OP. ED.

This year’s World Intellectual Property (IP) Day campaign—Reach for Gold—takes a closer look to the universal values sports encompass—excellence, respect and fair play—power their global appeal. It explores how innovation, creativity and the IP rights that encourage and protect them support the development of sport and its enjoyment around the world.[1]

There is virtually no sport that has remained unchanged since its inception; all have seen innovation and growth. What has driven this progress? To a large extent, IP rights have provided the right incentives to continuously inspire advancement in sports. Different kinds of IP rights stimulate the growth of the sports industry in different ways. This article examines how five important categories of IP rights (patents, trade marks, design rights, copyrights, and trade secrets) are used in the sports sector to protect assets, generate value, and stimulate growth.

Patents

Patent system has proved to be a powerful incentive to innovate with a no less important societal benefit of enhancing the common pool of knowledge and stimulating others to build on and improve the current state of the art—setting a virtuous cycle in motion. Sports is a sector that directly uses and benefits from the patent system. Sporting equipment is continuously evolving. New technologies help athletes jump higher, swim faster, cycle longer, and hit a ball harder and farther. Safety also improves with technologies that lessen impact and stress on athletes’ bodies. There are literally tens of thousands of utility patents relating to sports. A search of the Google patents public datasets reveals hundreds of thousands of utility patents related to sports and making reference to such terms as “athletic” or “athletes”.[2]

Trade Marks

Branding plays an essential role in creating value, interest, and vitality in sports. It drives consumer loyalty and confidence in the quality and features of sporting goods. It also generates allegiance to sports teams and sportswear styles. The sports sector presents a unique opportunity to create a “domino effect” in trade mark value creation.[3] Consider an individual athlete who becomes a dominant player in a team sport and develops his or her own individual brand. The dominance of this athlete drives the growth and popularity of the athlete’s team as well as the entire professional league in which he or she plays. There are numerous examples of athletes who raise teams and entire sports leagues to national and even global prominence and strengthen the brand and goodwill associated with both.

Designs

An equally important IP right in the sports sector is aesthetics protected by design-specific IP rights. Industrial designs are key to making a product attractive and desirable. Companies spend vast amounts of resources on understanding consumers’ tastes and developing stylish and attractive product designs to capture valuable market segments. These designs often become their most valuable assets .

Copyrights

Copyright plays a critical role in maintaining the vitality of sports, keeping fans interested and inspired, and enhancing value. The promotion and marketing of championships and sporting events, the artistic designs of the logos of sports teams and sports competitions, the literature contained in game day programmes sold to fans and supporters, the merchandise, and the software of computer and online games are all copyrightable subject-matter. Revenues from broadcasting and media rights are often the main source of funds for sports organisations to build stadiums, host sporting events, and carry out community outreach to maintain high levels of interest.[4] Major sporting events can now be streamed or broadcast anywhere in the world, giving millions of fans the opportunity to participate in the excitement of an event .

Trade Secrets

Sports also generate an important volume of trade secrets that play a key role in competitive advantage and value creation. Teams gather proprietary information in the form of statistical analysis, scouting reports, dietary regimens, physiological metrics, and psychological assessment techniques—all to gain potential competitive advantage over their rivals.[5] Sports gear often features secret new compounds and materials to allow athletes to perform better. Companies invest heavily in elaborate focus groups to find the right mix of features and designs to make their products more attractive and marketable.

Juxtaposition of Trade Secrets and Patents/Design Rights

Patents and design rights are the publicly known aspects of the invention, while trade secrets encompass the undisclosed knowledge behind it. In exchange for disclosure the inventor obtains a patent that prevents others from copying the invention for a period of time. Conversely, there is no need to register trade secrets, and they can last indefinitely as long as the information is kept confidential. But protection is much more limited; others are only prevented from breaching the security measures in place. Moreover, competitors are free to independently develop that very same invention. Hence the two sides of the innovation coin: elements of an invention subject to reverse engineering are candidates for patent protection, while trade secrets can protect what is not apparent from examining the product. Often patents and other registrable forms of IP rights are the tip of the iceberg. The rest is knowledge acquired over time during many iterations of the development process. Some inventions, like the secret syrup formula for Coca-Cola for instance, are difficult if not impossible to determine how to copy and as such can be kept entirely secret indefinitely, as long as measures are in place to ensure their security. Trade secrets can take many forms in the world of sports, from proprietary information and processes used by individual teams and leagues to techniques and business strategies used by sporting goods and product manufacturers. Sports gear and equipment utilise undisclosed formulas, material, and processes, so, for example, golf balls can be more aerodynamic or skateboards can be lighter and stronger.[6] The development process of new products and designs takes years of prototyping and testing that must be kept secret to prevent tipping off the competition.

