Trade Secrets' Under New Zealand Law
| Author | Rob Batty |
| Position | Senior Lecturer, University of Auckland |
| Pages | 235-268 |
235
“TRADE SECRETS” UNDER NEW ZEALAND L AW
R B *
A
Under New Zealand civil law there is no specic legislation that governs
the protection of “trade secrets”. Before the civil courts the protection of secret
information is largely addressed by the judge-made breach of condence action.
Yet, the term trade secret is regularly used in commercial arrangements, business
discourse and in legislation as a descriptor for certain types of secret information.
Given this potential disjoint between legal doctrine and practice, this article
asks whether the term trade secret carries any legal meaning and e ect under
New Zealand law. It is argued that the term trade secret has no settled doctrinal
meaning under New Zealand law. e te rm trade secret is in fact moored in some
ambiguity. Having explored the sources and causes of this ambiguity, this article
concludes by considering some of the implications for statutory intervention and
commercial practice.
I. I
At some time, every business will possess certain commercial information
that provides it with a signicant competitive advantage in the marketplace.
Such information could be a formula, a manufactu ring process, technological
know-how or marketing information, like a customer list. A business may
be anxious to prevent such information getting into the public domain -
or worse - into the hands of a competitor, so the business may try to keep
the information secret. e term “trade secret” is often used to describe
this commercial information. Legal systems around the world adopt an ex-
post role in protecting a business’s trade secrets. For example, in the United
States a business may obtain the remedy of an injunction or damages when it
establishes another has misappropriated its trade secret.
Traditionally, the legal protection of trade secrets has been seen as the
“forgotten step-daughter” to the most prominent intellectual property rights
* Senior Lecturer, University of Auck land. My thanks to Dr A nna Kingsbury a nd Tim Jaray
for their helpful c omments on earlier dra fts. My thank s to Johanna Commi ns for her research
assistanc e and insightful com ments. All errors remai n mine.
236 Canterbury Law R eview [Vol 22, 2016]
of copyright, patent and trade marks.1 at is changing. In Europe, the EU
Trade Secrets Directive seeks to harmonise the law governing the protection
of trade secrets across Europe.2 In the United States, a federal law on trade
secrets has recently been introduced.3 At an international level, the Trans-
Paci c Partners hip,4 and negotiations concerning the Trans-Atlantic Trade
and Investment Partnership have also put trade secret protection into focus.5
e increased attention given to trade secret protection is linked to policy
goals a bout promoting innovation.6 Eective protection of trade secrets is
also said to encourage collaborative research between traders.7 e evidence
for these benets, at least in Europe, may be equivocal.8 However, at a local
level, evidence and anecdotal reports indicate that New Zeala nd rms do
use and value secrecy as a way of preventing appropriation of innovation by
others.9 Trade secrets, then, are important – and increasingly so. Yet, when
one comes to assess the nature and ecacy of New Zealand ’s law concerning
the protection of trade secrets, one may be struck by the lack of explicit
mention of the term trade secret in the “law books”. Under the civil law,
there is no legislation governing the protection of trade secrets. is raises
the question whether, despite its widespread use, the term trade secret has
any legal meaning. is article seeks to answer this question by determining
what, if anything, the term trade secret means under New Zealand law and
how this aects the legal protection of secret commercial information.
I claim that under New Zea land law the term trade secret has no settled
doctrinal meaning and is moored in some ambiguity. One of the reasons for
1 Sharon K. Sande en “e Cinderella of Intellect ual Property Law: Trade Secre ts” in Peter K.
Yu ed Intellectual Propert y and Information Wealth: Issues and P ractices in the Digital Age ( Vol
2) (Praeger Perspect ives, Westport, Conn 2007) 399 at 399: “In m any ways, trade secret law
is the Cinderell a of the intellectual proper ty law eld”.
2 Directive (EU) 2 016/943 of the European Parl iament and of the Council of 8 June 2016 on
the Protection of Undisc losed Know-How and Business In formation (Trade Secrets) Aga inst
eir Unlawfu l Acquisition, Use and Disclosu re [EU Trade Secrets Directive].
