Trade Secrets Global Guide 2018
Contents 1. Purpose of this guide 3 2. China 4 3. Europe 10 a. France 12 b. Germany 15 c. Italy 18 d. Netherlands 21 e. Russia 24 f. Spain 28 g. UK 32 3. United States 35 4. Trade Secrets and Confidential Know-how 40
Global Trade Secrets Guide 2018 3 Preface Trade secrets theft is not a new issue: many businesses rely on highly confidential information and unique inventions to stand out in their markets. Despite this, many jurisdictions still do not have sufficient laws to help these businesses protect their position. It's not all doom and gloom: some lawmakers are responding and are amending and introducing increasingly robust rules to protect trade secret owners and their rights. As two of the most prominent markets, the US and Europe have taken a step forward and are implementing new laws that may make a difference. As trade secrets law tries to catch-up with increasingly sophisticated infringers, being proactive is essential and waiting to act until your ideas have been stolen is often too late: finding the culprit is becoming more difficult. Our guide We are delighted to introduce our guide to trade secrets legislation around the world. Knowing how, when and where to enforce your rights is essential and the decision is often complicated by the need to maintain confidentiality throughout proceedings. This publication assesses the current state of legal protection afforded to rights holders within each jurisdiction, as well as the changes that are taking place. Understanding the law and how it can help you can mitigate potential losses and save you vast amounts in legal fees and potential loss of revenue. We hope you find this guide useful as a reference point. Chris Mammen Co-head of Trade Secrets Practice, Partner, San Francisco T +1 415 374 2325 chris.mammen@hoganlovells.com Steven Levitan Co-head of Trade Secrets Practice, Partner, Silicon Valley T +1 650 463 4032 steve.levitan@hoganlovells.com
Hogan Lovells China The current landscape China is often seen as "the world's factory". Over the last decade Chinese companies have continued to use more sophisticated technology to produce high tech products, as China's manufacturing industry move up the value chain. With this emphasis on acquiring and developing high technology, trade secret misappropriation can be a major issue for businesses operating in China. Trade secrets are protected in China primarily under the Anti Unfair Competition Law ( AUCL ), the Criminal Law, various provisions under the Contract Law, Labor Law and Labor Contract Law, as well as the corresponding judicial interpretations and implementing regulations. Trade secrets can be both technical know-how and business information. Criminal, civil and administrative sanctions or liabilities can apply against acts of trade secret misappropriation.
Global Trade Secrets Guide 2018 5 What constitutes a trade secret? The definition of a trade secret under the Chinese law is consistent with Article 39.2 of the Agreement on Trade-Related Aspects of Intellectual Property Rights ( TRIPS Agreement ). Paragraph 3, Article 9 of the AUCL defines a trade secret as technical or business information possessing the following features: 1. Not known to the public; 2. Having commercial value; and 3. Protected by the rightful holder with corresponding confidentiality measures. Evidencing infringement The trade secret holder bears the evidential burden to identify the technical or business information asserted as trade secret, to show that such information meets the three pre-requisites mentioned above, and to prove the infringer s acts of misappropriation, which might include: 1. Acquiring the trade secret through unfair means; 2. Disclosing, using, or allowing a third party to use the trade secret so acquired; or 3. Disclosing, using, or allowing a third party to use the trade secret in violation of his or her obligation of confidentiality. If the infringing act is done by a third party who did not obtain the trade secret directly from the rights holder, the rights holder would also needs to prove that the third party has acquired, disclosed, or used such information knowingly or they should have known that it is a misappropriated trade secret. In civil proceedings, the plaintiff (trade secret holder) has the burden both to establish that the information is a trade secret and to prove infringement. There is no common-law system type of discovery/ disclosure in China (although discovery is available in civil proceedings in Hong Kong), but a Chinese civil court can order the preservation of evidence against the infringer, and it may collect evidence from a third-party. It could also issue a preliminary or interim injunction, provided that the plaintiff shows a high chance of success, it is a matter of urgency and there would be irreparable harm.
6 Hogan Lovells In criminal or administrative proceedings, the relevant enforcement authority would itself need to investigate the infringement but it usually requires the rights holder to provide evidence to establish an eligible trade secret and its ownership, and at least some preliminary evidence to prove existence of misappropriation of the trade secret. Civil remedies A civil court in China can typically provide the following remedies against trade secret misappropriation: 1. A declaration that the defendant s act has violated the plaintiff s trade secret, and an order for the defendant to cease such infringement, such as the destruction of copies of infringing documents, stopping use of the plaintiff s confidential technical knowhow or business information, etc.; 2. Damages and reasonable costs of enforcement. The damages amount should be equal to the amount of the rights holder s loss caused by the misappropriation, the infringer s illegal gain if the rights holder s loss is difficult to quantify, or if there is no evidence to show either of the above, statutory damages up to RMB three million (around US$470,000) to be determined by a court in its discretion taking into consideration various factors such as the value of trade secret, the seriousness of infringing act, etc. Other civil remedies (for example, a public apology) are less likely to apply in trade secret misappropriation cases because the general conditions for such remedies to apply (in the case of public apology, the loss in the rights holder s personal or business reputation) might not be present.