Conclusion

Sports have become a multi billion dollar global industry—one that generates investment in facilities, employs millions of people around the world, and entertains many more. We look at how sports businesses use patents and designs to foster development of new sports technologies, materials, training, and equipment to help improve athletic performance and engage fans worldwide.

We find out how trade marks and branding maximise commercial revenue from sponsorship, merchandising and licensing agreements. These revenues offset the cost of organising world class events, such as the Olympic Games and World Cup series, and ensure that the value and integrity of these spectacular events are safeguarded. We explore how broadcasting rights underpin the relationship between sport and television and other media that bring fans ever closer to sporting action. At their core, IP protections and incentives allow industries and individuals to prosper in their pursuit of innovation and brand development. This creates a synergistic and reinforcing effect. The development of new technologies strengthens a given brand; the strengthening of a given brand leads to the development of new technologies and products, which in turn further strengthens the brand. Additionally, the popularisation of a given sport leads to the development of related industries and technologies. Think of wearable fitness devices, which have led to the creation of a whole new sub-industry of app development. Similarly, there is a powerful symbiosis between individual players, their sports, their teams, the respective leagues, and related industries, including branding, sporting goods, and sportswear. The success of one part of this ecosystem leads to potential commercial opportunities and the development of new products and services for all related industries.


*Vaishali Singh is an Assistant Professor of Law, School of Law, University of Petroleum and Energy Sciences.

[1]    Reach for Gold: IP and Sports, see <https://www.wipo.int/ip-outreach/en/ipday/>.

[2]    The data produced by Google patents is from the respective patent offices, not from Google patents itself. See <https://cloud.google.com/blog/big-data/2017/10/google-patents-public-datasets-connecting-public-paid-and-private-patent-data>.

[3]    See  <http://www.wipo.int/ip-sport/en/>.

[4]    See <http://www.wipo.int/ipadvantage/en/details.jsp?id=3110>.

[5]    D.C. Lippoldt and M.F. Schultz, Uncovering Trade Secrets—An Empirical Assessment of Economic Implications of Protection for Undisclosed Data, OECD Trade Policy Papers, No. 167, OECD Publishing, p. 29.

[6]    The most durable skateboard deck ever, Tech StartUps. See <https://techstartups.com/2017/07/31/capsule-skateboard-durable-skateboard-deck-ever/>.

Experts CornerGUJCOST - GNLU

What do Google’s search algorithm, Coca-Cola and KFC’s original recipe, the selection criteria for the New York Times annual best seller list and the Big Mac special sauce recipe, share in common? These valuable recipes, methods and selection criteria are protected as trade secrets. Also called the “other intellectual property right (IPR)”, trade secrets does not dominate the popularity index with regard to the types of IP protection sought, corporations and individuals generally prefer other modes of IP protection. However, in the family of intellectual property rights, this right may be the oldest form because who does not have secrets. And what better measure to protect the secret than by keeping it undisclosed? Here a line of differentiation must be drawn between a personal and a professional secret as some professional secrets hold commercial value, like Coca-Cola’s recipe. What is the status of this form of IPR? A lack of consensus is found among nations and scholars alike regarding the recognition and treatment of trade secrets.

In this age of overcommunication, Coca-Cola’s recipe is one of the best kept secrets in the world. The company goes nostalgic in an account of its 125 years journey and presents proudly on its website some facts of its recipe.[1] The recipe was developed by John S. Pemberton, a pharmacist in 1886 and has been closely guarded, for more than a century.[2] Competitors have fiercely hunted for the recipe, yet apparently, this best kept secret has aided the Coca-Cola Company to become the successful, globally recognised brand it is today. Similarly, KFC has been a secret keeper for Colonel Harland Sanders’ recipe of 11 herbs and spices used by the fast food restaurant chain which has become its flagship product. The recipe is more than 70 years old and was apparently scribbled on the back of a door, which is being followed till date.[3] KFC has gone to a great length to protect this prized secret recipe, when it recently built a brand new, hi-tech home for the original handwritten recipe where the recipe is protected in a digital safe weighing more than 770 pounds encased in two feet of concrete with a 24-hour video and motion detection surveillance system.[4]

