A trade secret is defined as any confidential information kept secret, meaning that it has not been disclosed to third parties, that has commercial value and its subject to measures aiming at keeping it secret.  In a wider sense, trade secrets refer to any confidential business information which provides an enterprise with an economic benefit that translates into a competitive advantage.  Examples of trade secrets are: business methods, business relationships, pricing and cost information, customer or supplier lists, process know-how and technology, computer data bases and manufacturing methods, among others.   

There is no worldwide harmonization of trade secret protection. In the EU, trade secret protection is harmonized by Directive 2016/943. This Directive provides the basis for managing trade secrets, also in case of infringement and litigation.

Holding a trade secret is not always easy to prove.  Unlike patents, trade secrets may be legally protected for an unlimited period of time, are not applied for neither be registered, so no registration cost is required. This fact does not mean that holding a trade secret is less expensive, it can be expensive to maintain high confidentiality levels at all times, in particular make sure that the information is kept secret at all times, e.g. by the use of encryption mechanisms, confidentiality clauses in employees’ contracts, NDAs with third parties.

Protection of trade secrets from competitors starts by setting up special procedures for handling such secrets. First, the information needs to be properly identified and it can be further classified and marked as Critical, Maximum, Medium and Minimum, according to the level of confidentiality or the risk of disclosure. Secondly, the trade secret owner should determine who can have access to the information. The use of passwords, locks, badges as well as having a tracing system to identify the access and changes made over the confidential information should be considered.  These protection measures must be framed under a corporate policy that it must be communicated to the employees. This policy should define the way employees should manage confidential information in both, when working in the company facilities and when connecting remotely or through open wireless networks. Accompanying this policy, signing Non-Disclosure Agreements (NDAs) with employees help to decrease the risk of disclosure of confidential information by establishing contractual obligations, whose breach may be sanctioned by financial penalties contractually agreed, involving  judicial actions. Other agreements such as non-compete agreements specify a period of time during which a former employee is not allowed to work for a competitor or reveal certain information. Non-solicitation agreements are contracts in which an employee agrees not to solicit a company’s clients or customers, for his or her own benefit or for the benefit of a competitor, after leaving a company. Previous contracts are also important when working with contractors, clients or other business partners. It is worth mentioning that having up-to-date operating systems, anti-virus and anti-spyware software and performing regularly back up information stored is essential.

Trade secret protection does not prevent competitors from copying and using the same solutions if a trade secret is obtained in a lawful manner, for example, through reverse engineering. On the other hand, it is unlawful to acquire a trade secret by means of unauthorized access, appropriation, or copying of any documents, objects, materials, substances, or electronic files containing trade secrets without the consent of a trade secret holder. Such a breach can lead to court litigation and monetary compensation for the trade secret holder. A way of proving the trade secrets ownership is by having a notary seal on the document.


Source: European IP Helpdesk

Do you need help? Contact us!

8 + 15 =

Pin It on Pinterest

Share This