ENHANCEMENT OF PROTECTION OF TRADE SECRET IN THE CEE/SEE REGION
The value of trade secret is continuously increasing; however, the ability to enforce trade secret infringements seems to be rather insufficient. In order to combat differences in trade secret protection within the member states, the European Union enacted Trade Secret Directive (EU) 2016/943 (the "Directive") in 2016 which took effect on June 9, 2018. It provides major improvements of legal protection in practical terms for those entrepreneurs who have decided to keep their know-how secret. In particular, the Directive requires to implement provisions enabling judicial authorities to order the seizure or delivery up of goods suspected of trade secret infringement (Art 10 para 1 lit c) and to recall infringing goods from the market as a final measure (Art 12 para 2 lit a); both measures are of valuable practical benefit.
To date, within the CEE/SEE region, only Croatia and Slovakia have already implemented the Directive, whereby in most of the countries – Austria, Czech Republic, Poland, Romania, Serbia and Slovenia – only draft provisions to implement the Directive into national law exist. In some of the countries – Albania, Bosnia & Herzegovina, Bulgaria, Hungary and Ukraine – there are not even draft legislative measurements to adopt the national law to the new provisions of the Directive in place.
In the following, we would like to provide you with a brief overview on the current status of where in the CEE/SEE region the Directive has already been implemented or – at least – draft legal provisions for implementation are available:
The Directive shall be implemented within the framework of the Austrian Unfair Competition Act (Gesetz gegen den unlauteren Wettbewerb – "UWG"), namely in the §§ 26a - 26j UWG.
As Austrian laws have only provided a handful of regulations on the protection of trade secrets so far, the implementation of the Directive will bring major novelties for trade secret holders.
Except for minor amendments, the regulations of the Directive will be implemented directly into national law. The most essential change that comes with the implementation of the Directive is probably the legal definition of a trade secret in Art 2 para 1 of the Directive, since Austrian law did not provide such a definition so far. Furthermore, major novelties are the regulations concerning the protection of trade secrets during legal proceedings which shall also be implemented within the framework of the UWG.
Currently, the proposed draft is under review by interested groups with the possibility to submit their observations to the draft until July 27, 2018. Thereupon, the final version of the provisions to adopt the Austrian law can be expected by September.
Just to name a few, the most import provisions dealing with the protection of trade secrets under the new Austrian law are as follows: The Austrian law will provide trade secret holders with existing remedies as claims for cease-and-desist pursuant to § 14 UWG and claims for damages pursuant to § 16 UWG, but also trade secret holders with new remedies as claims for the destruction of infringing products and documents, which include or are based on the trade secret (new § 26g UWG), or are to receive injunctions against the unlawful acquisition, use or disclosure of a trade secret (new § 26i UWG).
The Directive has been implemented by the Act on protection of unpublished information with market value (the "Act").
The Act defines what is considered as trade secret, lays down rules on the protection against unauthorized acquisition, use and disclosure of trade secrets. The Act also defines the difference between lawful and unlawful acquisition, use and disclosure of trade secrets, introduces rules on the confidentiality of trade secrets during the court proceedings and provides the details on the civil protection in case of violations of the provisions of the Act.
The Act also provides for the seizure or delivery up of the suspected infringing goods (as a provisional measure, see Art 10 para 1 lit c) Directive) and for the recall of the infringing goods from the market (as a final measure, see Art 12 para 2 lit a) Directive).
The Directive shall be implemented by an amendment to the Act No. 221/2006 Coll., on the enforcement of industrial property rights (to be renamed as the Act on the enforcement of industrial property rights and trade secrets – the "Act") which already provides similar options as Art 10 para 1 lit c) and Art 12 para 2 lit a) of the Directive for holders of recognised industrial property rights. These options shall also become available for a protection of trade secrets.
According to the Czech legislator, there is no need to implement other provisions of the Directive than Articles 12, 13, and 14. However, one can possibly doubt such a conclusion. The Czech Civil Code already provides a definition of trade secret but it is associated with the enterprise; even though there is no such association within the definition of trade secret in the Directive. The Directive allows member states to enact far-reaching protection for trade secrets. However, narrowing the scope of the trade secret definition seems to be the opposite.
Furthermore, a failure to properly adopt the Directive (especially its Articles 3, 4, and 5) may result in the applicability of the current unfair competition rules when it comes to protection of trade secrets, unless a euro-conform interpretation of relevant statutory provisions takes place.
The Section 4 of the Act already provides options for possible actions in case of unlawful breach of protected rights such as the seizure or delivery up of goods suspected of trade secret infringements (Art 10 para 1 lit c) of the Directive), as well as the recall of infringing goods from the market as a final measure (Art 12 para 2 lit a) of the Directive). The amendment to the Act shall improve this in a way that trade secret is recognised as one of the protected rights.
In accordance with lit a) and lit b) of the Section 4 of the Act an entitled person is empowered to request a recall of the infringing goods from the market and a permanent removal or a destruction of such infringing goods. As to the interim measure, Czech law provides a general option to file for a preliminary injunction which is also available for the protection of trade secrets.
The Directive is to be implemented primarily by changes to the Act on Combating Unfair Competition (the "Act").
The proposed changes to the Act, which are still on-going, may significantly affect the scope of protected trade secrets and the basis of related claims.
