This article is the second in a series outlining the practical aspects of trade secrets legislation and procedure in Saudi Arabia.(1) In particular, this article sets out the key provisions under the Regulations for the Protection of Confidential Commercial Information (the Regulations) and the Labour Law.
Scope of protection
Any information shall be deemed a commercial secret if:
- it is usually not known in its final form or in any of its minute constituents, or if it is not usually easily obtainable by those engaged in this type of business;
- it is of commercial value due to its confidentiality; and
- the rightful owner has taken reasonable measures to maintain its confidentiality under its current circumstances.
When is information deemed to be a secret?
In order to receive protection under the Regulations, the rightful owner must show that:
- it is entitled to disclose, use or retain the commercial secret;
- the information is in their possession and has not been disclosed; and
- they have taken necessary measures to prevent any person from using the commercial secret.
What conduct is deemed to be a breach of confidential information?
Obtaining, using or disclosing any commercial secret in a way that is inconsistent with honest commercial practices and without the consent of the rightful owner is considered to be a breach of confidential information. Examples include:
- a breach of a contract relating to commercial secrets;
- a breach of confidentiality of entrusted information or the encouragement of such a breach; and
- a person obtaining a commercial secret from a third party if such a person knows or is capable of knowing that the third party has obtained the commercial secret as a result of a violation of honest commercial practices.
Reverse engineering is not considered a violation of honest commercial practices.
Undisclosed information
Article 4 of the Regulations states that any commercial secrets provided to competent authorities (eg, for the purpose of marketing authorisations) must be protected against disclosure and unfair commercial use.
Marketing authorisations
Article 5 of the Regulations states that information about secret tests or any data obtained as a result of substantial efforts must be shared with the official competent authority as a precondition for the approval of the marketing of drugs or chemical agricultural products in which new chemical substances are used. Such information must be kept secret for a period of five years from the date of obtaining the approval.
While not expressly mentioned in the Regulations, the above period will be shortened if the information becomes public through other means. The competent authority is the Saudi Food and Drug Authority (SFDA).
Emergency access to undisclosed information
The SFDA may permit third parties to use the undisclosed data of secret tests submitted by another applicant if this is required by a pressing necessity determined by the competent authority to protect the public.
Penalties for disclosure
Article 8 of the Regulations provides that any person harmed as a result of a violation of the provisions of the Regulations may file a lawsuit before the competent judicial authority to claim compensation for the damages sustained. The damages or nature of the penalties are not discussed in the Regulations.
Shari'ah law
Article 7 of the Regulations states that commercial secrets which are inconsistent with Islamic (Shari'ah) laws, public order and public morality will not be protected. Therefore, companies dealing in products which contravene Shari'ah law (eg, alcohol or pork products) will not be able to rely on the Regulations if confidential information relating to their products is disclosed.
Article 83(1) of the Labour Law protects employers by allowing for a non-compete order relating to the employer's customer information. If the work assigned to the worker enables them to know the employer's customers, the employer may, in order to protect its legitimate interests, require the worker, after the expiry of the contract, not to compete with it. For the validity of this condition, it shall be limited, in terms of duration, location and type of work, and the period thereof shall not exceed two years from the date of termination of the relationship between both parties.
Article 83(2) of the Labour Law protects employers by allowing for a non-compete order, relating to the employer's secret information. If the work assigned to the worker enables them to know the employer's business secrets, the employer may, in order to protect its legitimate interests, require the worker, after the expiry of the contract, not to disclose its secrets. For the validity of this condition, it shall be limited, in terms of duration, location and type of work.
Both sections require a specified time period to keep the information secret. As a result, the employer will eventually be exposed without suitable recourse.
For further information on this topic please contact Richard Gaugeler at Bird & Bird by telephone (+44 20 7415 6000) or email ([email protected]). The Bird & Bird website can be accessed at www.twobirds.com.
Endnotes
(1) For the first article in this series, see "Practical guide to trade secrets in Saudi Arabia: relevant legislation". For the second article in a similar series on trade secret law in the United Arab Emirates, see "Practical guide to trade secrets in the United Arab Emirates: key provisions". For the first article in a similar series on patents in Saudi Arabia, see "Practical guide to patents in Saudi Arabia: relevant legislation".