Lawyering Skills

May 05, 2020

Confidentiality and Trade Secret

Trade secrets are the great asset to companies wanting to compete in the business environment. Knowing importance of trade secrets from different perspectives becomes indispensable for business people.

 

BUSINESS AND PRACTICE CONSIDERATION

While confidential information derive their value, and right to legal protection, from not being widely known, it is widely accepted that companies must sometimes disclose such secrets and information to third parties during the negotiation of the terms of prospective business relationships with consultants, vendors, customers, licensees or potential joint venture or merger partners, as well as during the course of the relationship itself. 

Type of NDAs

Unilateral Agreement: A unilateral nondisclosure agreement is appropriate when disclosures will be made by only one of the parties.

Mutual Agreement: While confidentiality agreements are obviously necessary in situations where only one party in a business relationship will be disclosing trade secrets and confidential information to the other party, many business relationships require a mutual exchange of confidential information between the parties.

Which transactions need NDAs

General agreements, which may vary in length and detail, and which may be used in almost any business situation where trade secrets or other confidential information is to be disclosed by one or both of the parties. Confidentiality and nondisclosure agreements can take a variety of different forms. They can be found in the following agreement:

  • Customer and Vendor Nondisclosure Agreements;
  • Joint Ventures and Other Joint Development Agreements;
  • New Product Idea Agreements;
  • Investment Relationship Agreements;
  • Merger & Acquisitions; and
  • Confidentiality Provisions in Standard Contracts (license agreement, Product Design Agreements, Technology Development Agreement, New Product Development Agreement, Government Contracts, employment contract)

It is vital to know which transactions need NDAs and select a specific form of agreement which best captures the business relationship between the parties. 

LEGAL CONSIDERATION

Vietnam Trade Secret Law

In most jurisdictions, confidentiality is regulated under Trade Secret Law. In Vietnam, it has been found scattered in Law on Intellectual Property (Article 4.23), Labour Code (Articles 19.1 and 23.2) and Law on Competition (Articles 3.10, 39.2, and 41). As there is no relationship linking these three laws, this leads to unclear and inconsistent application and enforcement of confidentiality agreements. 

In general, trade secret law does not give direct and automatic protection in favor of the trade secret owner. Instead, the trade secret owner only has a cause of action against any party who wrongfully appropriates the trade secret, as well as a cause of action against persons who utilize any illegal or unethical methods to acquire the secret information. A trade secret owner cannot prevent others from independently developing the trade secret, even by reverse engineering, and thereafter practicing the trade secret as their own.


Validity and Enforceability of Confidentiality Agreements

Duties of non-disclosure are stipulated under the scattered laws mentioned above while claims regarding misappropriation of trade secrets are creations of civil law (specifically tort law). In the absence of proof of an implied duty in the context of a special relationship, a nondisclosure agreement can be used to create a contractual obligation for the recipient of the trade secret not to disclose or use the information without authorization from the trade secret owner.

The same public policies which are invoked to limit the scope of trade secret protection will
also be relevant in determining the enforceability of a confidentiality agreement. 


Rudy Bui

Rudy Bui is Scholar, Young Lawyer, and Member of Inter-Pacific Bar Association (IPBA 2015) and International Bar Association (IBA 2017). In addition, Rudy Bui is also Member of Ho Chi Minh Bar Association, Vietnam Bar Federation, Vietnam Business Lawyers' Club (VBLC), Mentee of Young ICCA - Mentoring Program 2016-2017.



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