Where do these facts leave trade secrets with regard to the protection they provide and most importantly where does inclusion of trade secrets as a form of IP protection stand? Michael Risch opines trade secrets to be curious anomalies in intellectual property law and goes to argue that despite being the most important and litigated form of intellectual property, trade secrets are given derogatory treatment citing another work which terms this form “parasitic”.[5] On the contrary, trade secrets are justified by the economic benefits that flow from their existence, most notably incentives for businesses to spend less money protecting secret information or attempting to appropriate secret information.[6]

My Way or Yours? A Historical Perspective to Protection of Trade Secrets

The history of trade secret law is an interesting study in how certain intellectual property rights have developed. Whereas copyright, patent and trade mark law find legal justification through statutes, the trade secret concept and related reliefs grew out of the common law. Indeed, the very assumptions underlying patent and copyright laws—that government-granted rights can serve to incentivise the creation and sharing of new ideas and expression—are diametrically opposed to the notion of keeping information secret to gain a competitive advantage.[7]

The concept that so-called business or “trade secrets” were entitled to legal protection spread rapidly throughout the world. As early as the Renaissance, most European nation-States had laws that protected businesses (notably, the guild cartels) from those who used their secret processes and ideas without permission. During the Industrial Revolution, courts and legislatures translated these early laws into statutes that protected “industrial secrets”. Many of these statutes are still in force today, albeit in modified form. The modern trade secret regime traces most clearly and directly to the Industrial Revolution and is primarily an Anglo-American doctrine.

Currently, nations differ regarding their standpoint on treating trade secrets. Some have chosen to grant statutory relief to an act of trade secret violations while others treat the violations through popular principles of common law breach of confidence, etc. Looking at how nations seek to work together on various legal issues it is surprising how a unified treatment of trade secrets has not been possible. There is clearly no consensus on whether it be treated as a creature of contract law, tort, property or criminal law. With the continued confusion, none of these different justifications have proven entirely persuasive. Worse, they have contributed to inconsistent treatment of the basic elements of a trade secret cause of action, and uncertainty as to the relationship between trade secret laws and other causes of action.[8] Robert Bone has gone so far as to suggest that this theoretical incoherence suggests that there is no need for trade secret law as a separate doctrine at all.[9]

There is no State agency that “issues” (or even registers) trade secrets, thus categorising it separately from other forms of IP.[10] At the judicial level, courts will find misappropriation of trade secrets in two circumstances: (1) where the secrets were obtained by theft or other improper means, or where they were used; or (2) disclosed in violation of a confidential relationship agreement. However,  trade secret laws do not protect against independent discovery or invention. Nor do they prevent competitors from “reverse engineering” a legally (read fairly) obtained product to determine the secrets contained inside. Violations of trade secrets entitle the owner to damages and in some cases injunctions against the use or further disclosure.[11]

The International Framework of Trade Secrets

At the international level, the Trips agreement was the first international agreement to accord express protection to trade secrets. The agreement while defining trade secrets laid out its approach, based on the notion that in order to establish and maintain a fair and free market, protection against unfair competition should include protection for undisclosed information. While presenting this approach and defining the term, the Trips agreement referred to the prior existing protection as presented in the Paris Convention for the Protection of Industrial Property.

Trade secrets are dual in nature, they are confidential as well as commercial. To get the commercial benefit out of the secret, the owner must share it with a limited number of people or partners. Thus, laws expect and account for a certain amount of protected disclosure, within a constrained circle.[12] Nevertheless, even if trade secrets are not “secret” in the strictest sense of the term, they must, in fact, remain non-public and known only to a limited number of people.[13] The Trips definition of trade secrets reflects a broadly similar understanding of the term across nations and addresses its dual nature as confidential but commercial. Moreover, in order to place all nations on a similar footing, the Trips platform took into consideration then current practices in many countries while laying down a path for shaping subsequent laws.

      7. Protection of undisclosed information.[14]

Article 39

  1. In the course of ensuring effective protection against unfair competition as provided in Article 10bis of the Paris Convention (1967), members shall protect undisclosed information in accordance with Para 2 and data submitted to Governments or governmental agencies in accordance with Para 3.[15]
  2. Natural and legal persons shall have the possibility of preventing information lawfully within their control from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices so long as such information[16]:

           (a) is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;

                (b) has commercial value because it is secret; and

                (c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

  1. Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilise new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair commercial use. In addition, members shall protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use.[17]

These three conditions define trade secrets in a manner covering a potentially very large scope of economic activity. The range of subject-matter covered by trade secrets may be open-ended, though often trade secrets fall into one of two broad categories: technical information (e.g. technical plans and formulae) and confidential business information (e.g. customer lists and marketing strategies).[18] However, an interesting point is that trade secrecy does not provide an exclusive right for a specific time-limit, which means its discovery by a second party through fair means or entry in the market, and they can run out in the regular course of the competition, unlike patented inventions or copyright protected content.

