By Rich Purtell
“Free Trade” agreements are loaded with language to protect intellectual property (IP). These protective efforts do very much have potential to turn into protectionism, which is the opposite of free trade.
I really think that we are under-utilizing the concept of Non-Disclosure Agreements (NDAs) with regard to IP protection in international trade. A good deal of the time IP loss occurs when there is a partnership between companies that have a shared interest, whether within the same or different countries, and then for some reason the relationship dissolves. A strong NDA that lives beyond the forming of the partnership will be more effective than the use of patents, as it may then be possible to bind trade secrets and other concerns to such an agreement, aside from patents.
Thinking in free market conceptual terms, a patent fundamentally is rather protectionist. There is a developer party, the government, and an imaginary “villain” that often times is the boogie man. Patents are more a statist practice, vs. an NDA which is a contract between two or more free market entities, developed by those entities. Government only becomes involved as necessary to enforce the NDA contract if there is an attempted breech. See how an NDA follows free market principles much closer than patent creation/enforcement?
As an example suppose a large, USA based multi-national corporation intends to outsource some of its’ manufacturing processes to a foreign business, also called a “job shop”. This is a common scenario for international trade. An NDA with some international teeth would protect patents, trade secrets, customer lists, and other areas of concern should the relationship with the job shop sever at some time in the future. Oddly enough, an independent job shop working under an NDA could offer MORE protection to the parent company than to open up a fully owned and managed overseas operation. An overseas operation, if shut down in the future, could re-open as a competitor to the original parent company. This has happened many times.
I really think extensive use of NDAs would be a more effective approach for international trade IP issues than trying to implement international patent law. NDAs don’t work for every situation, of course, but where they can be applied, an NDA makes a lot more sense than to use international patent law. Use an NDA as the first tool out of the toolbox, if you can.
International patent laws are a bad idea.
Someone brought up non compete agreements (NCAs) and I wanted to add this thought:
I see NCAs as pretty weak. If you look at a spectrum of jurisprudence, there is a balance between the need for a person/group to make a living and for another person/group to hold on to trade secrets. This basic premise is what sets the bar of enforceability for NCAs and NDAs. NCAs tend to be used aggressively and forcefully against a less powerful person/group by a more powerful person/group. The premise of the NCA often requires that the person/group goes out of business, moves to a different market, or changes careers. Hence why NCAs typically flop, ruled in favor of the defendant, with any legal challenge.
But in an NDA situation, if both parties enter into an agreement that is mutually beneficial, and there is discontinuance of the relationship for some reason, similar logic would apply in terms of jurisprudence. If one party was or has become highly dependent upon the other, the NDA will lose traction for the same reasons as why the NCAs have low traction.
So, if it is mutually beneficial to keep an NDA enforceable, it is in both parties interest to maintain their commercial independence, whilst having some level of cooperation. This is an excellent means to prop up small to mid size businesses, and encourages them to stay independent. It’s a “don’t put all your eggs in one basket” commercial message.
Thinking on an international scale, it would tend to encourage businesses in more powerful nations to NOT exploit businesses in less powerful nations. Exploitive behavior would weaken jurisdictional desire to enforce an NDA, provided of course the NDA had any cross-border enforceability to begin with.