Global Trade Secrets Guide 2018 7 Criminal law Criminal penalties are available under the Criminal Law of China, including a fine and/or up to seven years of imprisonment. Article 219 of the Criminal Law provides essentially the same definition of trade secret and acts of trade secret misappropriation as the AUCL, but criminal liability applies only if the acts of misappropriation at issue cause a substantial direct loss to the rights holder currently, the threshold is set at RMB500,000 (around US$80,000). The threshold amount is not high, but rights holders can face challenges in establishing a criminal case if the misappropriation act has not caused a direct loss (for example, the stolen technical knowhow is not put into actual use), and in proving the causation between the alleged misappropriation (for example, a competitor has unfairly acquired and used its trade secret) and its loss (for example, a loss in the rights holder s sales of the relevant product). A criminal action is often the most powerful way to collect evidence of infringement, which is frequently a major challenge in trade secret enforcement. Administrative penalties If the criminal threshold is not met, other than filing a civil action, the rights holder has another option of filing a complaint to an administrative enforcement authority. The administrative enforcement authority has certain powers to investigate, but it might be less effective compared to police in criminal proceedings, in particular in aspects such as seizing personal items, searching private or business premises and seizing evidence when the target is not cooperative. An administrative authority can issue penalties, including an order to cease infringement and a fine of up to RMB three million (around US$470,000).
8 Hogan Lovells Confidentiality measures and agreements When it comes to trade secret leakage or misappropriation, it is of course better to prevent it from happening in the first place than having to deal with a problem afterwards. Rights holders should always consider the following pre-emptive measures: 1. Non-disclosure agreements but bearing in mind that for some recipients of trade secrets, this may be viewed as just another piece of paper; 2. Be selective about the information to be disclosed to a current or potential customer, business partner, etc., and the way it is disclosed; 3. Confidentiality and non-compete agreements with employees and to have them reviewed by a lawyer with experience of Chinese labor and contract law to ensure they are effective and enforceable against both current employees and ex-employees; 4. Use of access control and IT security measures. Changes that have happened in the past five years and more changes expected in the future? Looking back over the past five years much has changed in China concerning trade secret protection. To highlight some of these, civil courts started to implement preliminary and interim injunctions in trade secret cases, following changes introduced in the amended Chinese Civil Procedural Law. The amended AUCL has increased the maximum amount of statutory damages and administrative fines. The amended General Principles of Civil Law has recognized trade secret as a type of intellectual property in parallel with patents, trademarks and copyright. We will continue to keep an eye out for more changes, including the long-discussed proposal to enact a comprehensive Trade Secret Protection Law. Katie Feng Partner, Shanghai T +86 21 6122 3826 zhen.feng@hoganlovells.com
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Hogan Lovells Europe Historically protection of trade secrets has been at national level in the EU. However, this is now set to change. In November 2013, the European Commission published a draft directive with the aim of harmonizing the law protecting undisclosed know-how and business information throughout the European Union. After some debate, the Commission, the Council and the Parliament eventually agreed the text of a final version which was published in the Official Journal of the European Union on 15 June 2016 as Directive 2016/943 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (the "Directive"). Member States of the European Union must implement the Directive into national law by 9 June 2018.
Global Trade Secrets Guide 2018 What does the Directive hope to achieve? The main objective of the Directive is the establishment of a minimum standard of legal protection for undisclosed know-how and business information throughout the European Union. This harmonization aims to create a functioning internal market. Unlike the first draft back in 2013, the final form of the Directive expressly states its aim of minimum rather than full harmonization of the law. As a result, Member States can choose to go beyond the minimum requirements and level of protection set out in the Directive. Thus, while it will ensure that Member States' laws will all achieve a minimum level of protection, the Directive will not lead to an entirely level playing field as some Member States within the Union may still enjoy additional protection for trade secrets.
Hogan Lovells France As of today, the only specific trade secrets legislation in French law is that protecting "manufacturing secrets", as set out in the Intellectual Property Code (IPC). What constitutes a trade secret? only secrets relating to the manufacturing of a product are protectable the person committing the act must be an employee or a former employee the denounced act must be a disclosure or an attempted disclosure (not a use) Civil law: Under civil (tort) law three elements must be present for liability: a wrongdoing (including negligence); a loss; and a causal link between the wrongdoing and the loss. Compensatory damages are available if wrongdoing is proved. The evidenced loss of the plaintiff is used as a basis for awarding damages. The infringer's profits are not taken into account. Where there is breach of a contractual obligation, the plaintiff may obtain damages specified in the agreement or in the Civil Code and possibly termination of the contract.
Global Trade Secrets Guide 2018 13 Evidencing infringement: Trade secret owners can use the general provisions of the French Code of Civil Procedure to try and secure evidence of trade secret infringement either in ex parte or inter partes proceedings. The Code provides that if there is a legitimate reason to preserve or establish evidence, legally permissible preparatory inquiries may be ordered by the court. Confidentiality of proceedings: In theory, general French civil procedure allows for cases to be heard confidentially but these provisions have so far not been used in information misappropriation cases, thus leading those impacted by a disclosure or misuse to avoid going to court to avoid public discussion of their secret information. Criminal law: Criminal liability for trade secret violation is most often based on theft (if documents containing the information are stolen too) and breach of trust. Different penalties apply depending on whether the information is a manufacturing or other secret. Employment law: France provides for contracts of employment to be enforced against employees during the term of their employment. The Labor Code also provides criminal liability for trade secret violations by former employees; ie. former employees who use or disclose secrets after leaving employment. When parties are bound by a contractual obligation not to disclose secret information, an action lies for breach of contract. An employee who discloses confidential information may also be held to be in violation of his general duty of loyalty. The employer may seek damages and termination of the employment contract if still in force. How will France implement the Directive? Like other EU Member States, France now has until June 2018 to implement the Directive s provisions (Article 19). If France does not implement the Directive in a timely manner, then French law will need to be implemented in light of the Directive and clear and unambiguous terms in the Directive will even have direct effect (i.e. will be enforceable before French courts) in France between parties to a litigation. What's going to change? With the implementation of the Directive, it is expected that parties to an agreement governed by French law and/or executed in France, as well as French courts, will be in a better position to identify and protect trade secrets.