Conclusion

Trade secrets are a form of intellectual property, serving the same purpose as patent, trade mark and copyright laws i.e. promotion of innovation. While protection under trade secrets results in reduced investment in terms of money and time, on the contrary it does not provide an exclusivity over the secret, if a second party learns the information through fair means in the market. A proper understanding of trade secrets as an intellectual property right will let them be absorbed by society and encourage the formation of a law designed in order to promote innovation.

With varying patentability standards across nations, patent rights have become increasingly uncertain, especially when there is a movement in many countries to further raise the bar as far as the patentability criteria are concerned. To address this situation if the trade secret law is strengthened across the world, it will provide a viable option to inventors to keep their inventions secret. More importantly, stronger protection under trade secret law will ensure enhanced protection to tacit knowledge or know-how that may complement a patent, enabling the owner to protect his patented technology better in fact even beyond the patent period.

India does not have a dedicated law in place to protect trade secrets, however, there is a rich stock of jurisprudence that got introduced through cases, covering the definition and scope of trade secrets, protection remedies and so on. However, there is an increasing expectation that India introduces a statutory protection for trade secrets but time alone can tell whether it is to take place.


*Hetvi Trivedi is Research Associate, GNLU-GUJCOST Research Centre of Excellence in IP Laws, Policies & Practices.

[1]  Coca-Cola journey, available at <https://www.cocacolacompany.com/content/dam/journey/us/en/private/fileassets/pdf/2011/05/Coca-Cola_125_years_booklet.pdf>.

[2]  Ibid.

[3] What Made Us Great is Still What Makes Us Great, available at <https://www.kfc.com/about>

[4]  R. Mark Halligan and David A. Haas, The Secret of Trade Secret Success, available at  <https://www.forbes.com/2010/02/19/protecting-trade-secrets-leadership-managing-halligan-haas.html#77ea0d661372>.

[5]  Michael Risch, Why do we have Trade Secrets, p. 3 (2007).

[6]  Id., p. 5.

[7]   Id., p. 6.

[8]  Miles J. Feldman, Toward a Clearer Standard of Protectable Information: Trade Secrets and the Employment Relationship, 9 High Tech. LJ 151, 161-163 (1994).

[9] Robert G. Bone, A New Look at Trade Secret Law: Doctrine in Search of Justification, 86 California Law Review 241 (1998).

[10] Peter S. Menell, Mark A. Lemley and Robert P. Merges, Intellectual Property in the New Technological Age: 2017, Vol. I: Perspectives, Trade Secrets and Patents, p. 62 (2017).

[11]  Ibid.

[12]  OECD, Enquiries into Intellectual Property’s Economic Impact, p. 132 (2015).

[13]  Ibid.

[14]  Trips agreement, available at <https://www.wto.org/english/docs_e/legal_e/27-trips.pdf>.

[15]  Ibid.

[16]  Ibid.

[17]  Ibid.

[18] Id., at p. 62.

 

Foreign CourtsNews

US District Court for Northern District of Texas: A federal court presided by Ed Kinkeade, J. halved the amount of USD 500 million that was to be paid by Facebook Inc. and others to ZeniMax Media Inc., a video game publisher. The Court also turned down ZeniMax’s request for the ban on sale and promotion of products by ‘Oculus’- virtual reality unit of Facebook. In 2014, Oculus (bought by Facebook for about USD 2 billion) was sued by ZeniMax alleging it of stealing trade secrets while developing a headset and violating copyright. In 2017, a US Jury in Dallas found that Oculus used ZeniMax’s computer code to launch ‘Oculus Rift’-VR headset; and ordered Facebook, Oculus, and others to pay a combined USD 500 mn to ZeniMax. Kinkeade, J., in his order, said that USD 250 mn ordered against Oculus and its co-founders for false designation lacked sufficient evidence for damages. Holding thus, the Court halved the amount to be paid by Facebook, Oculus, and others.

[Source: Reuters]