Enforcement proceedings

Causes of action

What causes of action are available and commonly asserted against misappropriation and unauthorised disclosure of trade secrets in your jurisdiction?

The causes of action generally asserted against misappropriation include the tort of misappropriation of trade secret, as well as breach of contract (mostly breach of employment contract, non-disclosure agreements), breach of fiduciary obligation, unjust enrichment and breach of duty to act in good faith.

Court jurisdiction

What criteria are used to establish the courts’ jurisdiction over trade secret disputes? Are there any specialist courts for the resolution of trade secret disputes?

There are no special courts for the resolution of trade secret disputes. Trade secret disputes can be brought before various courts, depending on the nature of the dispute and the amount of the remedies requested by the rights holder. In general, civil matters in which the amount of the remedies exceeds 2.5 million shekels are held at district courts, while disputes up to that amount are brought before magistrate courts. However, should the dispute be between an employer and its employee, the jurisdiction is with the Labour Court, regardless of the amount.

Procedural considerations

What is the typical format and timetable of proceedings?

Since trade secret disputes are civil matters, these are conducted in accordance with the Civil Procedure Regulations, 5779-2018 and include the following stages:

  1. Filing of statements of claim by the parties – this stage includes submission of the statement of claims by the rights holder, which is followed (within 60 days) by the defendant’s statement of defence. The rights holder is then entitled (but not obliged) to file (within 14 days) a statement in reply.
  2. Preliminary discussion – in this stage, the parties are required to hold meetings to attempt to reach an agreement or reduce the scope of the dispute.
  3. Preliminary proceedings – this stage includes discovery and written interrogatories.
  4. Pre-trial – the pre-trial is mainly intended to delineate the issues in dispute, settlement discussions, and such.
  5. Filing of evidence – the evidence shall be filed in the form of affidavits and expert opinions. The rights holder submits its evidence, followed by the defendant’s evidence. The rights holder’s evidence in rebuttal can be filed upon the court’s permission.
  6. Trial – this stage includes cross-examinations of the affiants and experts whose affidavits or opinions were filed as evidence.
  7. Summations – the summations are to be oral by default, but the court may order to have them in writing.

 

Such kind of proceedings might take about three years until a final decision is issued and sometimes more, depending inter alia on interim proceedings.

Limitation periods

What limitation periods apply for trade secret misappropriation claims?

According to the Statute of Limitations Law, 5718-1958, the limitation period for filing a lawsuit for trade secret misappropriation is seven years, beginning on the day on which the cause of action arose. However, if the facts constituting the trade secret misappropriation were not known to the rights holder, for reasons that were not dependent on him and that even with reasonable care the rights holder could not have prevented them, the limitation period shall begin on the day on which the rights holder became aware of these facts.

Secondary liability

To what extent can someone be liable for inducing or contributing to trade secret misappropriation? Can multiple parties be joined as defendants in the same suit?

According to the Commercial Torts Law, 5759-1999 (the Law), the taking, transferring or receiving of a secret in circumstances where the person receiving it knows, or it is self-evident, that the transfer or use of the trade secret is made without the consent of its owner, amounts to infringement. Hence all said actions constitute primary liability.

Moreover, since the Torts Ordinance applies on the chapter of the Law referring to trade secret misappropriation, liability can also be imposed on persons who collaborate with the infringer by facilitating the infringement or inducing the infringement, such as joint tortfeasors or aiders and abetters (see section 11 of the Law and CA 817/77 Beecham Group Ltd v Bristol-Myers Co., 33 (3) P.D. 757 [1979], where a foreign manufacturer was joined to a patent infringement action against its local distributor).

Obtaining and preserving evidence

What mechanisms are available to obtain and preserve evidence from defendants and third parties in trade secret litigation?

Section 16 of the Law empowers the court to appoint an official receiver when it was proved (by affidavit or another testimony) that there is a serious suspicion that a wrong is committed. Such official receiver may be authorised to enter the premises of the defendant or those of a third party to search and seize goods produced while the wrong is committed or that were used for the purpose of committing a wrong, or to seize evidence where there is a reasonable suspicion of concealment of evidence.

