> Intellectual Property

Protection of trade secret

Article published in Direktor Magazine, No. 38, February 2019

The government has recently released a draft Bill on the Protection of Trade Secrets transposing Directive (EU) of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure. The directive was adopted to address unequal protection of trade secrets across the Union.

As the introduction to the directive stipulates, businesses, irrespective of their size, value trade secrets as much as patents and other forms of intellectual property right. They use confidentiality as a business competitiveness and research innovation management tool, and in relation to a diverse range of information that extends beyond technological knowledge to commercial data such as information on customers and suppliers, business plans, and market research and strategies. Trade secrets are not just the result of innovation activity, commercial and business data may be classified as trade secrets as well.

Under the draft bill, a trade secret covers undisclosed know-how and business information which must comply with the following requirements:
– It is secret in the sense that it is not generally known among or readily accessible to persons within the circles than normally deal with the kind of information in question
– It has commercial value
– Person lawfully in control of the information has taken reasonable steps under the circumstances to keep it secret

For a piece of information to be designated as a trade secret, it must satisfy all three criteria. The draft bill also assumes that the requirement for reasonable steps is met if the trade secret holder has designated such information as a trade secret in writing and communicated that to all persons coming into contact or being acquainted with the information designated as a trade secret, in particular the company’s members, employees, members of the corporate governance bodies and other persons. Written designation is therefore only one example of reasonable conduct, it is up to the company to adopt a “programme for the protection of trade secrets”.

The draft bill distinguishes between lawful and unlawful acquisition, use and disclosure of a trade secret. For example, reverse engineering is listed among actions that constitute lawful acquisition of a trade secret, but only to the extent that the product will be made available to the public or come into legal possession of the acquirer. However, employers that might be interested in the know-how a new worker has carried over from a previous employer must be cautious: it may well happen that the “know-how” may contain trade secrets from a previous employer, in which case such information would be deemed to have been acquired or used unlawfully.

Under the draft bill, a trade secret holder whose trade secret has been unlawfully acquired, used or disclosed may request protection of rights against the infringer and compensation for loss under general rules on redress. The assessed damages will be equal to the agreed or customary compensation for lawful use of the trade secret; if such an amount cannot be determined, damages will be awarded under general rules on redress. The legislation also introduces punitive damages of the kind known from copyright law, with remuneration increased by up to 200% in the event the right has been infringed intentionally or by gross negligence.