May 27, 2017

Q&A with Donal O'Connell (MD, Chawton Innovation Services Ltd.) > On Trade Secrets & the Hazel tool for Trade Secret Asset Management

Donal O'Connell's introduction with respect to the IPR field can be summarised in four short (but strong) sentences:
  • Ex-VP of R&D and Director of IP at Nokia
  • Adjunct Professor of IP at Imperial College
  • IAM 300 member for the past few years
  • Author of two books and over 100 papers on various aspects of IP
He is currently serving as Managing Director of Chawton Innovation Services, a company that offers the following products and services
  • IP education, 
  • IP consultancy
  • IP Risk Management solution
  • Trade Secret Asset Management solution
  • Open Source Software Risk & Compliance

Q&A with Donal O'Connell (MD, Chawton Innovation Services Ltd.)


Nilesh: Trade secrets are being widely considered these days to be an important form of IP. Many consider trade secrets to be a decent alternative to filing patents considering the threat of the patent being used as a recipe book by competition - what according to you are the factors making trade secrets and their management so important?

DonalWellthere are forces at play which are increasing the importance of trade secrets and trade secret asset management:
  1. Recent law changes - in particular, the Defend Trade Secrets Act (DTSA) in the USA (Trade secret misappropriation is now a federal crime in the US thanks to the Defend Trade Secrets Act passed in April 2016) and the EU Directive on Trade Secrets
  2. OECD BEPS guidelines which include trade secrets in their definition of intangible assets
  3. IP reform in key jurisdictions challenging other forms of IP
  4. Cyber security - given that the hackers are oftentimes after the trade secrets
  5. Companies embracing open innovation and sharing more and more with others
  6. Changing nature of employment (Constant movement of employees amongst competitors)

Nilesh: But trade secrets are secrets, right? What's the need for their management?
Donal: There can be many types of trade secrets; for example:
A Company's trade secrets assets may be found across different functions in the organisation and include:
  1. Some algorithms within the R&D function 
  2. Customer data managed by Sales & Marketing functions
  3. Some filtration process held by Operations in the factory
  4. Some negative know-how in the form of failed tests and test data held by the Test function ·
  5. Some new business plans by the Business Development function 
These trade secrets are of tremendous value to the company and among the most valuable intangible assets, it possesses. 

Now, let's imagine if one of these important trade secrets is stolen: 
by a former executive of the company, a disgruntled employee, a supplier, a competitor or some hacker. 

Let's assume that the theft was of an Algorithm XYZ, and it took place at Date A and a court case takes place at Date B.

At the court case, the company has to prove the following 3 things:
  1. Algorithm XYZ was a trade secret as of Date A
  2. Accused stole the trade secret
  3. Theft of trade secret caused damage to the company
Now, without proper documentation and management, it will be very difficult for the company to prove the first point.

Hence, it is important to maintain a proper trade secret documentation process wherein important metadata about the trade secret is maintained in a central location without disclosing the trade secret itself. This metadata can be data points such as:
  1. The name or title of the trade secret
  2. The date that trade secret was created
  3. The person or persons who created the trade secret
  4. The physical location of the trade secret
  5. The legal owner of the trade secret
  6. The person or persons responsible for managing the trade secret
  7. The type of trade secret (technical, operational, process, financial, etc.)
  8. The persons with authorised access to the trade secret
  9. The value of the trade secret to the business
  10. The protection mechanisms in place to protect the trade secrets
  11. Whether the trade secret has been shared with a 3rd party or not
  12. The expiration date of the trade secret (if applicable)

I have identified over a hundred individual pieces of metadata associated with a trade secret and I continue to identify additional useful data points.


Nilesh: How did you come up with the Hazel tool for trade secret management? What's the story?

DonalOur company, Chawton Innovation Services, started the design of the Hazel Trade Secret Asset Management tool back in 2015, prompted to do so by one of the licensees of our Alder IP Risk Management Tool (another IP solution we have in the market).

We were most fortunate to have had great input from one of the architects of the DTSA, an ex-trade secret manager at Syngenta, a US IP lawyer, the GC of a biotech company and some others during the design and development stages of the Hazel tool.


Nilesh: What customer base are you targeting for this tool?

Donal: We had our first licensee back in May 2016 just when the DTSA was being passed into law. We have operating companies and Legal IP Firms as licensees today.

We have started to have interest from IP Insurance Firms, Accountancy & Tax Firms, General Consultancy Firms and Cyber Security Providers but these discussions are still in their infancy but proving of great interest. I would hope to find some licensees in these sectors in the not too distant future, particularly in the finance sector.


Nilesh: What lies ahead for the Hazel tool? Are there any enhancements in store?

Donal: Some enhancements have been made to the Hazel tool since mid-2016 thanks to great feedback from various entities during that time period. For example, the enhancement to the value and costs feature coming in the June 2017 release is thanks to guidance from one of the major Accountancy & Tax Firms.


You can find out more about Hazel Tool here.

Further Reading:

[1]  Donal O'Connell's Linkedin articles - available here, here, here, and here.

[2]  US Attorney Sterling Miller's article on Hazel tool for automating the trade secret management process - available here
[3] Patents or Trade Secrets - a strategic choice by Kanzlei Warneke - available here