In addition, a rights holder may consider requesting an interim injunction.

Expert evidence

What rules and standards govern the admissibility of expert evidence?

The Civil Procedure Regulations, 5779-2018 and the Evidence Ordinance [New Version], 5731-1971, both referring specifically to expert evidence, govern the admissibility of expert evidence.

Confidentiality during litigation

What measures may the court and litigants take to protect trade secrets during litigation?

The measures to be taken to protect trade secrets during litigation are regulated in the framework of section 23 of the Law.

  1. Section 23(a) empowers courts to order that a trade secret (of a litigant or even a third party) will not be published.
  2. Section 23(b) empowers courts to provide protective orders regarding the manner in which evidence containing trade secrets shall be submitted.
  3. If the court is of the opinion that orders under sections 23(a) and 23(b) would not be sufficient to protect the trade secret, it may issue an order relating to the non-disclosure of evidence containing trade secrets, provided that the interest in non-disclosure of the evidence is greater than the need to disclose it for the purposes of doing justice (section 23(c)).
Defences

What defences are available and commonly asserted against trade secret misappropriation claims?

The defendant may claim in defence that the information alleged to be a trade secret does not meet the requirements under section 5 of the Law (eg, that the information is in the public domain, that it is easily discoverable by lawful means or that it does not provide its owner a business advantage over its competitors).

In addition, the defendant may claim that his actions do not constitute misappropriation under the Law (eg, the action of reverse engineering is excluded from the actions deemed as misappropriation – section 6(c) of the Law).

Lastly, the defendant may claim that there is no liability for other reasons, for example, that the know-how deemed as trade secret became part of his general professional skills – section 7(a)(1) of the Law.

Appeal

What avenues of appeal are available following an adverse decision in a civil suit? Is new evidence allowed at the appeal stage?

In trade secret misappropriation litigation, as in other civil proceedings, judgments of a magistral court granting final relief can be appealed (as of right) to a district court, and such district court’s judgment can then be appealed by leave of the Supreme Court. Judgments of a district court granting final relief can be appealed (as of right) to the Supreme Court.

In general, new evidence is not allowed at the appeal stage since the review of the appellate court is limited to legal determinations and flawed conclusions. However, the appellate court may authorise the submission of new evidence in exceptional cases – when such new evidence may affect the outcome of the appeal and that one of the following occurs: (1) it was not possible to locate the evidence with reasonable diligence and submit it to the first instance on an appropriate date; or (2) the submission of evidence is necessary to prevent miscarriage of justice (section 144 of the Civil Procedure Regulations, 5779-2018).

Costs

What is the typical cost range of a trade secret misappropriation suit? Can a successful litigant recover costs and attorneys’ fees?

As with other civil matters, the cost range of a trade secret misappropriation suit depends on, among other factors, the complexity of the proceedings, the number of affiants or experts, and whether any interim petitions are submitted. Attorneys’ fees and costs can be awarded to the successful party at the discretion of the court. When awarding costs, the court will have regard to the conduct of the parties. In addition, the courts have discretion to award costs against any party that unduly protracted the proceedings by making spurious claims.

Litigation funding

What litigation funding options are available?

Litigation funding options such as contingency fees are available. Furthermore, the doctrine of champerty, although acknowledged by courts, is interpreted in a narrow manner, and thus other sources of funding may be used. Case law on this issue is scarce (CA 2871/00 M Daoud Churi v Mercantile Discount bank (2003)).

Alternative dispute resolution

What alternative dispute resolution (ADR) methods are available to resolve trade secret disputes?

The parties may agree to have the dispute handled by a mediator or by an arbitrator. Such options should be considered since the mediation/arbitration proceedings remain confidential.

Enforcement risks

To what extent may enforcement of trade secret rights expose the rights holder to liabilities such as unfair competition?

