Introduction
Information and data belonging to the company may be defined as valued information, including Know-how. Sometimes, information, data, and Know-how are perhaps the most overlooked and underestimated intellectual property assets.
Know-how may be defined as information or knowledge merely acquired and known by the company about how to use or to make something more easily in business1. Know-how is created through a process of “learning by doing”, which means knowledge or information about how to perform, run, or operate something is derived from experience from time to time. The benefit of Know-how is to give or increase the company’s profit, thus Know-how is important and valuable information for the company. In general, Know-how is divided into non-proprietary know-how and proprietary know-how2. Non-proprietary know-how means the information provided and given by the company to their employees, such as a training, workshop, or practice held by the company for their employees about the operation of a machine or practice in an industry. While proprietary know-how is more specific information provided and given by the company to their employees about how to use the company’s technology, patent, and/or secret3.
Due to the importance of Know-how for commercial activities and company’s business, the company will make every effort to protect their Know-how from unauthorized or unlawful use by other parties without their consent. The common practice in protecting Know-how is by entering into and executing a Non-Disclosure Agreement with other parties who will use their Know-how or with their employees who is aware of the Know-how.
Discussion
- Know-how Protection Under the Republic of Indonesia’s Law
Given the benefits of Know-How for the company’s business, we can conclude that Know-how is the information that has economic value. In the terms of its nature, Know-how is not categorized as public information and only known by the certain parties, including the company as the owner, hence Know-How may be deemed as confidential information of the company.
Considering its nature and benefits, Know-how may be classified as a Trade Secret based on the definition and the scope of Trade Secret as stipulated in Article 1 Number 1 in conjunction with Article 3 of Law of the Republic of Indonesia Number 30 of 2000 on Trade Secrets (“Trade Secret Law”)
Article 1 Number 1 of the Trade Secret Law
“Trade Secret shall mean information in the field of technology and/or business which is not known by the public and has economic values as it is useful in business activities, and the confidentiality of which is maintained by its owner”.
With reference to Article 1 Number 1 in conjunction with Article 3 of the Trade Secret Law, the protection of Know-how could subject to the provisions of the Trade Secret Law, although there are not yet strict regulations or rules governing Know-how in Indonesia.
Trade Secret itself actually has a position between intellectual property rights and business competition, where the party / company is deemed necessary to do something to protect the intellectual property itself (reasonable steps to keep it as a secret), but on the other hand, the protection is automatic and also limited (de facto confidentiality).
Legal protection of Know-How in trade secret regime is automatically protected after Know-How is discovered by its owner without the need to be registered first. This is because the trade secret regime adheres to the declarative protection principle, which means protection is given directly without procedural or registration formalities after an intellectual property is created or discovered.
However, if there is a license agreement of Know-how, according to Article 8 Paragraphs (1) and (2) of Law 30/2000 it must be recorded to the General Directorate of Intellectual Property of the Republic of Indonesia so that it has legal consequences to third parties.
Based on the foregoing, it is known that the legal protection of Know-how in Indonesian jurisdiction will be subject to the provisions of the Trade Secret Law.
- Comparison of Know-how Protection By European Union
On 8 June 2016, the European Parliament and the Council issued directives in relation to the Know-how protection through Directives (EU) 2016/943 of The European Parliament And Of The Council of 8 June 2016 on The Protection of Undisclosed Know-How and Business Information (Trade Secret) Against Their Unlawful Acquisition, Use, and Disclosure (“(EU) 2016/943”).
Based on (EU) 2016/943, Know-how may be referred to as a trade secret, because of its valuable and undisclosed nature as well as intended to remain confidential. Despite the consideration, there is a condition leading to Know-how or any information not being deemed a trade secret, such as trivial information, the experience and skills gained by employees in the normal course of their employment, or any information that is generally known publicly or readily to be accessed.
Further, (EU) 2016/943 stipulates that an independent research or discovery is still possible for the purpose of innovation and business competition. This act may indirectly harm or damage any Know-how because it may indirectly disclose the existing Know-how, but Article 3 of (EU) 2016/943 regulates that any independent discovery or research or creation is considered as a lawful acquisition or disclosure of a trade secret to the extent that such acquisition or disclosure is required or allowed by the Union or the national law of the state member.
Besides an independent discovery or creation, reverse engineering of a product or an object is also not prohibited under (EU) 2016/943, even though it might harm or potentially disclose its Know-how. However, a reverse engineering of a product or an object is deemed lawful if a product or an object has been made available to the public and the party who conducts the reverse engineering is released from legal obligations related to restrictions or prohibitions on acquiring trade secrets.