14 Hogan Lovells Defining a trade secret Thanks to the Directive, parties holding or developing all types of confidential business and technical information now have a definition for what information is eligible to qualify as trade secret under French law. This definition does not significantly change the current approach taken by French courts but it clarifies that the information should be kept secret and that economic value is derived from it not being generally known. Confidentiality The Directive sets specific grounds for action as a result of unauthorized disclosure of a trade secret. Remedies in case of misappropriation, use or disclosure of trade secrets are available at preliminary ruling: allowing faster concealment of any information unduly acquired or used and/or any seizure of products including trade secrets. It is expected that the Directive will allow a party enforcing trade secret protection before French courts to apply for relative secrecy of the litigation, including setting confidentiality clubs, possibly even filing briefs for the eyes of the judges and litigators only, and obtaining redacted public decisions. Permitted disclosure In a move to protect whistleblowers, the Directive allows the acquisition, use, and disclosure of trade secrets if "allowed by ( ) national law," if the trade secret was disclosed "by workers to their representatives as part of the legitimate exercise by those representatives of their functions in accordance with [European] Union or national law," or was acquired through "any other practice which, under the circumstances, is in conformity with honest commercial practices." Stanislas Roux-Vaillard Partner, Paris T +33 1 53 67 18 87 stanislas.roux-vaillard@hoganlovells.com
15 Germany The current landscape Currently, Germany does not have one comprehensive law protecting trade secrets and protection is fragmented. Provisions protecting trade secrets can be found in: The German Unfair Competition Law (Gesetz gegen den unlauteren Wettbewerb UWG), the German Civil Code (Bürgerliches Gesetzbuch BGB) and the German Criminal Code (Strafgesetzbuch StGB). What constitutes a trade secret? German law has no explicit definition of what constitutes a "trade secret" and what the requirements for protection are. Settled German case law defines a "trade secret" as every fact in connection with business operations which is not known to the public, but rather known only to a very limited number of persons and which, in accordance with the will of the owner of the trade secret, shall be kept secret due to reasonable business interests. This definition, however, is still very vague and leaves a lot of room for interpretation by the German courts.
16 Hogan Lovells Civil law Under the UWG the owner of a trade secret can raise claims for an injunction, claims for damages and claims for information claims. In general, a theft of trade secrets requires the owner of the trade secret to establish (1) that a certain fact is a trade secret and (2) that this trade secret has been misappropriated. Under the German civil code an owner of a trade secret may act against an infringer. However, these tort claims require either (1) the infringement of a statute, or (2) that trade secrets are recognized as proprietary right under the German Civil Code, which is also being discussed but not yet confirmed by the German courts. Trade secret claims may also be based on contractual duty e.g. a non-disclosure agreement, a confidentiality clause or a confidentiality duty resulting from a duty of loyalty. Criminal law The theft of a trade secret or the unauthorized use of documents may be also a criminal offence under German law. Evidencing infringement In practice, the most relevant obstacle for the owner of a trade secret is to provide sufficient evidence proving the theft of the trade secret. Overall, the current German provisions allow in practice only a very narrow protection of trade secrets against specific acts of misappropriation. How will Germany implement the Directive? Like other EU Member States, Germany is bound to implement the Directive s provisions into national law by 9 June 2018. If Germany fails to implement the Directive in due time, the Directive may have direct effect or the German law has at least to be interpreted in light of the Directive. What's going to change? At present, the practical changes are difficult to predict. It remains unclear, if the Directive will be implemented into German national law by a new statute or integrated into the Act against Unfair Competition. Defining a trade secret The Directive's definition of a trade secret differs from the current definition used by the
Global Trade Secrets Guide 2018 17 German courts. The new definition does not require a reference to "reasonable business" which will ease the practical enforcement of trade secret claims compared to the current German law. However, it is uncertain whether the new definition will make the enforcement of trade secret misappropriation easier. The new definition requires that an adequate protection of the trade secret has to be shown to the court in order to classify the information provided as a trade secret. Asserting claims It is expected to be easier to assert more effective trade secrets claims in Germany. Current provisions only provide a very narrow and hard to demonstrate protection. Reverse engineering Under the Directive, reverse engineering is also explicitly admissible. It is not currently forbidden in all cases in Germany, but reverse engineering cases can potentially lead to civil and criminal charges according to Unfair Competition Law. Interim injunctions The Directive explicitly names a catalogue of circumstances which have to be considered for the proportionality of the interim injunction. Whether these circumstances as outlined in the Directive will be included into explicitly written German law remains to be seen because the Directive offers in its wording a loophole by stating "if necessary including". Also, it remains to be seen if the Directive will implement a provision into German law that the interim injunction can be revoked upon request of the respondent if the claimant does not start a main proceeding within a given time period or within 20 working days or 31 calendar days whichever is longer. Christian Stoll Partner, Hamburg T +49 40 41993 215 christian.stoll@hoganlovells.com Anna-Katharina Friese Senior Associate, Hamburg T +49 40 41993 173 anna-katharina.friese@hoganlovells.com