3 Defend Trade Secrets Ac t of 2016 [DTSA].
4 See Trans-Pacic Par tnership (signed 26 Februar y 2016) Chapter 18, art 18.78.
5 SI Akhta r and VC Jones “Transatla ntic Trade and Investment Par tnership (TT IP)
Negotiations” (Congressional Repor t R43387, 4 February 2014, Congressional R esearch
Service) avai lable from at 35.
6 For example, one of the justic ations for the EU Trade Secret s Directive is th at protecting
trade secret s “allows creators and in novators to derive prot from their c reation or innovation”
which is “impor tant for busines s competitiveness a s well as for rese arch and development,
and innovation-relat ed performanc e”, see EU Trade Secrets Directive , Recital 2. Sim ilarly,
the DTSA is cha mpioned as a mechanism to promote in novation. See Executive Oc e of the
President “Statement of Admini stration Policy: S. 1890 – Defend Trade Secret s Act of 2016”
(4 April 2016): “Eective protect ion of trade secrets promotes innovat ion…”.
7 EU Trade Secrets Direct ive, Recital 3.
8 See the comments of Tanya Aplin “A Critica l Evaluation of the Proposed EU Trade Secrets
Directive” [2014] 4 IPQ 257 at 259-260.
9 Basil Shar p and Owen Morgan R eview of the New Zeal and Intellectu al Property Syst em
(Auckland Un iservices Ltd, Auck land, 22 April 2010) at 84: “[according to an on line survey]
… condential ity agreements are rated the hi ghest in terms of protecting in novations. is
nding is suppor ted by the large majority of rms t hat would choose ‘secrecy’ a s a means of
protecting a new a nd non-obvious invention”.
“Trade Secrets” Under New Zealand Law 237
this ambiguity is because the term trade secret enjoys something of a double
life under New Zealand law. In commercial disputes, it is a mere label, rarely
used by courts to describe a type of information that they will protect under
the broad and exible common law action for breach of condence. Under
this judge-made action it is unnecessary to determine whether information
should be classed as a trade secret. Yet, in employment disputes the term
trade secret is identied as a legal c ategory that provides a division between
information that an employer can prevent an employee from taking away
with them and information that an employer cannot. e boundaries of
this category in employment law are fuzzy and it is dicult to identify with
precision what information will comprise a trade secret. Finally, in a raft of
legislation the term trade secret is used, but is left undened. e exception
is the Crimes Act 1961, which provides a clear denition of a trade secret.
However, this denition has not been considered or applied in any case law
and has seemingly not directly inuenced the civil law.
e main thrust of the article is positive, rather than normative in
approach. at said, in the last section of the ar ticle, I begin to explore the
normative implications of trade secrets not having a settled meaning under
New Zealand law. Ambiguity c an create uncertainty for public decision
makers, businesses and their advisers, employers a nd employees and those
seeking to document transactions and relationships that concern business
secrets. From this perspective, a continuing lack of clarity around the
meaning of trade secrets may be undesirable and statutory intervention may
look like an attractive option. I explore some reasons why one may pause
before travelling down this path. In the absence of a legislative response, I
suggest that those drafting and advising businesses may be able to achieve
greater clarity by avoiding using the term trade secret. Instead, to paraphrase
the March Hare, when identifying secret business information - “you should
say what you mean”.10 To reinforce this last point and to set the scene for
further discu ssion, I begin in Section II by survey ing the landscape of the use
of the term trade secret in commercial practice.
II. T S C C
A. Brief Survey of the Use of the Term Trade Secret in Commercial Practice
e dictionary provides a good starting point to ascertain the ordinary
meaning of trade secret. e Ox ford English Dictionary de nes a trade secret
as “a secret technique, process, substance, etc., which is u sed in a particula r
trade or occupation, or by a particular industry or business, and provides a
compet itive advanta ge”.11 e Merriam-Webster Dictionary similarly refers
10 Lewi s Carroll Alice’s A dventures in Wonder land (Hobok en, N.J: Generic NL Freebook
Publisher, 1865 (orig)) Chapter 7.
11 Oxford En glish Dictionary (onli ne edition) .
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