From an employment law perspective, an employer’s possibility to protect its most valuable assets – trade secrets – is often of uttermost importance. The increased digitalization within today’s working life offers a variety of benefits for knowledge-driven entrepreneurship, but has also brought new challenges for employers when trying to keep information and competitive advantage secret. Today, highly valuable trade secrets can easily be downloaded and spread by employees and others, potentially causing great damage for an employer’s business.
A government bill (prop. 2017/18:200, En ny lag om företagshemligheter) has most recently been presented by the Swedish government, in which a new act on trade secrets is proposed. The act is suggested to replace the current Act (1990:409) on the protection of trade secrets (Swe. lagen (1990:409) om skydd för företagshemligheter), in the following referred to as the “PTS”. The new act, in the following referred to as the “Suggested New PTS”, is proposed to enter into force on 1 July 2018.
The Suggested New PTS aims at implementing the EU Directive 2016/943 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure. The EU Directive was adopted on 8 June 2016, with the primary purpose to harmonise the different EU member states’ protection in civil law against unlawful acquisition, use and disclosure of trade secrets.
The current PTS contains provisions about responsibility and sanctions for unauthorized acquisition, use or disclosure of trade secrets. Trade secrets, defined widely within the PTS, include information concerning the business or industrial relations of a person conducting business or industrial activities; information which is concealed by such person and in relation to which disclosure is intended to result in a competitive disadvantage.
The Suggested New PTS in outline
To a large extent, the provisions in the current PTS respond to the requirements of the EU directive. Consequently, the essence of the PTS will remain unchanged within the Suggested New PTS. Nevertheless, the government bill suggests a number of alterations and supplements, which together forms the Suggested New PTS.
The essence of a “trade secret”
A new legal definition of the notion “trade secret” is proposed to be included in the Suggested New PTS, clarifying the necessary components of a trade secret. To a large extent, the legal definition is intended to elucidate the prevalent meaning of the notion trade secret. A novelty is that research institutions are explicitly mentioned as potential holders of trade secrets. It is also explicitly declared that employees’ personal experience and skills falls outside the scope of the Suggested New PTS, which entails that such personal experience and skills can never be regarded as a trade secret.
Infringements of trade secrets within one joint provision
The Suggested New PTS proposes that the term “infringement of trade secrets” is clarified in one joint provision and that the scope for various forms of infringements is extended. The proposal entails that additional infringements will be deemed unauthorized, inter alia by including import, export and storage of infringing goods with the purpose of exploiting these.
An infringement of trade secrets should not require intent or negligence by the offender. It will instead be sufficient that the infringement have occurred without the rightful holder’s consent. It should nevertheless, as under the current PTS, be stated that protection under the Suggested New PTS only applies in relation to unauthorized infringements.
The provisions regarding damages in cases of unauthorized infringements of trade secrets are proposed to be extended within the Suggested New PTS. New provisions on liability for damages for anyone who negligently acquires a trade secret as well as for anyone who makes use of a trade secret that a party or a party’s representative has been given access to due to a court decision are proposed.
Confidentiality during court proceedings
A new and important addition in the Suggested New PTS concerns the protection of trade secrets during and after court proceedings according to the act. Confidentiality is proposed to apply without limitation in time, although not after it has been finally decided that the information in question does not constitute a trade secret.
Measures against attacks – Publication of judicial decisions
The Suggested New PTS proposes that a court shall be permitted to decide that a person who has committed or participated in an infringement of trade secrets shall pay for the appropriate measures to disseminate information about the judgment, if deemed reasonable. This shall also apply in cases regarding impending infringements.
The minimum penalty for grave cases of industrial espionage is proposed to be increased to six months’ imprisonment.
Reflections from an employment law perspective
Employees are often provided with various information regarding the employer’s business; information which they have been permitted access to within their respective employment. This entails that actions by employees seldom will be defined as industrial espionage.
If an employee unauthorized utilizes or discloses the employer’s trade secrets, the employee could be liable to compensate the employer for the damage incurred. If the employment relationship has been terminated, a former employee can nonetheless only be liable to pay damages to the employer in a case of extraordinary reasons.
In many cases, an employer’s trade secrets also easily become part of the employees’ personal experience and skills; knowledge which is not protected under statutory provisions on protection of trade secrets.
If access to various types of information is allowed from the employer’s side, it is often difficult to protect the information by means of statutory provisions. In order to assure that trade secrets can be sufficiently protected, other measures are often required.
Such measure could, inter alia, involve the following;
- Limiting the number of employees with access to trade secrets;
- Implementing various forms of technical monitoring, supervisory and protection;
- Informing and educating employees about trade secrets, in order to prevent trade secrets from being revealed because of ignorance.
Supplementary agreements between an employer and an employee regarding confidentiality and – for certain categories of employees – non-competition, can also be valuable tools for an employer in order to better protect its business and competitive edge.