Hogan Lovells Italy The current landscape Under Italian law, trade secrets can be protected according to Articles 98 and 99 of the Italian Code of Industrial Property ("IPC"), headed "Secret Information". In particular, Article 98 IPC specifies the requirements that certain information must have to be considered as protected secret information while Article 99 IPC sets out the exclusive rights granted to the owner of such secret information. Confidentiality Some more specific provisions may be introduced to protect secret information in the context of civil proceedings brought by the right holder against alleged infringers. Indeed, under the current legislation, all the hearings held before the investigating Judge during the trial are private, whereas the final hearing before the panel of Judges issuing the decision is public. Only when a case involves national security, public order and decency, can the Court order that the public be excluded. Also, the parties can ask the Judge to keep certain information confidential and not to reveal it to the other side (in such cases the relevant documents are stored in a closed envelop in the safety box at the Court clerk office). Needless to say, counsels, ex parte experts and Court clerks are bound to a confidentiality
Global Trade Secrets Guide 2018 19 obligation and the Judge may even reinforce this by ordering lawyers and consultants not to disclose certain pieces of information to their respective clients. Similarly, the briefs and deeds of the proceedings are all confidential except for the final decision, which is public but the Judge provided that the right of defence is preserved can decide to omit certain parts of the ruling to preserve any confidential information. However, as there is no specific provision yet in the IPC aimed at securing the confidentiality of secret business information during and after civil proceedings, the Italian legislator may consider amending the IPC to mirror the Directive in this respect. What constitutes a trade secret? Article 98 IPC defines "secret information" as "the business information and the technical-industrial expertise, including the commercial ones, subject to the owner's legitimate control" which (a) are secret, (b) have an economic value due to their being secret and (c) are subject to adequate measures put in place by the information owner to keep them secret. Also data relating to tests or other confidential data (needed for the authorization to introduce on the market chemical, pharmaceutical or agricultural products employing the use of new chemical substances) can be protected as secret information. When some business information meets the requirements listed in Article 98 IPC, it enjoys protection as unregistered industrial property, and, as such, it benefits from all the remedies provided by the IPC for the violation of IP rights. The legitimate owner of secret information is entitled to prohibit third parties from abusively acquiring, disclosing or using it without his consent, except for cases where such information has been achieved autonomously by the third party in question (e.g. by way of reverse engineering) (Article 99 IPC). Unfair competition In cases where the requirements set forth by Articles 98 and 99 IPC are not met, the misappropriation, unauthorised use or disclosure of secret business information may amount to an act of unfair competition under the general clause contained in Article 2598, No. 3, of the Italian Civil Code ("ICC"), covering conducts that go against professional fairness. Violation of Articles 98-99 IPC and 2598, No. 3, ICC may be claimed cumulatively.
20 Hogan Lovells Criminal law The Italian Criminal Code ("ICrC") contains some provisions that may apply to protect trade secrets: Article 621 ICrC Disclosure of the content of secret documents Article 622 ICrC Violation of professional confidentiality Article 623 ICrC Disclosure of scientific or industrial secrets However, after the enactment of the IPC and the implementation of the Enforcement Directive in Italy, most claims for trade secret infringement are brought under Articles 98 and 99 IPC, given the broad scope of protection granted by those provisions and the wide array of available civil remedies. How will Italy implement the Directive? Like the other EU Member States, Italy is bound to implement the Directive s provisions into national law by 9 June 2018. If Italy fails to implement the Directive in due time, the Directive may have direct effect in the Italian territory. The Italian Government is already working on draft provisions in order to implement the Directive by the due deadline. What's going to change? As Articles 98 and 99 IPC appear to meet the minimum standard of legal protection required for trade secrets by Directive 943/2016, no material reforms are expected from the Italian legislator. However, the Italian legislator would be required to introduce specific provisions on the maximum limitation period (6 years) in accordance with Article 8 of the Directive. At present, the general statute of limitations provided in the ICC applies to the violation of trade secrets (10 years to start the proceedings and 5 years to claim damages from the day of the violation). Federico Fusco Senior Associate, Milan T +39 02 720252 369 federico.fusco@hoganlovells.com
21 The Netherlands The current landscape What constitutes a trade secret? There is currently no statutory definition of the term 'trade secret' under the laws of the Netherlands. A definition that is often referred to is the one from article 39 (2) of the TRIPs Convention. Civil law There is no specific provision for the protection of trade secrets under civil law. Trade secrets do enjoy protection under general principles of civil law, and in particular under the general principle of tort, laid down in the Dutch Civil Code. In addition to tort law, trade secrets can be protected under contract law. The protection of trade secrets on this basis will, however, highly depend on the terms of the contract. There is no specific legislation on this topic. Criminal Law Criminal law provides certain protections for trade secrets. Employees In the case of employees, the protection of a trade secret can be based on labor law. Under Article 7:678 (2)(i) DCC the employer has the right to terminate the employee's contract with immediate effect if the employee has disclosed a trade secret belonging to the company without permission.
