A trade secret is a collection of information that is not common knowledge and is kept confidential by the owner, using necessary measures to prevent the information from being disclosed and not easily accessible. This information can be applied in business and gives its owner an advantage over other entities.

In practice, the protection of such information is rather ambiguous: claiming a trade secret is tantamount to proving the existence of information that has been kept secret and remains elusive to outsiders. Because it only exists through confidentiality, trade secrets are a real target for misappropriation: employees, subcontractors, hackers, industrial spies, and reverse engineering, are all threats to this precious asset.

Trade Secret is a universal asset, and it was not long before it led to numerous references and regulations in international conventions on intellectual property rights, such as the TRIPS Agreement (Trade-Related Intellectual Property Right Agreement)[1] or more recently EVFTA Agreement (Europe-Vietnam Free Trade Agreement)[2].

Vietnam has also adopted domestic legislation designed to provide a framework for the protection of trade secrets and proof of their existence in a contentious context. However, the legal and international protection of trade secrets remains residual remedies, as it is often too late to refer to it once a disclosure or misappropriation jeopardizes the value of the information. Although the law provides for theoretical penalties in the event of infringement, trade secrets are only a real asset if they remain intact: companies are therefore the main players in the protection of these secrets.

According to domestic legal provisions, a trade secret is legally defined as information obtained from activities of financial and/or intellectual investment, which has not yet been disclosed and can be used in business.[3]

To be eligible for protection, the information in question must meet the following cumulative criteria[4] :

  • being neither common knowledge nor easily obtained (i)
  • being capable, when being used in business activities, of rendering advantages to its holder over those who do not hold or use it (ii)
  • being kept secret by its owner, with necessary measures so that it shall neither be disclosed nor easily accessible (iii)

Regarding trade secret violations, the violations are often from intellectual property rights[5], and the angle of unfair competition[6]. These infringements are generally materialized by a disclosure, a misappropriation, or a fraudulent acquisition of this information.

2. The contractualization of secrecy

Companies play a very important role in preserving their secrets that are only kept confidential because they have agreed to make them so. This contractualization of secrecy involves several practices :

2.1 Regular signing of non-disclosure agreements 

  • With whom?
    • These agreements are generally signed with all actors likely to be involved, in one way or another, in any of the company’s activities and therefore likely to learn about its internal workings.
    • These actors may be subcontractors, external service providers (cybersecurity consultant, premises renovation company, catering company, etc.).
  • Under what terms?
    • The quality of confidentiality will resolutely depend on the terms in which it is expressed.
    • The agreement must define the scope of confidentiality without defining it too precisely, at the risk of permitting what it forgot to prohibit.
    • This caution implies the use of writing formulas that allow the scope of confidentiality to be extended without the risk of being too precise, such as : “including but not limited to any information”, “may directly or indirectly relate to without being listed exhaustively”,…
      Drafting a non-disclosure agreement is first and foremost a deterrent: the recipient of information must therefore feel responsible for any breach of confidentiality.
  • At what point in time?

It is advisable to conclude this type of agreement before any transmission of trade secrets.

2.2 Stipulation of non-compete and non-disclosure clauses in employment contracts 

  • With whom?
    • These clauses will be included in the employment contracts of all the company’s employees, particularly those who are required to handle a trade secret.
    • This set of obligations will on the one hand ensure the confidentiality of the information transmitted, but also prevent any malicious act aimed to compete unfairly with the company in the future.
  • Under what terms?
    • There is controversy about the validity of non-compete agreements in employment contracts because they would theoretically infringe on the employee’s right to freely work[7].
    • However, some legal annals have reported a tolerance granted to these clauses[8] on the grounds of the willingness of the parties. When they are well detailed and delimited in time and space, these clauses are therefore seen as a civil agreement that can be valid.
    • Non-disclosure agreements (NDAs) are way more common agreements in the labor field, and they more specifically involve the protection of confidential company data by the employee.
  • At what point in time?
    The drafting and application of these agreements are generally concomitant with the signing of the employment contract.

To conclude, confidentiality is the key to the existence of trade secrets. Identifying all the company’s internal regulatory approaches allows businesses to better protect and control their trade secrets.

[1] Article 39 of TRIPS Agreement – Protection of undisclosed information

[2] Article 10.12 of EVFTA Agreement – Confidentiality

[3] Article 4.23 of Law on IP (2005)

[4] Article 84 of Law on IP (2005)

[5] Article 127 of Law on IP (2005)

[6] Article 45.1 of Law on Competition (2018)

[7] Article 10.1 and 10.2 of Labor Code

[8]  Notably a statement of the People’s Court of Duc Hoa District, Long An Province that the non-compete agreement is a valid type of civil transaction – https://letranlaw.com/insights/enforcing-a-non-compete-agreement-for-employment-contracts-in-vietnam/#_ftn1

The article is based on laws applicable at the time noted as above and may no longer be appropriate at the time the reader approaches this article as the applicable laws and the specific cases that the reader may wish to apply may have changed. Therefore, the article is for referencing only.

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