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No Way Out: Mandatory Trade Secret Protection Laws in International Arbitration

December 2, 2016 • International Law

By Charles H. Camp, Anna R. Margolis & Camellia H. Mokri

The World Trade Organization’s member countries are required to include trade secret protections in their respective laws. With that in mind, this article discusses why a State must be critical in every contract it enters with another State.

 

As of today, 164 of the 195 countries in the world are members of the World Trade Organization (the “WTO”). Each of the WTO member countries are required to provide trade secret protections under their respective laws.

According to a policy statement by the United States Patent and Trademark Office1 (“USPTO”),

“Trade secrets consist of information and can include a formula, pattern, compilation, program, device, method, technique or process. To meet the most common definition of a trade secret, it must be used in business, and give an opportunity to obtain an economic advantage over competitors who do not know or use it.”

The United States complies with its international legal obligation to provide trade secret protection as a WTO member, as well as a party to the Agreement on Trade Related Aspects of Intellectual Property Rights (“TRIPS”), by having each of the states within the United States enact the Uniform Trade Secrets Act (“UTSA”) – something which virtually every state has done.2

According to the USPTO official policy statement,3

“As a member of the World Trade Organization (WTO) and a party to the Agreement on Trade Related Aspects of Intellectual-Property Rights (TRIPS), the United States is obligated to provide trade secret protection. Article 39 paragraph 2 requires member nations to provide a means for protecting information that is secret, commercially valuable because it is secret, and subject to reasonable steps to keep it secret. The US fulfills its obligation by offering trade secret protection under state laws. While state laws differ, there is similarity among the laws because almost all states have adopted some form of the Uniform Trade Secrets Act. The language of the Uniform Trade Secrets Act is very similar to the language in TRIPS.”

The obligations of the 164 WTO states to provide trade secret protection – a virtually worldwide public policy requiring trade secret protection – make trade secret protection laws “mandatory rules of law” (or “mandatory rules”) that cannot be contracted out of by parties to international contracts requiring disputes to be resolved through international arbitration.

In other words, parties’ freedom to contract is not unlimited.4 Instead, the parties’ choice of governing law may be overridden by mandatory rules, i.e., rules of law that “cannot be derogated from by way of Contract.”5

A mandatory rule of law has long been defined as:

 
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