The drafting of trade secrets or confidentiality or non-disclosure clauses is usually along the following framework:
a. Defining the confidential information or what is to be included as trade secrets;
b. Defining the duty in the dealing of such information - maintaining confidentiality and the permitted use or disclosure;
c. Defining the exception(s) to the duty such as when there is overriding legal duty to the authorities.
We recommend that drafters of such clauses for use in Indonesia consider providing for liquidated damages as a consequence of the breach. The reason, as would be elaborated below, is that the civil procedure system does not provide any effective means of enforcing injunctions particularly those of the restraining nature.
Enforcement of breach of trade secrets
Although Article 11 of Law No. 30 of 2000 on Trade Secret (“Trade Secret Law”) provides for basis for the issuance of a restraining order, there is still no clear understanding of how such an order will be enforced.
In common law countries, the plaintiff will request for a committal order to set in motion contempt proceedings – leading to punishment of either fine or imprisonment. However, there is no such provision under Indonesian Civil procedure rules on the enforcement of a negatively framed order (order not to do something).
Our understanding is also supported by the Supreme Court Regulation 5 of 2012 on Interlocutory Injunction Order (Article 6j) that the consequence for ignoring an injunction is criminal sanction under the Criminal Code Article 216 – this means filing a police complaint to investigate on non-compliance.
It would be a rather circuitous route to have to sue in a civil lawsuit for a restraining order and then file a criminal complaint with the police should it become necessary to enforce the order – this is quite different from Common Law countries in which the same Civil Court which issues the injunction has the power to enforce the order through committal proceedings.
Stipulating liquidated damages is likely to instill more effective deterrence because the financial sanction is plain to see as a consequence of the breach – if the individual chooses to be loose about any confidential information entrusted to him or her.
Further, quantifying damages in breach of trade secret/confidentiality agreements before the court is usually difficult to establish, and the liquidated damages clause addresses this problem while at the same time serving as deterrence to the individual.
Since enforcing any restraining order is uncertain by the district court, consider arbitration in the event of dispute while reserving the right to enforce your right in the criminal route - an avenue for breach of trade secret.
Indonesian courts are generally quite difficult to manage – with a typical lawsuit mired in procedural challenges, and if such procedural challenges are successful, resulting in the total dismissal of the lawsuit with little or no opportunity to cure the defect. The problem is compounded when the judges do not issue summary rulings on procedural objection but only render such rulings after the evidence examination and parties going into the merits. In a sense, Indonesian judges are rather cavalier towards litigation costs – the need to refile following the first procedural rejection. For an example of a case study demonstrating this problem, please see this page.
Arbitration is probably safer in avoiding procedural challenges so that the real issue will be addressed before the panel of arbitrators instead of parties battling over procedural challenges in court litigation.
In summary, it is good to consider adopting the following ideas when crafting confidentiality agreements for use in Indonesia :
- stipulate liquidated damages clause in the event of breach
- arbitration as mode of dispute resolution