigerian law would include:

• Injunctions: A court can issue an injunction to prevent further unauthorized use or disclosure of a trade secret.
• Damages: The owner of the trade secret may also seek damages for any financial loss occasioned by the breach of confidentiality.Account of Profits: The court may require the party that misused the trade secret to account for any profit made from its unauthorized use.

Exceptions

In Nigeria, the protection of trade secrets through contractual agreements (such as Non-Disclosure Agreements) and common law (such as the doctrine of breach of confidence) has some exceptions. These include:

1. Public Knowledge: If the trade secret becomes publicly available or is disclosed to the general public by the proprietor, it loses its protection. Information that is readily accessible or widely known cannot be protected as a trade secret.
2. Independent Discovery: If a third party independently discovers the same information without violating any confidentiality agreement or legal duty, they are free to use and disclose it. The law cannot protect information that someone else discovers lawfully and without breach of any contractual obligation.^[2]
3. Reverse Engineering: Reverse engineering comes into play when someone takes apart a product to figure out how it works. As long as it is done legally, without breaking any agreements or using dishonest methods, it is generally allowed. In these cases, trade secret protection does not apply, and the person who reverse-engineers the product is not responsible for stealing any trade secrets.^[3]
4. Disclosure Required by Law: Sometimes, trade secrets may be required to be disclosed by law, such as in regulatory filings or court orders. In such instances, the disclosure is not considered a breach of contract or common law protection. When trade secrets must be disclosed by law or court order, such disclosures are exceptions to legal protections.

Practical Steps to Safeguard Trade Secrets in Nigeria

To effectively protect trade secrets, businesses should adopt the following practices:

• Limit Access to Sensitive Information: Restrict access to trade secrets to only those employees or partners who need the information for their work. Implement physical and digital security measures such as password protection, encryption, and access controls to protect confidential information.
• Draft Confidentiality or Non-Disclosure Agreements (NDAs): Businesses should require employees, contractors, and business partners who have access to sensitive information to sign NDAs. This legally binds them to maintain confidentiality and prevents unauthorized disclosure or use of trade secrets. These agreements should clearly outline the obligations and consequences in case of a breach of privacy.
• Third-Party Confidentiality Obligation: Businesses should ensure that where a party bound by a confidentiality or Non-Disclosure Agreement agrees with a third party, which would require the sharing of such trade secret with the third party, As such the third party should be made to sign a Confidentiality or Non-Disclosure Agreement
• Conduct Regular Employee Training and Awareness Programs: Educate employees on the importance of protecting trade secrets and the legal consequences of misusing confidential information. Regular training helps foster a culture of confidentiality and ensures employees are aware of their responsibilities in protecting sensitive information. 

   

  Conclusion

  Trade secrets are a valuable tool for Nigerian businesses to maintain their competitive edge. As already stated though Nigeria is yet to have specific laws governing trade secrets, businesses can however utilize contractual protections and common law principles to safeguard their confidential information as taking proactive steps to secure proprietary data is crucial.

  At Manifield Solicitors, we are dedicated to assisting you in managing the complexities of trade secret protection. If you have any questions or need assistance with drafting confidentiality and Non-Disclosure agreements or enforcing your rights to safeguard trade secrets, feel free to contact us.

  Sincerely,
  Your friends at Manifield Solicitors

   

Reference 

[1] Coco v AN Clark (Engineers) Ltd [1969] Supra

[2] World Trade Organization (WTO), n.d. Trade-Related Aspects of Intellectual Property Rights (TRIPS), Article 39. Available at: https://www.wto.org/english/tratop_e/trips_e/trips_e.htm  [Accessed 21 September 2024].

[3] Pooley, J., 2015. Trade Secrets: Overview of the Law and Proposals for Change. Washington Journal of Law, Technology & Arts Available at: https://digital.lib.washington.edu/dspace-law/handle/1773.1/1419  [Accessed 21 September 2024].

[4] The TR Company ‘NDA 101: What is a Non-Disclosure Agreement’ Available at: https://thetrcompany.com/en/nda-101-non-disclosure-agreement  [Accessed on 21 September, 2024]

[5] Olawunmi Ojo, “Navigating Non-Disclosure Agreements (NDAs) in Business” Available at: https://www.mondaq.com/nigeria/contracts-and-commercial-law/1397286/navigating-non-disclosure-agreements-ndas-in-business [Accessed 21 September, 2024]

[6] [1969] R.P.C. 41 at 47 (Ch.)

[7] Coco v AN Clark (Engineers) Ltd [1969] R.P.C. 41

[8] Through their Uniform Trade Secrets Act 1985 (UTSA)

[9] Through her Trade Secrets Protection Act 2009

[10] Saredau, D.P., Gupar, W. and Chalawa, B.M., 2020. “The legal regime for protection of trade secrets in Nigeria: Breach of confidence claim as gap-filler” Nnamdi Azikiwe University Journal of Commercial and Property Law, 7(1), pp.158-168.

[11] See Nigerian Civil Procedure Rules (Various State High Court Rules on Injunctions)

[12] World Intellectual Property Organization (WIPO), “What is a Trade Secret?” Available at: https://www.wipo.int/tradesecrets/en/ [Accessed on 20 September 2024]

[13] Section 1 of the Uniform Trade Secrets Act, 1985 as amended, of the United States Uniform Law Commission (ULC)