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- tradesecret.pdf (223 kB)
1. What are trade secrets?
By trade secrets we mean all secret information important for the functioning of a company. These are technical, technological and trade secrets (knowledge and experience of commercial and managerial character, e.g. lists of customers, information about contracts the entrepreneur has signed, company strategy or its financial situation) and manufacturing secrets (information about a particular technology used). For information to be deemed a trade secret, two conditions must be met: first, the information should be confidential, that is to say it cannot be publicly known; second, the trade secret holder must make reasonable efforts to ensure its confidentiality. Because there is no single, precise definition of a trade secret, a number of criteria have been presented in legal literature and case law that facilitate the definition of information as secret in practical situations. These criteria may be, for example, how much third parties know, how much the employee knows, means and measures used by the owner of the trade secret to keep the information secret, and how much the information is actually worth for the trade secret holder and its competitors.
2. Should the secrecy of information be absolute?
Information that is the subject of trade secrets should be confidential. This does not mean it they should be known only to the holder. Its confidential disclosure to employees or others bound to secrecy will not destroy the status of the trade secret. The secret information should be significant, that is to say it should have (actual or potential) market value for the entrepreneur.
3. Examples of information that can be trade secrets
The following information may be considered trade secrets:
- manufacturing technology;
- data compilations, e.g. lists of customers;
- cost and price information;
- computer programs;
- architectural plans.
4. How are trade secrets protected?
Trade secrets are not subject to registration. The holder of the trade secret does not need to apply to any official authority for protection in order to use the rights arising from the ‘entry into possession’ of confidential information. Granting protection of trade secrets is not dependent on the fulfilment of any formal requirements or procedures. Therefore, a trade secret can be protected for an unlimited period of time. As a rule, the protection exists as long as the condition of confidentiality exists. This kind of protection does not entail any substantial costs. The only costs a holder has to bear are the costs connected with the implementation of the safety and information protection policy, control, surveillance, and the adoption of measures against trade secret infringers.A trade secret holder can protect himself against unauthorised disclosure and use of the trade secret (e.g. against its use by a person who acquires it by theft, fraud, or breach of the confidentiality obligation).The conditions and scope of trade secret protection differ from country to country. Depending on the country, trade secrets are subject to the protection provided for in unfair competition laws (e.g. in Germany, Japan or Poland) or other specific provisions (like the provisions of the labour law, criminal law, civil law, invention law), as well as to rules developed in case law having to do with secret information protection.
5. What steps should the holder of a trade secret take in order to protect its confidentiality?
Since information which constitutes trade secrets is helpful in bringing about market success, the entrepreneur should take steps to prevent it from being accessed by unauthorised persons. A common method used to protect it is the signing of agreements with contractors or licensees obliging them to keep the information confidential, as well as agreements signed with employees under which they have a duty not to disclose the confidential information both during the term of their employment and after its termination, and also obliging them not to use it for competition purposes (e.g. with a view of running one’s own competitive business). What is more, in order to restrict access to the information, technical means of protection can also be applied (such as monitoring or restricted access to computer-stored data). Protection of trade secrets can also be achieved by limiting access to the archives or other rooms where confidential papers are stored.
6. How should relations between the entrepreneur and his employees be set up?
Trade secrets are most often violated by employees. Therefore, the entrepreneur (employer) should apply the safety and secret protection policy by informing the employees of the obligation to guard the secrecy of the information, the necessity to return confidential documents after the employment terminates, the liabilities for the breach of secrecy, etc. To protect trade secrets, the entrepreneur can sign special confidentiality agreements with the employees in which he should set the detailed limits of time and space as to the secrecy of the information (especially regarding the period of time following the termination of employment). Such agreements, however, are not always necessary because in many countries the law governing employee-employer relations requires the employee to maintain the confidentiality agreement. Nevertheless a well-prepared confidentiality agreement is a very useful and effective technique for dealing with employee misconduct and facilitating the burden of proof in case of litigation.
7. In what situations is it advisable to take steps to protect trade secrets?
It is advisable to take steps to protect trade secrets whenever:
- the trade secret is not protected by any other intellectual property right,
- it is probable that the confidentiality of information will be observed for a considerable period of time,
- the trade secret holder is not going to commercialise the trade secrets while using them.
[For more detailed information please consult the extended version of this document]