Based on the foregoing, it can be concluded that (EU) 2016/943 has specifically and unequivocally stipulated that Know-how may be deemed as a Trade Secret. On the other hand, Article 3 of (EU) 2016/943 also outlines some actions of third parties that may indirectly harm or disclose the existing Know-how, but they are still allowed with certain restrictions and limitations.
- Trade Secret Infringement in the Form of Know-how Disclosure
The Know-how legal protection under the Trade Secret Law may provide an opportunity to the information proprietor to pursue civil or criminal remedies if there is any misuse or disclosure of the information to the public by any party without the owner’s consent, to the extent that it is known that the trade secret owner has taken reasonable steps to protect their trade secret.
A common standard practice conducted by Know-how proprietor in maintaining the confidentially of the information is by entering into a Non-Disclosure Agreement or Confidentiality Agreement with the other party who will use the Know-how or their employees. In accordance with the principle of “Pacta Sunt Servanda” as implicitly stated in Article 1338 of the Indonesian Civil Code, every agreement legally made shall apply as a law to those who execute it and must comply with it. Based on this, through the Non-Disclosure Agreement executed, there is an obligation for the user of Know-how to maintain its confidentiality.
In the event that there is violation of the Non-Disclosure Agreement for the use of the Know-how or any disclosure of Know-how without the owner’s consent, the owner may take civil or criminal remedies.
As for the criminal remedies, according to Article 17 Paragraph (1) of the Trade Secret Law, the sanction for parties who deliberately disclose the trade secret, renege or breach agreements or written or unwritten obligations to maintain confidentiality is imprisonment for 2 (two) years and/or a maximum fine of Rp300,000,000 (three hundred million rupiah).
Article 17 Paragraph (1) of Law 30/2000
“Any person who deliberately and without rights uses the Trade Secret of another party, or conducts any acts as referred to in Article 13 or Article 14 shall be sentenced to imprisonment of at most 2 (two) years and/or a fine of at most Rp300,000,000.00 (three hundred million rupiah)”
Article 13 of Law 30/2000
“An infringement on Trade Secret takes place when a person deliberately discloses the Trade Secret or breaks the agreement, or the obligation, either written or not, to maintain the confidentiality of the relevant Trade Secret”
In terms of civil remedies, the owner of Know-how may file a lawsuit against the recipient and user of Know-how for failing to fulfill the obligation to maintain the secret in accordance with the Non-Disclosure Agreement executed. The filing of the lawsuit is certainly aimed at getting the owner of the Know-how compensation for the disclosure of their Know-how which may harm the company.
Although know-how is subject to the Trade Secret Law, in the event a Know-how proprietor fails to make a Non-Disclosure Agreement to keep Know-how confidential, then the evidentiary process of the misuse or failure to keep the Know-how confidential may be difficult, because the evidentiary process may depend on the witnesses or documents of Know-how existence.
Conclusion
Based on the elaboration above, it is known that the legal protection of Know-how is subject to and protected by the Trade Secret Law. This is because there is an economic value of Know-how to the company as the information proprietor for its confidential nature and shall remain its confidentiality.
Know-how protection under the Trade Secret Law in Indonesia is similar to the protection in Europe Union under (EU) 2016/943, because both regulations have a similar meaning of trade secret. Furthermore, considering its nature and benefit of Know-how, Know-how is still categorized as a trade secret either based on Trade Secret Law or (EU) 2016/943.The common practice that is often conducted to protect and maintain the confidentiality of Know-how is by entering into and executing a Non-Disclosure Agreement or Confidentiality Agreement. Nevertheless, if the owner of Know-how forgets or neglects to make or sign a Confidentiality Agreement to protect their Know-how from other parties’ uses, then the owner of Know-how still obtains protection from the Trade Secret Law; however, proving an infringement of Know-how will be difficult, because it will depend on witnesses or documents of the existence of Know-how, without a Confidentiality Agreement.
- Know-how, Cornell Law School, Maret 2022, https://www.law.cornell.edu/wex/know-how, accessed on 23 Mach 2023;
- Michael A. Lechter, Esq, Rich Dad’s Advisors: Protecting Your #1 Asset, Creating Fortunes from Your Ideas, Warner Books in association with CASHFLOW Technologies, Inc., and BI Capital Inc, New York, 2001, page 206;
- Ibid, page 207;