Trade secrets are statutory rights and therefore their enforcement does not constitute unfair competition. In some cases, where the interest of protecting the owner’s trade secret conflicts with an interest of securing a person right for employment, then a trade secret may be considered as know-how, which is part of a professional skill (section 7(a)(1) of the Law).

If the trade secret owner knowingly files an overly broad claim that encompasses information that goes beyond the trade secret, this might be considered an act of unfair competition.

Remedies

Injunctions

Under what circumstances can a rights holder obtain a preliminary or final injunction in a civil suit for trade secret misappropriation?

To obtain a preliminary injunction, the rights holder must show the following (section 95 of the Civil Procedure Regulations, 5779-2018): (1) prima facie evidence that the trade secret was misappropriated; (2) necessity of the preliminary injunction for achieving the purpose of the lawsuit; and (3) the balance of convenience is in favour of the rights holder – namely, the defendant who is alleged to have misappropriated the trade secret will be less harmed should the injunction be granted than the rights holder will be harmed should the injunction be not granted; there is no other remedy that harms the defendant less and achieves the purpose of the injunction; good faith of the rights holder, including the filing of the motion without delay, and incalculable damage.

As to a final injunction, the rights holder must show that the balance of convenience is in his favour (the third condition detailed above) (except the filing without delay, which is relevant to preliminary injunctions).

Damages

What rules and criteria govern the award and calculation of damages for trade secret misappropriation?

The damages may be based on the calculation of the profits deprived from the rights holder following the misappropriation of the trade secret, namely the economic benefits it would have enjoyed had it used the trade secret in lieu of the defendant, or alternatively by calculating the profits made by the defendant while using the trade secret according to the principles of unjust enrichment (CA 3853/11 Ronit Nation Flags Ltd. v Roni Stein (13 May 2013)). Where there is difficulty in proving actual damages, the rights holder may request statutory compensation. If the damages are based on the calculation of the profits deprived from the rights holder, the rights holder must show a causality between the misappropriation of the trade secret and the real and conceivable losses incurred by the rights holder.

Other civil remedies

Are any other civil remedies available for wilful trade secret misappropriation?

Under general principles of tort law, courts may award punitive damages in appropriate cases also where no explicit provisions permitting it are provided in the statute (High Court 2651/09 Association for Civil Rights in Israel v Minister of Interior (15 June 2011)).

In addition, section 13 of the Commercial Torts Law, 5759-1999 (the Law) empowers the court to award statutory damages up to 100,000 shekels for every tort without proof of actual damages. Such statutory damages may bear a punitive aspect since in determining the sum of the statutory damages to be awarded, the court may consider, inter alia, the degree of guilt of the defendant (CA 3853/11 Ronit Nation Flags Ltd. v Roni Stein (13 May 2013)). Thus, if the court is of the opinion that the misappropriation was done wilfully, it may order (at the rights holder’s request) high statutory damages as a warning measure.

Criminal remedies

What criminal remedies are available for trade secret misappropriation? Under what circumstances will they be awarded, and what procedural issues should be considered when seeking them?

Divulging a professional secret is a criminal offence under section 496 of the Penal Code, 1977-5737 (the Code):

 

If a person discloses secret information which he was given because of his profession or occupation – other than an official secret within its meaning in Article Five of Chapter Seven, and he was not required to disclose it by virtue of an enactment, then he is liable to six months imprisonment.

 

Violations of criminal offences are generally prosecuted by the state. However, according to the Criminal Procedure Law, 1982-5742 a person may file a private criminal complaint against another based on certain listed offences, including against persons who divulged professional secrets (section 496 of the Code PA 387/96 Har-Tuv v Yesh-Line Ltd. (21 January 1996)).

Since the enactment of the Law in 1999, it appears that the offence under section 496 of the Code is hardly in use.

Administrative remedies

What administrative remedies are available for trade secret misappropriation? Under what circumstances will they be awarded, and what procedural issues should be considered when seeking them?

Not available.