Professional Business Ethics 22-04-2015

Trade Secrets & Conflict

of Interest

Presented by

Pray for me reader

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Scheme Of Presentation 1

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Trade Secret

Employee’s obligation and right toward their

organization.

Factors determining information to protect as Trade

secret.

3 Major arguments regarding Trade Secret.

How to Extract Information.

Objectives of Information Gathering.

Un-Ethical Intelligence Gathering.

Scheme Of Presentation 2

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Conflict of interest.

Actual & Potential Conflict of Interest.

Kinds of Conflict Of Interest.

Insider Trading.

Summarizing the key points.

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What is Trade Secret in your

opinion?

Trade Secret

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It can be defined as

A Formula, Pattern, Device, Set of info Which

gives you opportunity to have advantage over

competitors who don’t know or use it

Examples of Trade secrets are

Manufacturing process, Ingredients, Chemical

composition

Employee’s obligation and right toward

their organization.

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Employee Role Companies Role

Employee has obligation of

confidentiality not to disclose any

info acquired during their job.

Employees have right to change

job or start up new business of their

own using skill and knowledge they

acquired from former employer

Companies can use their own

employee Knowledge or skills that is

legally acquired elsewhere and to

gather legitimate competitor

intelligence.

Factors determining information to

protect as Trade secret

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Extent information is known outside the organization.

Extent it is known by employees and other involved in business.

Extent of measures taken to guard the information.

Value of information to Employer and it’s Competitor.

Amount of money or effort expended to developing the information.

Difficulty or ease by which information can be acquired or duplicated by others.

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Activity

What is the most important factor in

your opinion to protect information as

Trade Secret & why?

What we think

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Amount of money or effort expended to developing

the information.

R&D factor

Employers Capital has been used.

3 Major arguments regarding Trade secret

protection

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Trade Secret as kind of property

Principle of fair competition

Obligation of Confidentiality

Trade Secrets As Property

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Trade secrets with patent and copy rights are

regarded as intellectual property(intangible property).

Owner has right to use, sell, license, or assign

ownership to others.

If Some one use his own time, material and facilities

then he has a right to be known as sole owner of

product.

Whereas if an employee use the resources of

Employer then whatever he will invent will belong to

Employer.

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Activity

Read Waxler case carefully and identify the court

order was it right in favor of Alvin Green berg? if

yes why if no why?

Our opinion on Waxler Case

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Employer should be having legal document for

protectable trade secret.

Employer must have a confidential relationship.

Greenberg did not violated the obligation of

confidentiality. Because he was the real owner to

the formulas.

Argument of Fair Competition

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This argument hold that

“companies are at disadvantage when information

which they expended resource on is being used by

competitors without a cost”

Career Issues of Employees ( Two Sides of

Fairness Argument)

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Limits the personal freedom of the employee

Stops further advancement in the industry

Employee gets bound by the acquisitions of trade

secrets.

Can’t use his gained knowledge and experience in

the industry.

The Confidentiality Argument

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Not to use or to communicate information

confidentially given him by principal or acquired by

him on account of his agency to the injury of the

principal, on his own account. Unless the information

is a matter of the general knowledge.

The Confidentiality Argument

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Obligation of confidentiality does not end with the

employment relation.

(Exists from one job to another)

Strong Support to the Employers (To Trade secret

protection)

It is also limited by the right of employees (usage of

skill and knowledge in trade – Occupation)

How to Extract Information

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By the help of computes.

Through Open excess data base.

Gathering Information from Different mediums News Sources

Trade publications

Court Records

Presentation at Industry Meetings

Suppliers

Competitors

Objectives of Information Gathering

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“On the basis of this extracted Information the

conclusion is made regarding company & than

strategies are made accordingly for the betterment

and profit.

UNETHICAL Intelligence Gathering 1

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Theft & Receipt of unsolicited Information Improper way – Method of acquiring Information

Reasons : To take revenge from Employer

Selling it for Monetarily reasons – ( Lust of Money )

To get a new job – Advance Career

UNETHICAL Intelligence Gathering 2

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Misrepresentations Deception – Gain Information by false Methods.

Violates the duty to be honest in all dealings

Improper influence

Bribery

Not only bribery but other job opportunities

For career benefit.

UNETHICAL Intelligence Gathering 3

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Covert surveillance

Some methods for gathering information Intrude

because Companies have not recognized them to prevent the leakage of

info.

Factors involve in Covert surveillance :

Employees who talk about confidential matters in public places.