22 Hogan Lovells Interim injunctions/evidencing infringement The owner of a trade secret, who proves that his trade secret was misappropriated, can: claim an injunction (preliminary or permanent) against a user of a trade secret; or seek damages and/or make information claims. The possibility of an evidentiary seizure is available. In order to be successful, the owner of the trade secret must prove (i) that certain information qualifies as a trade secret and (ii) that this trade secret was misappropriated. How will the Netherlands implement the Directive? A legislative proposal has been circulated, but implementation of the Directive has not yet been completed. Like other EU Member States, the Netherlands are bound to implement the Directive s provisions into national law by 9 June 2018. If the Netherlands fail to implement the Directive in due time, the Directive may have direct effect or Dutch law will have to be interpreted in light of the Directive. What's going to change? The legislator intends to introduce the Act protection of trade secrets. It thus appears that the rules on trade secrets will be formalized in the Netherlands for the first time. The wording of the draft Act protection of trade secrets closely follows the provisions of the Directive. Defining a trade secret The fact that the Directive contains a clear definition of what information qualifies as a trade secret was generally considered as a positive development. The definition is however similar to the definition currently accepted in case law. With reference to the Directive, the Advocate General to the Supreme Court recently advised in the Organik Kimya v. Dow Chemical case that a trade secret holder must specify its trade secrets in the context of an information claim. The Supreme Court is expected to decide on this point later this year. Asserting claims The Directive and the draft Act protection of trade secrets provide for clear definitions of permissible actions and forbidden actions. Whilst current Dutch law is more or less in line with these definitions, the fact that they now have been clearly laid down is considered as a helpful development for the protection of trade secrets in
Global Trade Secrets Guide 2018 23 the Netherlands. The same is true as regards the available remedies. The remedies referred to in the Directive are usually available in Dutch trade secret cases however these are subject to an interpretation of Dutch case law. Specifying the available remedies in the Directive should be a helpful tool when enforcing trade secrets in the Netherlands. Confidentiality The requirements concerning the protection of confidential information in court, provided for in Article 8 of the Directive, is a positive development for Dutch practice. Although Dutch procedural rules do provide for some measures to maintain confidentiality, it was felt that these measures could be made more robust. New confidentiality provisions are indeed included in the draft Act protection of trade secrets. The draft Act inter alia includes the possibility of limiting access to certain confidential documents to a limited number of persons, including at least one natural person of each party and said party's lawyers or other representatives. This is generally considered a helpful development. Ruud van der Velden Partner, Amsterdam T +31 20 55 33 642 ruud.vandervelden@hoganlovells.com
Hogan Lovells Russia Under Russian law, a trade secret can be defined as information of any type (production-related, technical, scientific research, business, organizational etc.) that has real or potential commercial value by virtue of it being unknown and hidden from third parties. To be protected as a trade secret, certain measures need to be taken, including: a) preparing a list of the information considered as a trade secret; b) adoption of internal regulations within the company on trade secrets protection, handling and control; c) appointment of persons having access to trade secrets or to whom trade secrets have been transferred ; d) provision of trade secrets to third parties only under non-disclosure agreements and to employees under labour agreements;
Global Trade Secrets Guide 2018 25 e) implementation of technical measures to protect trade secrets from unauthorized use and labelling of all material carrying trade secrets information as "Confidential". Implementation of these measures creates a so-called "trade secret regime". If the regime is not established, a company's trade secret is considered to be unprotected. Russian Civil Code also provides for a separate regulation for know-how. The owner of the know-how must take reasonable measures to protect the confidentiality of information considered as know-how. These measures may include implementing a trade secret regime, however, this is not a mandatory measure for know-how protection, but is recommended to help prove that certain information is know-how. Russian civil law perspective Unless an agreement with a disclosure penalty clause is in place, the owner of a trade secret may seek to recover damages from an individual or a company that has illegally disseminated or used the trade secret. In particular, such an agreement may provide for a specific penalty for dissemination of trade secrets in a fixed amount or calculated otherwise. Evidence As with many other countries, trade secrets litigation in Russia can be very complex. Due to lack of disclosure proceedings, the plaintiff is expected to provide solid evidence of a breach himself. There are very limited legal tools available to the plaintiff seeking the court's assistance in obtaining evidence from the defendant. Collection of evidence requires patience and precise compliance with the requirements of Russian procedural rules.
26 Hogan Lovells An owner of a trade secret should demonstrate to the court that the trade secret regime was established for the disputed information. Most recent precedents state that if there is no trade secret regime established by a company (i.e. there is no approved policy, list of information constituting trade secret, etc.), it is not possible to clearly define the information constituting a trade secret regime, and therefore no liability for breach of a non-disclosure obligation may be imposed. The burden of proof that the trade secret regime was established and subsequently breached rests on the plaintiff. Nevertheless, Russian court practice is developing and in some rulings the courts have confirmed that information constituted a trade secret, even in the absence of a formally established trade secret regime. These successful cases give hope for a breakthrough in streamliningtrade secrets litigation in Russia. Confidentiality Russian procedural law allows court proceedings to be kept confidential in as far as they relate to a trade secret regime or other information protected by law. An interested party can file a motion and request that the court conducts closed court proceedings. The courts may grant this request if the requesting party can show that the information being disclosed in the court proceedings is confidential (i.e. that a trade secret regime has been established). Closed court proceedings can only be attended by the parties to the case, as well as experts, translators and witnesses (if any) All attendees are obliged to not disseminate confidential information received during closed court proceedings.
