How to perfectly combine the protection of trade secrets with blockchain technology?

Using the term “blockchain” is a buzzword that most lawyers don’t understand. It is often confused with things such as ” Bitcoin “-Bitcoin is a digital currency launched in 2009 by a mysterious figure under the pseudonym Satoshi Nakamoto.

Blockchain and Bitcoin are different. The blockchain can be regarded as an operating system such as Microsoft Windows, and “Bitcoin” can be regarded as one of many applications that can run on the blockchain.

Think of the blockchain as a computer ledger, which can record information and convert it into a cryptographic hash value with a digital time stamp, called a “block”, which can then be linked to the next “zone” in chronological order Other information in the block.

Each individual block now provides a unique fingerprint that is used to identify a specific block in the chain (“hash”), the “hash” code of the previous block in the chain, and a code that can prove when the information is The digital timestamp of a specific block that is put into the blockchain.

How to perfectly combine the protection of trade secrets with blockchain technology?

The key to understanding the function of the blockchain operating system is to understand the cryptographic hash. MD5 stands for MD5 Message-Digest Algorithm 5, which was invented by MIT professor Ronald Rivest in 1991 to replace the MD4 standard. Because encryption cannot be reversed, MD5 is a one-way hash function. Today, MD5 is widely used to convert variable-length plain text into a 128-bit hash value, expressed in 32-bit hexadecimal.

The hash code creates a unique and immutable tamper-proof record. Digital forensics experts usually use hash methods to verify whether a copy of digital evidence matches the original data from which the copy was made, that is, a hash or “fingerprint” match. The blockchain provides an efficient, economical, reliable and secure system for managing trade secret metadata (Metadata), and has a built-in time stamp function in the blockchain to link blocks in chronological order.

There is no security risk because the blockchain only captures the trade secret metadata (not the actual trade secret), and then uses a one-way hash function to encrypt the trade secret metadata. The 32-character alphanumeric hash code cannot be deciphered.

ec55d3e698d289f2afd663725127bace。

The plaintiff in a trade secret misappropriation lawsuit must prove its existence, ownership, notice and access (“EONA” certificate):

  • Existence: The information meets the conditions of a trade secret, that is, there is a trade secret.
  • Ownership: The plaintiff owns the ownership of the information.
  • Notification: The defendant has actually, presumptively or implicitly notified the trade secret status of the information.
  • Access: The defendant has access to the information, that is, there is no independent development of the information.

The proof of these evidences can be confirmed by the recognition of witnesses’ testimony and documents or other physical evidence, or now, as discussed in this article, the recognition of blockchain evidence.

Trade secret dispute litigation is fact-intensive. The existence of trade secrets is a matter of fact; the ownership of the suspected trade secret is a matter of fact; the defendant’s notification and obtaining evidence of the suspected trade secret is a matter of fact and the use of evidence-unauthorized acquisition, disclosure or use of trade secrets.

Blockchain evidence can greatly reduce or eliminate major factual issues in trade secret misappropriation litigation, saving parties millions of dollars in discovery costs.

A basic requirement of the law of evidence is that the proponents of the evidence show the authenticity of the proposed evidence. Certification requires the supporter of the evidence to prove that the evidence “is what the supporter claims.”

However, there is a special rule for “process or system”. Evidence rules allow the use of evidence that describes the “process or system” and shows that it produces accurate results to verify the “process or system.”

How to perfectly combine the protection of trade secrets with blockchain technology?

Digital forensics experts have been using cryptography and hash codes for many years. Today there are thousands of applications using blockchain platforms. The certification of blockchain evidence will not be an issue for the court of first instance. States are formulating special “blockchain” regulations.

Take Illinois as an example. On January 1, 2020, the Illinois Blockchain Technology Act took effect.

We can look at these legal definitions in Section 5 of the Act:

Section 5, this law applies to:

  • “Blockchain” refers to electronic records created by multiple parties through a decentralized method to verify and store digital records of transactions, which are encrypted and protected by using hashes of previous transaction information.
  • “Hash algorithm” refers to a mathematical algorithm that performs a one-way conversion of input data to output data of a specified size to verify the integrity of the data.
  • “Electronics” refers to technologies related to technologies with electrical, digital, magnetic, wireless, optical, electromagnetic or similar functions.
  • “Electronic records” refer to records created, generated, sent, communicated, received, or stored electronically (including blockchain or smart contracts).
  • “Record” refers to information that is engraved on a tangible medium or stored in an electronic or other medium and can be retrieved in a perceivable form.
  • “Smart contract” refers to a contract stored in the form of an electronic record, which is verified through the use of a blockchain.

Applying these statutory definitions, the Illinois Legislature stipulated the following permitted uses of blockchain in Section 10 of the bill:

Section 10, the scope of use of blockchain:

  • The legal validity or enforceability of smart contracts, records, or signatures cannot be denied simply because the blockchain is used to create, store, or verify smart contracts, records, or signatures.
  • In the program, the evidence of smart contracts, records, or signatures cannot be excluded just because the blockchain is used to create, store, or verify smart contracts, records, or signatures.
  • If the law requires the record to be in writing, electronic submission of the blockchain containing the record is also in line with the law.
  • If a signature is required by law, the submission contains the signature electronically or verifies that the blockchain provided by the signature complies with the legal requirements.

In Rule 902(12), the state of Illinois addresses the acceptability of certification records generated by electronic processes or systems-records generated by electronic processes or systems produce accurate results, so the certification of qualified personnel shows that the blockchain technology complies with These statutory requirements.

How to perfectly combine the protection of trade secrets with blockchain technology?

Over the years, parts of Asia have been criticized for failing to protect trade secrets in courts. The problem that plagues parts of Asia is the difference between the civil law system and the common law system.

For example, China is a country in the civil law system, and the legal provisions for the protection of trade secrets are scattered in various laws and regulations, and even in the civil law system, the law is not perfect.

Unlike China, the United States is a common law system with strong pre-trial evidence: interrogation, document production request, testimony, recognition request, common law precedent.

This distinction is important because the protection of trade secrets usually requires the holder of the trade secret (who bears the burden of proof) to use the evidence obtained before the trial in order to find evidence of the misappropriation of the trade secret.

As there is no right of discovery, no inquiry, no document production requirements, and no testimony, the plaintiff in the Chinese court cannot prove his proof of the misappropriation of trade secrets through evidence.

The differences in the legal systems of the United States and China seem difficult to resolve, but China has recently changed its trade secret protection system in two main areas:

  • Accept blockchain evidence to prove the existence and misappropriation of trade secrets;
  • When certain assumptions are met, the burden of proof is transferred to the defendant.

Using the blockchain system, trade secret holders can store the trade secret evidence required to prove the elements on the blockchain: existence, ownership, notification, and access. Trade secret holders can now enforce and protect trade secrets in China more effectively and efficiently without being discovered.

In addition to the evidence established using blockchain evidence, the recent amendments to China’s Anti-Unfair Competition Law (AUCL) also stipulate that if the evidence proves that trade secrets have been infringed, the burden of proof is transferred to the defendant, proving that there is no embezzlement of trade secrets.

Therefore, blockchain technology has changed the rules of the business game in the United States and internationally.

The original report comes from http://www.reuters.com, R. Mark Halligan, Fisher Broyles, partner of LLP, and is considered to be a leading practitioner of automated encrypted asset commercial blockchain systems. The Chinese version is compiled and compiled by the chain market team, and the English copyright belongs to the original author.

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