Attention! Trade secret

New technologies, innovation and developments are the key to competitiveness. In order to protect unpatented business secrets from misuse, the European Union has created a specific legal framework. In March 2019, the National Assembly passed a Law on the Protection of Trade Secrets, which is already in force. “Popov, Arnaudov & Partners” law firm explains the new provisions for protecting sensitive business information.

More effective protection

Trade secret is not a new concept in Bulgarian legislation at all. However, the new law seeks to provide additional, faster and more effective protection of trade secrets, which may also be related to certain intellectual property subjects - production know-how or future patent development. If, in any way, it becomes apparent that a trade secret violation would be committed, precautionary measures might be required, which would allow, for example, certain goods to be seized. It is envisioned how to protect the trade secret during the lawsuit itself by ensuring a fair trial for both sides, says lawyer Hristo Koparanov, head of competition and consumer law practice in the law firm.

Competition

A trade secret may be any production or technology information that meets several criteria: Not to be publicly known, to have commercial value due to the fact that someone else does not know how to do something, and precisely that to give it competitive advantage. To be a secret, specific measures must be taken to protect this information. In the real business race, two companies can work at the same time on developing a product which is known to be in great demand on the market. If one of the companies knows when and at what price the competitor starts the sales, it is possible for it to take preliminary measures to overtake the competition. A few days earlier, the company can release the product, which could be even worse or at a higher price, but being the first, it could gain a larger market share, thanks to the confidential information. Therefore, the marketing strategy might also be a subject of trade secret.

Territory

If no measures are taken to protect the secret, it will not be able to benefit from the protection that the law provides. Law is for the ones who are alert, not for those who are sleeping, reminds lawyer Hristo Koparanov. Therefore, according to him, it is important to know what information is of commercial interest and what we would gain if only we have this legal monopoly on it. His main recommendation is to analyse what know-how to protect and how to do it in the most reliable way. Among the legal measures are the clauses restricting the use of trade secrets, as well as the non-disclosure clause. It is unacceptable for a company to claim that all of its information is a trade secret. One of the major advantages of the non-disclosure and non-use clauses is that they may provision for damages and compensation for any harm suffered due to unauthorized handling of the secret. However, it is extremely difficult to specify the amount of the damage, because no one can certainly foresee the precise market developments in case the secret has been preserved. Non-disclosure clauses are considered to be related to non-compete clauses but are quite different. A clause that an employee will never ever operate in a business, competitive to his former employer, is invalid, even if it is included in the contract. Such a ban may apply to certain products for a certain time and for a particular territory. If the employee leaves, he can compete with his former employer, but without using any know-how. Otherwise, one could be sanctioned.

Information security

There are many practical measures that need to be taken to protect trade secrets. In the digital era, a business should not neglect information security and information systems management, advises Alexander Stamenov, CEO of CLICO Bulgaria. He warns that serious consideration should be given to where and how we store our trade secrets and what we do to protect them. An important question is how we provide access to them. When sending confidential data, it must be encrypted and password protected. Employees are an inseparable part of the measures for trade secret protection and they must be trained accordingly.

Slippery slope

When an industry know-how is created for someone, the rights go to the one who paid it for it. If an employee has created a valuable development for the company, but has been remunerated for doing so, he is not the owner of the know-how in question. If such an employee leaves, he must be careful, although it is often difficult to prove that he is using precisely his former employer's know-how, lawyer Koparanov recommends. There are concerns that some of the opportunities that the new law creates could be used in bad faith - for example, precautionary measures. It can be argued that someone is using the trade secret in bad faith to block his business. Then the victim could get compensation for it, but it would hardly cover the damages and missed benefits that he would have sustained. Other concerns are that the law can also serve to limit media freedom to conduct journalistic investigations, that it will not prevent the well-known practices of classifying information on key public interest transactions as a trade secret and key elements of contracts not being disclosed.

Created with good intentions, the law can also be used for less-than-pure purposes. The road of trade secrets is a slippery slope.