Global Trade Secrets Guide 2018 27 Russian criminal law perspective Criminal liability of up to 7 years of imprisonment depending on the peculiarities of a case may be imposed on an individual that illegally collects, shares or uses information protected by a trade secret regime or information that can be constituted as a trade secret. Russian employment law perspective Disciplinary liability may be imposed by an employer on an employee who illegally shares information protected by a trade secret regime, which had become known to him/her in the course of work. Dissemination of information protected by a trade secret regime is considered by law as a gross violation of labour obligations and may serve as a ground for the employee's dismissal. Natalia Gulyaeva Partner, Moscow T +7 495 933 3025 natalia.gulyaeva@hoganlovells.com Maria Sedykh Associate, Moscow T +7 495 933 3000 maria.sedykh@hoganlovells.com
28 Hogan Lovells Spain The current landscape Trade secrets are currently protected in Spain under the Unfair Competition Act. These provisions prohibit the disclosure or exploitation, without permission of the holder, of trade secrets accessed illegitimately or legitimately but under a confidentiality obligation as well as the acquisition of trade secrets through espionage or similar means and aiding and abetting competitors' employees to disclose trade secrets. What constitutes a trade secret? Courts in Spain have construed the notion of trade secret in light of the definition included in Article 39.2 of the TRIPs Agreement: The information is secret in the sense that it is not generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question; The information has commercial value because of its secrecy; and The information has been subject to reasonable measures under the circumstances, by the person lawfully in control of the information, to keep it secret.
Global Trade Secrets Guide 2018 29 Evidencing infringement The trade secret holder must show that the trade secret has been disclosed, exploited or appropriated without his authorization. The plaintiff must also prove the intention of the infringer to obtain an advantage from the violation of the trade secret for himself or for a third party or, alternatively, his intention to harm the holder of the trade secret. Under Spanish procedural laws, the trade secret holder is entitled to ask a court to order pre-trial inspection proceedings in order to confirm whether a trade secret violation is taking or has taken place. For that purpose, the trade secret holder must substantiate his request by filing evidence establishing prima facie the alleged trade secret violation and showing that the inspection is essential for the preparation of complaint. The plaintiff is not entitled to participate in the inspection in order to protect the defendant's trade secrets. The inspection is hence conducted by a judicial commission formed by the judge, court officials, and, if necessary, one or more independent experts appointed by the court. If the outcome of the inspection is positive (the expert concludes that the trade secret may have been disclosed) the court will provide the plaintiff with a certification describing the results of the inspection for the sole purpose of initiating proceedings on the merits. Unfair competition Under the Unfair Competition Act, the trade secret holder is entitled to request the court to issue a declaration that the violation of the trade secret constitutes an unfair practice and consequently order the defendant to: a) Cease and abstain in the future from violating the trade secret; b) Remove the effects of the violation of the trade secret; c) Compensate the plaintiff in cases of wilful infringement or negligence as well as the unjust enrichment obtained by the infringer; and d) Publish the decision (partially or in its entirety), at the defendant's expense, in cases of admission of the declaration claim as well as the ones contained in (a) and (b). Preliminary injunctions The holder is also entitled to obtain interim relief provided he can show likelihood of success of the complaint and irreparable harm or urgency. Preliminary injunctions are
30 Hogan Lovells generally applied for with the complaint and handled by the same court although independently from the proceedings on the merits. Exceptionally, they may be applied for before the complaint on the merits if the plaintiff shows reasons of urgency or necessity. Interim injunctions may also be ordered ex-parte if the plaintiff provides sufficient evidence of a "qualified" urgency, or justifies that the hearing might have a negative impact on the effectiveness of the preliminary injunction. Criminal law The Spanish Criminal Code sets out the circumstances in which the disclosure of trade secrets would be considered a criminal offence: disclosure by any person subject to a legal or contractual obligation to maintain confidentiality; or the seizure of data (e.g., written or electronic documents, computer media) through any means in order to disclose a trade secret; or the disclosure or assignment of trade secrets by a third party not participating in its discovery but acknowledging its illegal origin. How will Spain implement the Directive? The Directive shall be implemented in Spain prior to June 2018. In absence of any legislative developments to date, it is still unclear whether the Spanish legislator will opt for implementing the Directive in a new piece of legislation or amend the relevant provisions of the Unfair Competition Act. What's going to change? Asserting claims What constitutes infringement? The Directive provides a more detailed regulation than the domestic Unfair Competition Act and extends liability to the recipient of a trade secret who "at the time of the acquisition, use or disclosure, knew or ought, under the circumstances, to have known that the trade secret had been obtained directly or indirectly from another person who was using or disclosing the trade secret unlawfully". Moreover, the implementation of the Directive will relieve the trade secret holder from the burden of proving the intent of the defendant. and what doesn't? The Directive also clarifies the limits where the acquisition, use and disclosure of trade secrets is to be deemed lawful as well as the exceptions to trade secret protection) which are not currently codified in the Unfair Competition Act.
