Sri Lankan IP Laws and the way forward for Tech Companies

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It’s the nightmare of every founder and anyone in the business of innovation. You spend a fortune and countless hours building something. Afterwards, you do everything to safeguard its inner workings. But then one day you wake up to find the people you once trusted have stolen your idea and are passing it off as their own. It may not happen to everyone, but when it happens, then it’s natural to feel lost. While Sri Lanka does have robust IP protection laws, navigating the jungle of legal regulations is no easy task, but if you know your way around it then it’s possible for you to get justice – irrespective of how big your opponent is.

Cases of IP theft in Sri Lanka

Sri Lanka | IP law
Over the years, there have been several cases where courts in Sri Lanka have offered justice in cases of IP theft (Image credits: Vox Media)

Recently, Informatics was awarded interim injunctions by the Commercial High Court against some of its former employees and their current employers. Informatics claimed these employees had access to confidential information relating to its software products. The company alleges these employees along with their current employer, Scicom Lanka and its parent company, Scicom (Msc) Berhad, made unfair and unethical use of this confidential information. The interim injunctions were awarded against these former employees and their employers, preventing them from violating the IP of Informatics.

Another case earlier this year saw the Supreme Court of Sri Lanka refusing to grant leave in an appeal by SLT and SLT (Services) against an injunction by the Commercial High Court. The injunction prevents SLT and SLT (Services) from violating the IP of a local inventor, A.M.T. Nirmala. Having developed a power strip with lightning surge protection against high voltages, the local inventor entered into discussions with SLT and offered them a sample. Claiming SLT had dissected the device to illegally obtain knowledge of its inner workings, the local inventor took the case to courts, where the injunction was awarded preventing SLT from utilizing this confidential information for any commercial purposes. 

Similarly, 2 years ago, DIMO was awarded an interim injunction by the Commercial High Court against two of its former employees. The company alleged that its former employees utilized confidential information from its Storage and Material Handling Department to poach clients and set up a competing business. The judge of the case held that the former employees had violated their Non-Disclosure Agreement (NDA) and as such, the interim injunction was awarded preventing them from utilizing the IP of DIMO. 

How to fight a case of IP theft

Sri Lanka | IP law
Fighting for justice in cases of IP theft can be exhaustive and daunting. Having knowledge of the law goes a long way in making things easier in your quest for justice. (Image credits: Law.com)

At first glance, the idea of going to court may seem daunting. It’s an exhaustive exercise that’ll require countless hours of effort from several stakeholders. One that can be an extreme distraction preventing you from focusing on the day to day business. Not to mention, the potentially steep legal fees you’ll be forced to spend. Even then, you may feel there’s no guarantee justice will be served. After all, outside of these cases, there are several instances on a daily basis in Sri Lanka where IP theft goes unpunished, the most subtle yet common example being when we illegally download movies. 

However, contrary to these popular beliefs, the Intellectual Property Act of 2003 does offer strong protections. Particularly, Section 160 (6) of the Act, which covers unfair competition and undisclosed information. In simplified terms, this section of the Act states that the disclosure of confidential information without the consent of its rightful owner amounts to an act of unfair competition. This includes information disclosed through breach of confidence, industrial/corporate espionage or a breach of contract. 

Sri Lankan IP Laws and the way forward for Tech Companies 5
While software cannot be patented, Sri Lankan law still has many protections for technology companies to safeguard their IP when it comes to software products. (Image credits: Artibeus)

For many technology companies in Sri Lanka, the latter instance is fundamental. A standard NDA requires employees to not disclose confidential information belonging to their employers for commercial purposes. Hence in the event, an employee steals a company’s IP then it would amount to a breach of contract. With these two factors, you’d have the foundations to build a strong case when seeking justice in the event your company falls victim to IP theft. 

It should be noted that software cannot be patented in Sri Lanka. However, it’s still protected under copyright law. On these grounds, a company has sole ownership of the source code, architecture, technical guidelines, and other IP related to the software it creates. To further clarify, if you’re an employee working at a company, building software products for it, then the law in Sri Lanka recognizes the company itself as the owner of the software IP. 

Rebuilding trust within an organization after an IP theft

Sri Lanka | IP law
Businesses are built on trust. After cases of IP theft, their leaders are forced to answer hard questions moving forward to rebuild that trust while safeguarding the IP of the business. (Image credits: Bongkarn Tthanyakij)

Businesses are built on trust. Unfortunately, when instances of IP theft involve its employees, this foundation of trust is shaken to its core. For a leader, the question is, “How do you rebuild trust within your business after something like this occurs?” It’s not an easy question for any leader. Particularly if such incidents involve employees who had been in the business for years. In those rare instances, it’s naturally difficult to re-establish trust. 

Yet, it’s unfeasible for any business to withhold information from its employees. You can only do that for so long until you hinder people from doing their jobs. Hence, a more practical approach is for a business to be governed by a secure framework of processes from both HR and legal perspectives. The exact nature of the framework will vary between businesses. 

While it’s a tough question to answer, many companies can avoid unnecessary headaches by answering it early on. Many companies are founded on good faith between friends and on mutual trust. This is especially common with startups. But there are many instances where overtime, this friendship becomes strained. A simple agreement early on can ensure friendship is removed from the equation and it becomes a simple business operation. 

Sri Lanka | IP law
A simple NDA can go a long way in protecting the IP of your business. Granted, for startups, it’s a tough call to make but one that could potentially keep them safe as they’re vulnerable to theft. (Image credits: JotForm)

Another tool, which businesses can utilize are NDAs. Often we hear these agreements being criticized for being unfairly strict to employees. Yet, a standard NDA can go a long way in protecting the IP of companies both large and small. Particularly startups in Sri Lanka, as they end up in a vulnerable position when pitching to investors as they have to offer sensitive information like their financials and technical details. 

It’s a vulnerable position to be in as there is potential for anyone with this information to steal the idea. After all, once you dissect the inner workings of a business, it’s not impossible to replicate it. Unfortunately, this is exactly what happened in the case of SLT and SLT Services against local inventor A.M.T Nirmala. In this case and with others in Sri Lanka like DIMO and Informatics, we’ve seen that NDA’s are a powerful tool in obtaining justice due to the Intellectual Property Act. 

Hence, when offering sensitive information, startups can ask anyone interested to sign a simple NDA. Granted, asking investors to sign an NDA is a tough sell. Knowing they have every right to say no, startup founders risk losing potential investors. A safe space to be is to only offer basic information on pitch decks, websites, social media, and other public platforms. Whereas detailed sensitive information is protected with an NDA and is only offered to investors whom the startup confidently believes is interested in their growth. 

Sri Lanka | IP law
As digitalisation reshapes everything from how we travel to buy our groceries, it’s imperative that companies take steps to protect their IP. This is especially true for startups. (Image credits: Norwalk Tomorrow)

Ultimately, as digitalisation affects every aspect of our lives, there are countless startups being born that need to ask these questions. The same is true for established businesses as they continue their efforts to digitalise their operations to adapt to the future. To quote, Head of Intellectual Property Law at the Singaporean law firm Rajah and Tann, Lau Kok Keng, “Digitalisation and IP come hand in hand. Governments should encourage businesses to embark on digitalisation and should not only offer funding, but also make it easier for businesses to protect the IP rights created in the process of digitalisation.” 

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