any business, be it a sole proprietor or a multinational LLC, keeps certain
data that can be dubbed a “trade secret”. According to the Companies Act this
is defined as all information considered a trade secret by the company, and in
general all data whose transfer to unauthorised persons could evidently cause
considerable damage. Even more importantly in this case, this definition allows
for trade secrets to be interpreted as intellectual property.
*Note that new Trade Secret Law has recently come into force and might contain a bit different provisions regarding Trade Secrets, but the core remains the same. More on that topic next time.
We’ve already talked about the value of intellectual property, so let’s not waste time. Just a reminder that it is almost invaluable, and that proper intellectual property protection is one of the foundations of a company.
Admittedly, we cannot deny that in the case of an employee who leaves a company and shares the experience they acquired with others and the public, the society profits. HOWEVER! Is the welfare of the society really proportional to the energy, effort and hard work the company invests into its know-how, planning, strategies and employee training? Not to involve politics into this writing, let’s just say one day it was so, but not today.
Let’s take a look at this from the perspective of certain (business) ethics theories – a perspective telling us what to do (in business) and how to act.
Take as an example Kant’s formalism, according to which certain ethical norms should be used universally, and universal moral rules represent an absolute – used in all cases and all situations. “Do no harm.” A company wants to cancel a contract because a collaboration with the other party to the contract did not come to fruition as expected. According to Kant, the company’s management would not cancel the contract because it wouldn’t want the other party to do so were the circumstances reversed. We can see that this theory does not apply. Each business relationship has its specifics, therefore each one should be considered with these specifics in mind, and not with universal moral rules.
The theory of rights solves the dilemma of whether a decision is ethical by asking “How will this affect the rights of others?” It is necessary to arrange the rights and corresponding duties hierarchically, which can prove rather problematic – is an employee’s right to e-mail privacy and the privacy of the contents of his suitcase superior to their employer’s right to protect his intellectual property?
Utilitarianism judges the morality of an act by the good or bad consequences to the social welfare. An act is moral when it does the most good for the largest number of people. Following this theory, cancelling patents and business secrets and therefore releasing them to public, could be considered an ethical decision. The problem with this thesis is that individual interest gives way to greater good. That’s all fine and dandy, but one cannot subsist in the world of business by just pursuing the greater good; with ethics but no capital.
The Justice theory, as the name states, is based on fairness. A decision is ethical if it’s fair, and it is fair if it leads to a fair distribution of societal resources – ethical means fair to all members of the society. Just like the theory of formalism, this theory also represents an absolute – an absolute of fairness. Is it fair to make business secrets available to the public to teach them successful business practices? The reality of business is such that it does not allow for excessive use of absolutes. The relationships between the participants in the market differ, so should be treated differently.
When we look at this in the spirit of the obligation of trade secret protection, we see these theories lead to the following conclusion: when the welfare of society prevails, sanctioning the breach of business or IP secret protection is impossible. The lack of sanctions means future innovators won’t have the motivation or initiative to innovate, because it will be more economical to simply wait for someone else to invent the solution and then just tweak it to their specific needs. Although criticisms of the current system of intellectual property protection abound (more on that another time), it is unreasonable to expect every business decision to be 100% ethical. Considering the tendency toward long term progress, this simply isn’t possible.
All of the above by no means leads to the conclusion we can do as we please on the market. A certain standard of fairness is established by the law itself (i.e. the competition provision of EU law), but it is vital to strive for the preservation of a fair treatment of staff, partners, consumers and in general all participants on the market.