ProtectionLegislation and legal definition
What legislation governs the protection of trade secrets in your jurisdiction? How is a ‘trade secret’ legally defined?
The protection of trade secrets is governed by the Commercial Torts Law, 5759-1999 (the Law) and the Commercial Torts Regulations (Remedies and Procedures), 5760-1999 (the Regulations). Chapter two of the Law, which refers specifically to the misappropriation of trade secrets, defines ‘trade secret’ as follows:
Commercial information, of every kind, which is not in the public domain, and is not easily discoverable by lawful means by others, the secrecy of which grants its owner a business advantage over its competitors, provided that its owner implements reasonable measures to keep the information secret.
An unofficial English translation of the Commercial Torts Law, 5759-1999, as published by WIPO Lex, is available here.Ownership
How is ownership of a trade secret established?
Section 5 (in Chapter two of the Law) defines the owner of a trade secret as ‘including someone who has legal possession of a trade secret’. This definition of ownership is broad, since it provides to any person legally holding a trade secret the right to sue in case of misappropriation of the trade secret.Secrecy
What criteria are used to establish the state of secrecy of a trade secret before misappropriation or disclosure?
The definition of ‘trade secret’ in the Law sets forth three criteria that must be met to establish the secrecy of the trade secret before misappropriation or disclosure:
- the information is not in the public domain, and is not easily discoverable by lawful means;
- the secrecy of the information provides its owner with a business advantage over its competitors; and
- the owner must implement reasonable measures to keep the information secret.
How is the commercial value of a trade secret established?
Since the trade secret is an intangible asset, its approximative value may be established through an assessment (LCA 6500/19 Dr Sharon Gavriel v Vered Eshed (published on 7 May 2020)). The value of the trade secret may be established by expert opinion, possibly on the basis of accounts provided by the defendant, and may take into consideration (where appropriate) the time the defendant saved had it developed the information independently.
Section 15 of the Law empowers the court to order the defendant to provide the plaintiff with accounts. According to section 1 of the Regulations, it is possible to request such accounts during interlocutory injunction proceedings.Protective measures
What criteria are used to determine whether the rights holder has adopted reasonable protective measures to prevent disclosure and misappropriation of trade secrets?
It has been ruled that the more the secret is susceptible to being disclosed, the greater are the measures required (CC 30839-02-11 S.P.G Moked Communications Ltd. v Elta Systems Ltd. (published on 18 September 2016)). Therefore, the owner of the secret is required to apply adequate means of protection in accordance with the level of risk that such information would be disclosed.
One of the common protective measures to take is the execution of non-disclosure agreements, since the absence of such agreement might lead to the conclusion that the owner of the secret did not take reasonable means to keep its information secret (see eg, CC 30839-02-11 S.P.G Moked Communications Ltd. v Elta Systems Ltd. (published on 18 September 2016); and CC 3180-03-10 Dr Rina Luvel v Fam Corner Ltd. (published on 20 May 2013)). The registration of a customer database with the Privacy Protection Authority, which imposes duties on the database owner to keep the database safe from third parties, may be deemed as a protective measure (CA 34442-03-20 Strauss Water Ltd. v Netanel Shmuel Malka (published on 4 February 2022) – currently under appeal).Best practices
What best practices and internal policies should rights holders consider to ensure maximum protection of their trade secrets?
The best practices and internal policies a rights holder should consider are as follows:
- signing of confidentiality agreements with third parties receiving access to the trade secrets;
- restricting access to the trade secrets by physical means (eg, having the relevant documents kept in locked closets or rooms) or by technological means (such as passwords);
- giving access to the trade secrets only on the basis of need so as to allow persons to perform their duty;
- documenting the trade secrets – on one hand, documenting the trade secret reveals it, but on the other hand, such documentation actually defines the information that cannot be disclosed;
- mentioning on the documents containing the trade secrets that they are secret; and
- keeping a list of persons who receive access to the documentation detailing the trade secret and having them sign a document declaring that they received access to the trade secret. Such documents can then serve as evidence that a trade secret was disclosed to a specific person.