Proposed changes to the Act provide a new definition of trade secret and also stipulate that it will no longer be permissible to obtain protected information without authorization. Under current law merely obtaining protected information is not actionable; some improper use or transfer is necessary. In practice, this means that entrepreneurs will be able to pursue claims against competitors infringing their interests at an earlier stage than before.
Additionally, the draft Act removes the statutory time limit of three years for when an employee is prohibited from disclosing, using and transferring trade secrets after termination of an employment relationship. Any implementation of time limits would be left to the agreement of the employer and employee.
The draft of the Act also introduces new remedies that will be available (e.g., publication of a judgment or information about its content and award of remuneration for the use of trade secrets in the future) in the event of a violation of trade secrets.
The Directive's provisions relating to the seizure (Art 10 para 1 lit c) and recall (Art 12 para 2 lit a) of infringing goods have not been directly implemented in the draft as similar remedies are already provided for under Polish law.
Romania has not yet implemented the Directive.
The draft law provides the court with the power to grant the cessation of industrial and/or commercial exploitation of the products resulting from the illicit apprehension of the trade secret or the destruction of such products. The interdiction is to be lifted when the protected information has become public.
The Directive has not yet been implemented. However, in 2011 the Serbian Parliament adopted the Act on Trade Secret (Official Gazette of RS No.72/2011) of which provisions are largely similar to the provisions of the Directive.
Pursuant to the Serbian Act on Trade Secret, a trade secret holder may file a lawsuit to court against any person who infringed his trade secret and in such civil law court proceedings (which are deemed urgent proceedings) can request, inter alia: (i) termination of all acts that may lead to the unlawful acquisition, use or disclosure of trade secret and prohibition of the unlawful acquisition, using or disclosing of information that represent a trade secret; (ii) prevention of trade, i.e. depriving and exclusion from trade, alteration or destruction of all objects containing data that represent trade secret, if such data, directly or indirectly, can be visible or can be transferred; (iii) compensation of damages, including the real damage and the lost profit, and if the infringement has been done intentionally, or by gross negligence, the plaintiff may, instead of compensation of material damage, claim up to threefold amount of the usual remuneration that would have been paid had the respective protected subject-matter been used lawfully; etc.
Apart from filing a lawsuit for trade secret infringement, a trade secret holder can request from the court to issue an interim measure of depriving or excluding from trade of all objects containing the trade secret or to issue a measure of prohibition of continuation of already initiated actions that infringe or might infringe the trade secret.
In order for the interim measure or securing of evidence to be ordered by the court, a party requesting such has to provide to court relevant evidence of probability that a damage can be caused due to the unlawful acquisition, use or disclosure of trade secret, and in case of requesting securing of evidence the requesting party must also prove that there is justifiable doubt that evidences shall be destroyed, or that it will be impossible to obtain such evidence later.
The Directive has been implemented by amendments to the Slovak Act No. 513/1991 Coll., Commercial Code, as amended ("Commercial Code").
The implementation has introduced new terminology in relation to the protection of trade secret, namely: (i) trade secret owner, (ii) trade secret violator (infringer), and (iii) goods violating trade secret (infringing goods). The Section 51 of the Commercial Code further clarifies the definition of an infringement of trade secrets and provides demonstrations of what does and what does not constitute an infringement of trade secret.
As the protection of trade secret requires a special concept and means of protection, the broader range of procedural measures has been stipulated in the Commercial Code, e.g. interim measures and corrective measures which consist of a set of obligations which may be placed upon the violators of trade secret, such as the seizure or delivery up of the suspected infringing goods, including imported goods, so as to prevent their entry into, or circulation on the market (Section 55b para (1) lit d) of the Commercial Code), or the recall of the infringing goods from the market (Section 55c para (2) lit b) of the Commercial Code). Another procedural measure of trade secret with an educational character is anchoring the possibilities, resp. the obligations to disclose the court's decision of breach of trade secret (Section 55d of the Commercial Code).
However, the obligation to disclose the court's decision of breach of trade secret is not automatic. The court may only impose this obligation to the violator on the basis of the petition of the owner of trade secret and only in justified cases, given the seriousness of breach of trade secret.
In the past, the protection of trade secret has been only provided through the legal remedies against unfair competition, however, they remain fully applicable.
The Directive will be implemented with the Act on Trade Secret (Zakon o poslovnih skrivnostih) (the "Act") that is currently undergoing the legislative process.
The draft of the Act provides (i) the definition of a trade secret, (ii) difference between lawful and unlawful retention of trade secret and (iii) measures for protection of trade secrets. In this regard, the Act provides that the court may issue an interim injunction ordering the seizure or delivery up of the suspected infringing goods (Art 10 para 1 lit c) of the Directive). Additionally, the Act foresees a corrective measure of recall of the infringing goods from the market (Art 12 para 2 lit a) of the Directive).
Austria: Georg Kresbach, Bernhard Schmidt
Croatia: Mario Vrdoljak, Luka Colic
Czech Republic: Katerina Kulhankova, Martin Pecinka
Poland: Monika Gaczkowska
Romania: Sorin Dumitru, Ligia Cecilia Popescu
Serbia: Iskra Lazic, Natasa Lalovic Maric
Slovakia: Dalibor Palaticky
Slovenia: Larisa Primozic, Klara Miletic
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