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Protection Of The Corporate Intellectual Property Rights In The Labour Relationship

The article written by Lawyer Nguyen Duc Hieu, Vuong Thanh Thuy & Trinh Thu Hao from Phuoc & Partners is published in Saigon Economic Times dated 29/11/2012.

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On a beautiful day, a famous toy manufacturing company surprisingly discovers a toy model identical to the products they intend to put up for sale in days ahead in the market place. This model is expected to earn huge profits for the company, because of its unique and state-of-the-art style.

To develop it, the company has mobilized a team of qualified experts who have been applying advanced technologies and working on engineering designs day and night. Moreover, they have spent a “considerable” budget on marketing and PR together with a promise that “new arrivals will be disclosed at the last minute.” Yet, such a “novel” model has now been put into massive production and then into trade channels by one of their rivals, just before the “last minute” in a surprise way.

Ones who are even outside of the business community cannot see it as a “coincidence”, while they should rather infer that there must have been some employee who was bribed to disclose, probably at a “bargain price”, designs and all specifications (i.e. the outer and the other engineering designs) of the new product. Under the prevailing Labor Code, such disclosure is deemed as an act of disclosing “trade secret” of the employer – one of the violations which are subject to the disciplinary form of dismissal. However, in the upcoming time, upon the enactment of the 2012 Labour Code (i.e. 01 May 2013), this act is also regarded as copyright infringement – one of the typical acts infringing intellectual property rights (“IPR”) the 2012 Labour Code adds to the category of serious infringement by employees against which employers are entitled  to impose the disciplinary form of dismissal.

Intellectual property rights under protection

The above is just an example of the employee who misappropriates “trade secret” of the employer – one of the subjects protectable under the Intellectual Property Law (“IP Law”). IP rights which can be conferred upon organizations and individuals in general and employers in particular under the IP Law include: campaigns to promote the toy model,

(i) Copyright:  Copyright is understood as the right of organization(s) or individual(s) over the works they have created or owned. For example, a professional software company shall be the owner of the software they have developed, and grant a license to use it to others or lease it; or an architectural firm who has created and held the ownership over design drawings shall be eligible to sell them to others.

(ii) Related rights (or neibouring rights): The related rights mean those rights of organization(s) or individual(s) over performances, audio and visual fixation, and broadcasts and satellite signals carrying coded programs. For example, a telecommunication company is entitled to sell performances they have legitimately fixed in a form of CDs or DVDs; broadcasters are entitled to obtain royalties (or rental fees) from those who receive or make use of the signals…

(iii) Industrial property rights. The industrial property rights mean those rights of organization(s) or individual(s) over inventions, industrial designs, layout designs of integrated circuits, trade secrets, trademarks, trade names and geographical indications which such organizations or individuals have created or legitimately owned. The industrial property rights (“IP rights”) also embrace the right to act against unfair competition. Of them,  the IP rights over inventions, industrial designs, layout designs of integrated circuits, trademarks and geographical indications shall  be conferred upon registration or grant of a patent by the competent State body (i.e. the National Office of Intellectual Property of Vietnam), or on the basis of international registration (as for trademarks).

(iv) Rights to plant varieties:  The rights over plant varieties mean those rights of organization(s) or individual(s) to new plant varieties which such organizations or individuals have bred, discovered and developed or otherwise legitimately enjoyed protection. The rights over plant varieties are established on the basis of the competent State body’s decision.

The IP Law specifies typical acts of infringing each subject of the IP rights in detail, so in some way, it would make it easier for enterprises to identify these acts. However, if put in the context of a given relationship between an employees and employer, the employee’ infringement seems to mostly involve copyrights, related rights and/or trade secrets.

Confidentiality or “safekeeping” is a key condition through which enterprises (employers) establish and exploit their IP rights. In some instances, as far as employees are concerned, they are in a position to gain access to, reproduce or unlawfully disclose the IP subjects what have belonged to employers.

It can be said that the impact employees’ infringement could give to employers’ business is immeasurable because for enterprises, IP rights are the most valuable and core asset, the role of which is vital to such enterprises’ existence or even involves a matter of “life and death”. Though the employee, if found infringing employers’ IP rights, can be fired, firing he or she should be treated as a “last-resort”, rather than a strategic approach with a view to protecting the long-term interests of the employer. Probably, there can exist the worse case where the enterprise has to cease existence following their dismissal of the employee who has infringed their IP rights, due to the fact that the entirety of their IP rights (or asset) has been misappropriated by a rival.

What to be done to protect IP rights

Enterprises should proceed with protection of IP rights as soon as possible. They should also contract with employee(s) about their IP rights at a time when these employees are recruited. Accordingly, all creative creation the employee has made under the scope of his or her employment, or is commissioned, or is closely related his or her employment, must inure to the employer’s interest. The contract to this effect should remain bound upon the parties even though the employee no longer works for the employer.

At the same time, enterprises should also enter into a confidential agreement with employees, pursuant to which the enterprises point out their trade secret or confidential information. Employees, on the other hand, are prohibited from using such trade secret or confidential information unless such use is deemed necessary to complete their commissioned assignment.

It is also prudent for employers to point to legal consequences of employees’ breach of confidentiality as a “warning”.  Moreover, employers can have employees signing up an agreement upon which employees shall be liable for damages in case they illegally disclose employers’ trade secret.  This agreement is a legal ground for employers to claim employees’ liability for their disclosure of the trade secret, even though the employees’ employment is terminated.

The fourth thing that enterprises need to do is that they should work out internal regulations or policies on their e-communication system. Accordingly, the enterprises should define all data or information, including all electronic mails, data… stored on computer hard disk as the corporate asset over or over/on which the enterprises can exercise control or conduct a check, or restrict any employee from having access to, with no exception, to restrict employees either from disseminating information, subject to the enterprises’ IP rights via e-communication, or carrying out a number of conducts (e.g. making copy of the information from PCs to other electronic medium, etc.). In addition, these regulations/policies require employees’ compliance and enable the enterprises have access to, export information and carry out a check on these devices at any time (if applicable).

The last thing enterprises need to do is that as soon as the 2012 Labour Code enters into force (i.e. 01 May 2013), they will need to add further violations by employee(s), subject to a disciplinary form of dismissal, to the internal labour regulations which have been registered with a competent authority. Another noteworthy point is that the employer is allowed to impose the disciplinary form of dismissal only when the employee’s violation, i.e. the cause of action, is specified in the internal labour regulations registered with the competent authority.

IP rights have been progressively shaping up as a fundamental corporate asset which might be easily vulnerable to employees’ violation, and enterprises may consequently be suffered great losses which may be immeasurable or unforeseeable in some aspect. So, the matter of how to protect IP rights has become more challenging to enterprises. Instead of taking the “last-resort” step to fire employee(s), enterprises should rather plan out a scheme for protection of IP rights in the long run. After all, “Prevention is better than cure” is an appropriate approach enterprises should have to deal with this matter.