The new Trade Secrets Act entered into force in May 2019. This article examines what this means for employment relationships with regard to copyright, patents and trade secrets.
Under Maltese law, the following are eligible for copyright protection:
- artistic works;
- audiovisual works;
- literary works; and
- musical works.
Copyright protects such works by ensuring that third parties cannot use them.
Patents can be placed on inventions which:
- are new;
- involve an inventive step; and
- are susceptible of industrial applications.
The law specifically excludes the following from being patentable:
- scientific theories;
- mathematical methods;
- aesthetic creations;
- schemes; and
- certain other items.
In contrast, a trade secret is information that:
- is not generally known or easily accessible;
- has a commercial value; and
- has been reasonably kept secret.
The aim of the law is to set out rules to protect against the unlawful acquisition, use and disclosure of trade secrets.
Pursuant to the Copyright Act, copyright initially vests in the copyrighted work's author in Malta.(1) The only exceptions provided by the law concern computer programs and databases made in the course of the author's employment. Thus, both employers and employees must enter into specific agreements should they wish to contract out of these rights arising from the law.
'Patents' are defined under Maltese legislation as being the exclusive right granted by a comptroller in relation to their inventions. The law provides limits on what can and cannot be patented.(2) The law states that any inventions made in the execution of a commission or a contract of employment will belong to the person that commissioned the work or the employer. The law also allows for this provision to be contracted out of. Thus, the law tries to strike a balance between the employer and employee by stating that such employee would have a right to equitable remuneration.
Trade secrets are controlled by what the law defines as the 'trade secret holder', which is either a company or an individual that has the right to manipulate or exploit the trade secret.(3) In most cases, where employees are concerned, the trade secret holder is the employer and the trade secret is being referred to, used or worked on during the day-to-day running of the business or as part of the employee's role. The new act has further clarified what would constitute a trade secret, but also clearly stipulates the obligations that the law does not create between employers and employees. Article 4(2) of the Trade Secrets Act states that the law does not:
- limit employees' use of information that does not constitute a trade secret;
- limit employees' use of experience and skills honestly acquired in the normal course of their employment; and
- impose any additional restrictions on employees in their employment contracts other than those imposed by law.
Employers should prepare written policies to inform employees of their rights and obligations. All policies should be made in writing and ideally follow a structured format that is made available to all employees in an accessible medium, such as a company handbook. The company handbook should explain what IP rights are and clarify that any creations belong to the company.
Where trade secrets are involved, employers should communicate what it considers to be a trade secret and ensure that employees which handle such information on a regular basis adhere to an additional level of secrecy. Employers must now decide what is and what is not a trade secret under the new terms of the law.
When entering into employment contracts, parties must ensure that any non-disclosure agreements attached to contracts, or confidentiality clauses within the employment agreements themselves, make sense and do not exceed an employer's legal rights. Inventions or creations thought up or fashioned as part of an employee's role should be governed by the employment contract to avoid any issues on termination.
The Maltese courts' and tribunals' interpretation of Article 4(2)(C) of the Trade Secrets Act will be interesting to follow over the upcoming years as it may directly affect employment contracts and non-disclosure agreements, and their power to restrict employee movement, especially in light of recent judgments (eg, MAIN Services) and fiduciary obligations.(4) The restriction of employee movement is a hot topic considering the size of Malta as a jurisdiction and employees' ability to move from one company to another without conflict.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.