Global Trade Secrets Guide 2018 31 Improved chances of fair compensation The Directive provides a clear criteria for assessing damages based on lost profits, the unfair enrichment obtained by the infringer, and moral damages, or, alternatively, a lump sum to be calculated applying the hypothetical royalty assessment method. Moreover, the Unfair Competition Act would need to be amended in order to allow courts to substitute, at the request of a bona fide infringer, corrective measures for a monetary compensation based on the hypothetical royalties that the latter would have had to pay if he had been granted authorization for exploiting the trade secret. In view of the system in place, it doesn't appear that the implementation of the Directive will require wholesale changes. The Directive will foster legal certainty by codifying certain aspects that have been established in the case law and provide Spanish courts with a specific set of guidelines tailored to the protection of trade secrets (e.g. relevant factors for ruling on preliminary injunctions). Defining a trade secret The Directive provides definitions of a trade secret and a trade secret holder building on established Spanish case law. Employment law The Directive establishes certain limits to the protection of trade secrets, such as the right of employees to use throughout their careers the skills, experience, and knowledge acquired as a consequence of their professional development. Confidentiality The Directive will implement trade secret-tailored procedural safeguards aimed at avoiding the disclosure of trade secrets in civil proceedings including restrictions to access to documents and hearings, establishing the possibility of publishing a non-confidential version of the judgment, and requesting the parties and the individuals participating in the proceedings. Ana Castedo Partner, Madrid T +34 91 349 82 61 ana.castedo@hoganlovells.com
Hogan Lovells UK The current landscape There is no legislation in the UK providing specific protection for trade secrets. Trade secrets are protected by contract and/or by the law of equity. Where there is no contract, in order to commence civil proceedings it is necessary for the plaintiff (or claimant) to show that: the relevant information has the quality of confidence in the sense of not being generally known and not being of a trivial nature; the information was disclosed to the defendant in circumstances of confidence; and the defendant has used or disclosed the information without permission or has threatened to do so (and possibly that such use or disclosure was or would be to the detriment of the plaintiff). Employees Whilst employed, an individual has a duty of good faith to his employer and will be bound to keep all confidential information secret. After employment ends the court will usually only offer protection to high-grade confidential information ("real trade secrets") and not day-to-day information which forms part of the employee's general skill and knowledge.
Global Trade Secrets Guide 2018 33 It may be possible to protect lower grade information after employment by imposing a suitable post-employment contractual restriction (known as a restrictive covenant). Asserting claims There are three primary remedies in a claim for trade secret infringement in the UK: a (preliminary and/or final) injunction to prevent further misuse or disclosure; compensatory damages; and an account of profits. The plaintiff usually has to choose either damages or an account of the infringer's profits and cannot receive both. An injunction is usually available in addition to the award of damages/an account of profits. However, the grant of an injunction is discretionary and in some cases the court may decide that an injunction is inappropriate. How will the UK implement the Directive? The deadline for implementation of the Directive is 9 June 2018. Despite the short timeframe remaining before the UK leaves the EU, the UK government plans to introduce new regulations, which will remain in place following Brexit. What's going to change? The substance of the Directive is already largely reflected in English law. In fact, English law already goes further than the Directive by including useful measures for the preservation of evidence by means of the search order which are not included in the Directive. Obtaining evidence of trade secret misuse is one of the main hurdles a plaintiff has to overcome in order to enforce his rights and prevent further misuse. However, the current draft regulations do introduce some uncertainty.
34 Hogan Lovells Defining a trade secret English law does not currently contain a formal definition of a trade secret, although English case law has effectively developed one along the lines of the TRIPS definition and it works well, protecting a wide range of information. However, the draft regulations introduce a new test (a trade secret holder must show that the person lawfully in control of the information has taken reasonable steps to keep it secret). While there is likely to be a large overlap, the current and new tests are not quite equivalent. As a result, some information may lose its protection unless businesses can show that they have taken steps to protect their information. Confidentiality of proceedings One of the most important provisions of the Directive is the introduction of procedural measures to ensure the confidentiality of court proceedings. The use of confidentiality clubs and private hearings are already common practice in English trade secret cases as is the publication of redacted versions of the court's decision and the pleadings so that the trade secret is not referred to in public. However, under the new regulations the confidentiality club must now include an individual from each party. This may dissuade a party from pursuing proceedings, if its trade secrets are at risk as a result. Alastair Shaw Counsel, London T +44 20 7296 2573 alastair.shaw@hoganlovells.com
35 United States General concepts Possible Forums for Litigation Federal district court U.S. state court The U.S. International Trade Commission ( ITC ) (in cases involving imported goods) What constitutes misappropriation of trade secrets? The misappropriation of trade secrets may give rise to a civil (or criminal) claim under both federal and state laws. This dual system means there is no federal preemption. The official definition for misappropriation of trade secrets (18 U.S.C. 1839): The acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or Disclosure or use of a trade secret of another without express or implied consent by a person who: Used improper means to acquire knowledge of the trade secret; or
36 Hogan Lovells At the time of disclosure or use, knew or had reason to know that his or her knowledge of the trade secret was: Derived from or through a person who had used improper means to acquire it; Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use. Before a material change of his or her position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake. What do we mean by "improper means"? Improper Means is: Theft Bribery Misrepresentation Breach or inducement of a breach of a duty to maintain secrecy Espionage through electronic or other means Improper Means is NOT: Reverse engineering, Independent derivation, or; Any other lawful means of acquisition. Independent development is a common defense to misappropriation claims.
