Trade secrets have a better protection

The law of 30 July 2018 on the protection of trade secrets, recently published in the Belgian Official Gazette, implements the European Directive 2016/943 on the protection of undisclosed know-how and business information.

The aim of the 2016/943 Directive is to achieve harmonisation across the EU on the protection of trade secrets and to provide Member States with a consistent level of civil measures that can be applied in cases where a trade secret has been unlawfully obtained, used or disclosed. You were informed of this matter in an earlier contributions on our website.

The provisions of the new law are included in Book XI of the Code of Economic Law, and immediately went into effect. 

1. The term "trade secret" now has a legal framework

The law of 30 July 2018 introduces a new concept: the "trade secret".

It is not always possible or eligible to protect trade secrets by means of an intellectual property right

According to the legislator, however, it is not the intention of the law to create a new intellectual property right. More specifically, the practical benefit of this law is mainly to provide protection when a plan, secret or idea falls outside the scope of existing intellectual property rights (patents, trademarks, drawings, models,...). After all, it is not always possible or eligible to protect trade secrets by means of an intellectual property right.

The new law hereby hopes to contribute to further innovation and scientific developments, and develops a framework for protected data exchange between parties.

2. Definition of the term "trade secret"

The definition of a trade secret is fully taken over from the European Directive. Hence, according to the Directive and the law, certain information is classified as "trade secret" if the information meets each of the following three conditions:

• the information must be secret.
  
  Information is secret in the sense that, in its entirety or in the correct composition and arrangement of its constituents, it is not generally known or easily accessible to people within the circles who usually deal with this type of information.
  
  
• the information must have a commercial value, thanks to its secrecy.
  
  To meet this condition, a potential commercial value will also be deemed as sufficient. The information must be considered to have a commercial value when the unlawful acquisition, use or disclosure thereof could be detrimental to the interests of the company, because, for example, its technical and scientific potential, the company’s financial interests or competitiveness are compromised.
  
  Everyday information, which is generally known by people within the same sector, is not covered by the standard "information with commercial value".
  
  
• the person legally in possession of the information must have taken reasonable security measures to maintain its secrecy.
  
  This could include confidentiality clauses in contracts with employees, but also physical or electronic barriers in order to keep the information secret. 

3. In which cases a trade secret is considered to have been obtained lawfully or unlawfully ? 

The acquisition of a trade secret is considered lawful when it is obtained:

• through an independent discovery or independent design;
• by observing, researching, disassembling or testing a product or object that is made available to the public or that is lawfully in the possession of the person who obtains the information and who is not bound by a valid obligation to limit the acquisition of the trade secret;
• by exercising the right of employees or employee representatives to information and consultation in accordance with European Union law, national law and national practices;
• through any other practice which, in the circumstances, is in line with fair trade practices.

In general, a trade secret is considered lawful when required or permitted by EU or national law.

The law refers to an unlawful acquisition of trade secrets if the acquisition took place through unauthorized access or the unauthorized taking or copying of documents, objects, materials, substances or electronic files containing the trade secret or in the case of other conduct that is contrary to fair trade practices.

There is an unlawful use or disclosure of a trade secret when this is done without permission of the trade secret holder and when one of the following conditions is fulfilled:

• the trade secret has been obtained unlawfully,
• there has been a breach of a confidentiality agreement or other obligation to not disclose the trade secret;
• there is a breach of a contractual or other obligation to restrict the use of the business secret.

The new law lists a number of exceptions, in which case the acquisition and disclosure of trade secrets is permitted.

For example, the acquisition and disclosure of trade secrets is allowed for whistleblowers and investigative journalists, insofar as immediately relevant misconduct, injustice or relevant illegal activities are brought to light and it can be proven that the purpose of the act was protecting the general public interest. The acquisition or disclosure of trade secrets in order to protect a legally recognized legitimate interest is also permitted.

4. Legal measures in case of violation of trade secrets

The main novelty introduced by the law is the possibility for the trade secret holder to take legal action if a trade secret is unlawfully obtained, used or disclosed.      

Seizure on grounds of forgery, which is a legal remedy in the context of intellectual property rights, will not be possible in this matter.

The law provides nevertheless an arsenal of measures that the trade secret holder can demand in court if unlawful acquisition, use or disclosure of a trade secret is established.

For example, the court may first order an injunction of any unlawful acquisition, use or disclosure of trade secrets, or a prohibition on the acquisition, use or disclosure of the trade secret. The court may also take measures that may contribute to the cessation of unlawful use or disclosure of the trade secret or its consequences.

A production ban, or even a compulsory issue of the infringing goods to a charitable organisation, is also possible.

Furthermore, the judge can order that any infringing goods are withdrawn from the market or that documents, materials, substances or electronic files that were illegally acquired or made public are destroyed.       
All this can be ordered by imposing a periodic penalty payment, whereby the offender owes a sum of money per further infringement on a court-ordered prohibition.

The new law also gives the holder of a trade secret the right to claim compensation from the infringer. According to the legislator, this option builds on the general liability law of Article 1382 of the Belgian Civil Code. It is therefore, as in civil liability law, required that the trade secret holder proves that he has suffered damage, and that the fault of the infringer is the cause of this damage.
The compensation amount that can be claimed by law depends on whether the infringer knew or ought to know the unlawful nature of his actions. If this is the case, all damage, such as lost profits, moral damage, etc. can be compensated. If the infringer could not have known that he had committed an irregular act in connection with a trade secret, the compensation cannot exceed the amount of royalties or fees that would have been due if the person had requested permission to use the relevant trade secret.     

5. Confidentiality obligation during an ongoing procedure

Another important aspect is the introduction of an obligation to preserve the confidentiality of trade secrets or alleged trade secrets during and after the termination of a procedure before the court. 

This will be necessary, for example, when one of the parties is obliged to submit documents containing trade secrets.

A confidentiality obligation applies not only during the procedure but also after the procedure was terminated, and can be enforced by the judge through a series of measures. Parties that do not respect this confidentiality obligation can be sentenced to a fine and / or to pay compensation.           

6. Competent court

The law stipulates that all claims for the unlawful acquisition, use or disclosure of trade secrets fall under the jurisdiction of the Commercial Court, even if the parties are not companies.

This specific jurisdiction allows these courts to develop a certain specialisation in this matter without compromising the specific jurisdiction of the labour courts.       

7. Limitation period

Finally, the new law provides for a limitation period of 5 years, starting from the day following the day on which the claimant becomes aware of (1) the conduct and the fact that the trade secret is unlawfully obtained, used or disclosed; and of (2) the identity of the infringer.

In any case, a maximum period of 20 years applies from the day following that on which the unlawful acquisition, use or disclosure occurred.

8. Conclusion

The law offers companies more opportunities to protect their trade secrets without the need of them being covered by the intellectual property rights regime.

However, it remains advisable that companies take measures to take preventive action.

For example, it is possible for employers to include a non-compete clause and / or confidentiality agreement in the employment contracts. It is advisable to provide physical and virtual barriers preventing access to trade secrets

One can opt for a confidentiality agreement or non-disclosure agreement (NDA) with regard to parties with whom one cooperate or have trade relations.

It may also be useful to make a list of all confidential information and the persons who have access to it.

It goes without saying that we would be happy to assist you in these matters.