What’s the secret to Col. Sanders’ recipe for fried chicken? Is the reason Coca-Cola tastes different from Pepsi based on a formula locked up in a vault at corporate headquarters? For many companies, their trade secrets – also known as intellectual property (IP) – are a key differentiator and the primary reason for their success. For some, it’s a recipe or a chemical formula. For others, it’s customer data or proprietary technology.1
The protection of intellectual property rights has become a clear focus as President Trump questions and renegotiates trade agreements around the world. IP-driven companies contribute more than 38 percent of gross domestic product and provide an abundance of high-paying jobs in the United States.2
Here in America, we have strong laws to protect intellectual property rights. Similarly, we have laws and regulations designed to protect individual investors with regard to scams, high-risk investments, advertising and communications, privacy, security and the transfer of money, among others. Recent regulations include the Senior Safe Act and FINRA rules 2165 (Financial Exploitation of Specified Adults) and 4512 (Customer Account Information). The Senior Safe Act works to prevent senior financial abuse; FINRA Rule 2165 puts mechanisms in place to protect the accounts of vulnerable adults; and Rule 4512 requires firms to make reasonable efforts to obtain the name and contact information of a trusted contact person for an individual’s account.3 When you work with a registered financial advisor, that person and their firm are rigorously supervised and monitored to ensure that everything spoken and all materials disseminated have been reviewed and approved for compliance with U.S. laws and regulations.
However, not all countries have the same stringent rules and regulations as the United States. In fact, the recent re-negotiation of the NAFTA treaty between the United States, Mexico and Canada (USMCA) placed new requirements on Canadian intellectual property laws. Specifically:4
” Increasing data protection for biologic medications from eight years to ten years
” Increasing copyright protection by 20 years, from the life of the author plus 50 years to the life of the author plus 70 years
” Providing for a term adjustment for delays at the patent office in issuing patents
One of the reasons intellectual property rights are important is that they enhance global trade opportunities. Countries that do not have strong laws may deter trade with others due to fear their company secrets will be stolen if they set up factories or distribution centers there. If intellectual property, particularly that which is intangible, such as technology or a highly recognizable brand, are stolen in a country with weak international property laws, a company has little recourse.5
One of the reasons China is in the cross-hairs of U.S. trade tariffs is that the intelligence community has long asserted that China is a leader in economic espionage. For example, China requires companies from other countries to transfer their technology to Chinese companies as a precondition of entering its market, notes Russell Slifer, former deputy undersecretary of Commerce for Intellectual Property and deputy director of the U.S. Patent and Trademark Office.6
In response to the Trump Administration’s complaints and tariff tactics, China has established a specialized intellectual property appeals court within the Supreme People’s Court, the highest court in the country, to begin hearing cases in 2019. This is good news not just for global companies looking to do business in China, but for Chinese companies also seeking to protect their intellectual property.7
Content prepared by Kara Stefan Communications.
1 Chris Kokoska, Dan Ovanezian, Laura Kees and Christine Beaman Rankin. IP Watchdog. Nov. 3, 2018. “Trade Secrets: Intellectual Property Considerations and Guidance for Start-Ups.” https://www.ipwatchdog.com/2018/11/03/trade-secrets-intellectual-property-considerations-start-ups/id=102912/. Accessed Nov. 8, 2018.
2 Lorenzo Montanari. Forbes. April 26, 2018. “How IP Rights Empower Women.” https://www.forbes.com/sites/lorenzomontanari/2018/04/26/how-ip-rights-empower-women/. Accessed Nov. 8, 2018.
3 Bressler, Amery and Ross PC. Lexology. Oct. 17, 2018. “Protecting Vulnerable Investors from Financial Exploitation: What Every Broker-Dealer Needs to Know.” https://www.lexology.com/library/detail.aspx?g=17b90f95-ff18-450b-a3c2-3c3ea0640421. Accessed Nov. 8, 2018.
4 Borden Ladner Gervais. Oct. 22, 2018. “US-Mexico-Canada Agreement: Business Insights on Intellectual Property Issues.” http://blg.com/en/News-And-Publications/Publication_5437. Accessed Oct. 31, 2018.
5 Knowledge@Wharton. Aug. 29, 2018. “Why Strong Intellectual Property Laws Matter in a Globalized World.” http://knowledge.wharton.upenn.edu/article/globalization-and-its-impact-on-inequality-for-companies/. Accessed Nov. 8, 2018.
6 Russell Slifer. The Hill. Aug. 30, 2018. “Congress and Trump are out of step on intellectual property.” https://thehill.com/blogs/congress-blog/technology/404383-congress-and-trump-are-out-of-step-on-intellectual-property. Accessed Nov. 8, 2018.
7 Peter Leung and John Butcher. Bloomberg Law. Nov. 5, 2018. “China to Open National IP Appeals Court Amid U.S. Trade Spat.” https://news.bloomberglaw.com/ip-law/china-to-open-national-ip-appeals-court-amid-us-trade-spat. Accessed Nov. 8, 2018.
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