Planting hidden microphones in competitors place

Hidden camera's.

Spying

What is Conflict of interest?

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Conflict of Interest is a personal interest that came

into conflict in the interest of employer or

organization.

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Explain

Case given in COI Page 145.

Better understanding of Conflict of Interest

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A conflict of interest is a situation in which a person

or organization is involved in multiple interests or

personal interest such as (Financial, emotional,

Monetary), one of which could possibly corrupt the

motivation or obligation of the individual or

organization.

What is Fiduciary – Conflict of Interest

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A fiduciary is a person who holds a legal or ethical

relationship of trust between himself and one or

more other parties (person or group of persons).

Ordinary seller and buyer concept

Fiduciary and client have more strong relation as

compared to the Ordinary sales man

Trust factor is involved.

Actual & Potential Conflict of Interest

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Actual COI Potential COI

When personal interest leads a person

to act against the interest of employer

or organization.

When there is a possibility that a

person will fail to fulfill the obligation to

act in the interest of other, even

though the person has not done so.

Example : R Foster Winans was

clearly in actual conflict of interest – “

He engage in stock trading” (Personal

Interest)

All reporters face potential Conflict of

interest in writing stories that could

have impact on there own financial

holding.

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Activity

What is Personal and Impersonal COI?

Provide Example!

Personal & Impersonal COI

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Personal COI Impersonal COI

This conflict arise when a person is

obligated to act in the interest of two

different person or organizations,

who’s interests conflict

A conflict where the resolution

benefits/affects persons or entities

other than yourself.

A lawyer who has a personal interests

that conflict with the interest of the

client has the personal conflict of

interest.

Where as lawyer who represent two

clients with conflicting interest faces

an impersonal COI.

Kinds of Conflict Of Interest (COI)

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Biased judgment

Direct Competition

Miss use of Position

Violation of Confidentiality

Biased Judgment

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Not being neutral is called biasness.

Placement of confidence in professional judgment.

Factors influence the Judgment of an employee. Outside Business interest

Stock and investment in other companies.

Wrong relations with competitors.

Conflict of interest occurs when an employee is in position to make decision that effect.

family members

relatives

close associates

Direct Competition

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A competition in which employee engages

him/herself in competition with his employer or

organization is known as direct competition.

Example of Xerox

His skills related to the technicalities are from Xerox.

He is bound to use such services outside because

they belong to Xerox.

Misuse of Position

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Misuse of position is when someone uses an available resource improperly or incorrectly.

Giving unnecessary favors

Harming people by power

Violating rights of people.

Example of a Bank Manager. (Conflict Of interest)

Choose her Brother unfairly.

Employer has obligation to not use Powers

opportunities

For personal gain.

Violation of Confidentiality

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Violation of set of rules or a promise that limits

access or places restrictions on certain types of

information is called Violation of confidentiality.

Confidential business information is a property

owner

It’s a right of organization to keep its information

classified.

Example of R.Foster Winans.

Insider Trading

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The illegal practice of trading on the stock to one's

own advantage through having access to

confidential information.

Key points for the person engaging in

insider trading

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Person who trades on material or nonpublic

information is engaging in insider trading when:

Trader violated legal duty to corporation and organization

Source of information has a duty and trader knows that

source is violating the duty.(duty to protect the

information)

Two arguments Against Insider Trading

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Property Right

The Fairness Argument

The Property Rights

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Those who trade on

Secret Material

Non public information

Are stealing property that belong to some other

organization.

Because that organization has spend money on developing

that information.

So they are the real property owner.

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Because that organization has spend money on

developing that information.

So they are the real property owner.

The fairness argument

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This argument holds that

“Trader who use inside information has unfair

advantage over other investors”

Why?

What we think

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Because obviously other investors don’t have such

information, they are playing fair game.

Summarizing the key points 1

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Trade secrets should be protected and registered as property rights.

Secrets are the strengths of the companies.

Core for the competitive advantages.

Companies should be care full about the classified information.

Employees role is of Morality and loyalty.

Summarizing the key points 2

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COI tell us about the personal interest of the

employees came in conflict with the organizational

interest.

Loyalty and morality also matters in COI.

One should be considered on level of equality as we

read in the case of a bank manager.

Misuse of position should be stopped. And fair

judgment should be done.

Summarizing the key points 3

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Illegal trading practices should be banned.

Avoid the unfair advantage which harms the

Investors & Employer.

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Thank You.