Global Trade Secrets Guide 2018 37 U.S. State Law Claims Historically, laws protecting trade secrets were predominantly state laws. Most U.S. trade secret precedent therefore involves application of state laws. 47 of the 50 U.S. states and the District of Columbia have adopted some version of the Uniform Trade Secrets Act ( UTSA ) as their trade secrets law. There are, however, differences in interpretation and application of UTSA among the states. U.S. Federal Claims The Defend Trade Secrets Act ( DTSA ), enacted in 2016, creates a federal civil cause of action for trade secret misappropriation claims: Effective for misappropriation occurring on or after May 11, 2016. The act provides for greater uniformity across state lines in trade secret definitions and misappropriation standards, as well as national service of process and execution of judgments. Among the DTSA s more notable provisions are: the availability of ex parte seizure orders in extraordinary circumstances, both to preserve evidence and as a remedy; and whistleblower protection for employees and contractors I8 U.S.C. 1831 et seq. Interstate or foreign commerce requirement for standing. Applies to conduct outside the U.S. if (1) offender is U.S. citizen or company or (2) an act in furtherance of the offense committed in U.S.
38 Hogan Lovells Remedies include injunctive; monetary damages for actual loss and any unjust enrichment, or alternatively a reasonable royalty; enhanced damages of up to two times the amount of monetary damages; and attorneys fees, where the misappropriation was willful and malicious, or if the claim of misappropriation was made in bad faith. The DTSA does not preempt state law claims; if properly in federal court, plaintiff can pursue both DTSA and parallel state law claims. U.S. International Trade Commission Claims In 2011, the Federal Circuit held that the ITC s jurisdiction includes trade secrets misappropriation cases where (1) the alleged misappropriation took place outside of the U.S.; and (2) the products embodying the allegedly misappropriated trade secrets were unfairly imported into the U.S. The ITC is to apply federal common law standards for trade secret misappropriation (TianRui Grp. Co. v. Int l Trade Comm n, 661 F.3d 1322 (Fed. Cir. 2011)). ITC remedies are limited to Exclusion and, Cease and Desists orders the ITC does not award damages. Chris Mammen Co-head of Trade Secrets Practice, Partner, San Francisco, T +1 415 374 2325 chris.mammen@hoganlovells.com Steven Levitan Co-head of Trade Secrets Practice, Partner, Silicon Valley T +1 650 463 4032 steve.levitan@hoganlovells.com
Hogan Lovells Trade Secrets and Confidential Know-how Trade secrets and other confidential know-how are the lifeblood of every business and protecting such valuable information is no simple matter. Our experienced, technology-focused trade secrets practice can help develop strategies to prevent misuse and will defend quickly against claims of trade secret misappropriation. Procedures should be in place to identify commercially important proprietary information and care taken when licensing or selling a trade secret, just as with other forms of intellectual property. To help protect this information, we can help you to draft employee agreements covering confidentiality and nondisclosure. We formulate policies and practices to help prevent the theft of trade secrets by former, current, and future employees. And we prepare agreements for the license or sale of industrial secrets. Should litigation be unavoidable, our lawyers command the experience, industry knowledge, and geographical scope necessary to handle
Global Trade Secrets Guide 2018 41 the relevant proceedings, whether heard in court or by an arbitral tribunal. If necessary, we can seek an injunction to prevent the misuse of information or to recover it from third parties. Because trade secrets litigation often moves rapidly in the courts, we stand ready to quickly assemble in-depth teams and strategies from innovation hubs in key jurisdictions across the world. Areas of focus: IP and technology licensing Preservation of evidence Infringement actions Employee disputes and team moves Use of third party information Audits and protection policies License disputes Licensing of know-how The only firm ranked Tier 1 for IP on a Global, European, and Asia- Pacific level. Chambers Guide, 2018 Representative experience Representing upi Semiconductor in a defense of Richtek Technology s complaint for trade secret misappropriation in California state court. Representing upi Semiconductor in a defense of an ITC enforcement proceeding brought by Richtek Technology involving Richtek s allegations of patent infringement and trade secret misappropriation in connection with power management IC technology. Conducting a six-month study published by the European Commission on trade secrets law: completing a comparative law assessment of protection against infringement in Member States. Acting for a global chemical company in an international dispute relating to industrial secrets of a world leading antibiotic formula. This involved litigation in the U.K. and U.S. and concerned activities in the U.S., the U.K., Sweden, the Netherlands, and Taiwan.
42 Hogan Lovells Advising a petroleum company in relation to protection of confidential know-how licensed to it and possible actions for breach of confidence where one of its plants was in danger of being nationalized and seized without its consent. Advising an international medical device company on suspected infringement of its trade secrets by one of its key ex-employees. Representing a German machinery company in an investigation and further legal actions against its Chinese former employee on the basis of misappropriation of our client s technical know-how, which involved working with computer forensic experts to recover deleted digital data. Advising Solvay Co. Ltd. in their defense of a trade secret misappropriation action brought in connection with the manufacturing process of the synthetic chemical vanillin. Advising a petrochemicals company on restructuring their employee inventions and remuneration program, and designing confidentiality and restrictive covenants to protect client s intellectual assets. Acting for a German chemical company in cross-border civil and criminal proceedings against trade secret theft by an employee and infringing factory in China, including successfully obtaining civil injunctions against infringers in Germany and a court evidence preservation order in China. Advising a European lighting designer on suspected trade secret misappropriation by its former Chinese OEM manufacturer and their ex-employees. When it comes to cross-border cases and litigation they take up most complex and serious cases. Chambers Global, 2018