Improved legal protection of trade secrets

The act of 30 July 2018 concerning the protection of trade secrets entered into force on 24 August 2018. The act implements a European directive and provides an extensive set of actions to protect undisclosed know-how and business information (trade secrets) against unlawful acquisition, use and disclosure.

Until recently, protecting trade secrets was not an easy task. Not only was there no legal definition of the concept of a "trade secret", but the opportunities to restrain the unlawful acquisition, use or disclosure of such information were also very limited. As a result, attempts by companies to take action against the unlawful possession of their trade secrets by a competitor often failed.
 
The European legislator intervened with a directive dated 8 June 2016 on the protection of trade secrets to ensure a minimum level of harmonised protection for trade secrets within the European Union. The directive pursues two objectives: providing a uniform definition of the term "trade secret" and implementing new civil measures to protect trade secrets.

The act of 30 July 2018 implements that directive in Belgian law. The protective measures have been incorporated in the Economic Law Code and the Judicial Code.

What is a "trade secret"?

For the first time in its history, Belgium now has a legal definition of the term "trade secret". The act stipulates three cumulative conditions in order for information to qualify as a "trade secret" (article I.17/1 Economic Law Code):

1. The information must be secret. This means that the information is not generally known among or readily accessible to persons within the circles that normally deal with that kind of information;
2. The information has commercial value because it is secret; and
3. The information has been subject to reasonable steps to keep it secret by the person lawfully in control of the information. Such steps concern, for example, providing a contractual confidentiality obligation, establishing physical or virtual security measures and registering an idea as an i-DEPOT.

A trade secret holder is any natural or legal person lawfully controlling a trade secret.

Infringements

The trade secret holder can take action against the following unlawful acts when they are undertaken without its consent:

• Receiving unauthorised access to any documents, objects, materials, substances or electronic files containing the trade secret or from which the trade secret can be deduced, or unlawful appropriation of or copying of items in these categories. This includes, for example, the situation where an employee copies electronic files at the end of the employment relationship in order to transfer the files to a competitor;
• Breach of a confidentiality agreement;
• Breach of a contractual or any other duty to limit the use of the trade secret;
• The production, offering or placing on the market of infringing goods, when the person acting this way knows (or ought to have known) that the trade secret is being used unlawfully. Infringing goods are goods of which the design, characteristics, functioning, production process or marketing significantly benefits from trade secrets unlawfully acquired, used or disclosed.

Until recently, it was difficult to take action against third-party acquirers of trade secrets. This will change as a result of the new act. A trade secret holder will now be able to take action against a third-party acquirer of trade secrets when the third party, at the time of the acquisition, knew or ought to have known that the trade secrets had been obtained directly or indirectly from another person who was using or disclosing the trade secrets unlawfully. The trade secret holder is also able to stop infringing goods significantly benefitting from the trade secrets which are in the possession of the third party acquirer.

Lawful acts

Not all acts will necessarily be held to be unlawful. Independently discovering or creating the trade secret, for example, will not be considered unlawful. Furthermore, an acquirer not legally bound by a confidentiality obligation will be able to observe, study, disassemble or test a product or object that has been made available to the public or that he lawfully possesses.

Procedures

The act of 30 July 2018 gives trade secret holders three new procedures for putting an end to unlawful activities:

1. An injunction procedure with summary proceedings lodged before the president of the commercial court;
2. Summary proceedings or an ex parte injunction (in case of absolute necessity) lodged before the president of the commercial court to seize the infringing goods to prevent their entry into, or circulation on, the market;
3. A claim for damages lodged before the commercial court.

These proceedings can only be lodged before the commercial courts established in the same city as a court of appeal (Ghent, Antwerp, Brussels, Mons and Liège), even if the proceedings are not initiated against a company.

In addition to the new proceedings, the existing possibility for an employer to take action against a (former) employee who unlawfully acquires, uses or discloses a trade secret as set forth in article 17, 3° Employment Contracts Act remains intact.

Likewise, criminal proceedings based on infringement of manufacturing secrets by a (former) employee (article 309 Criminal Code) and abuse of trust (article 491 Criminal Code) continue to exist.

Sanctions

The act of 30 July 2018 provides for a range of sanctions, including ordering the following:

• Cessation of or prohibition on acquiring, using or disclosing the trade secrets;
• Prohibition on producing, offering, placing on the market or using the infringing goods;
• Recall of the infringing goods from the market;
• Destruction of the infringing goods or withdrawal from the market, provided that such withdrawal does not undermine the protection of the trade secret concerned;
• Destruction of the documents, objects, materials, substances or electronic files containing the trade secret or from which the trade secret can be deduced, or delivery thereof to the trade secret holder or a charitable organisation.

Moreover, the trade secret holder can claim compensation. The new act provides that compensation can be claimed for any damage sustained as a result of the unlawful acquisition, use or disclosure of the trade secret. The compensation can take the form of  a sum of money but can also entail acquisition of the infringing goods or the materials or instruments used in the production of the infringing goods.

Evaluation

The act of 30 July puts an end to the unclear, fragmented and often inadequate possibilities in Belgium for protecting know-how, business information and technological information. Previously, the trade secret holder was unable to halt products based on an unlawfully acquired or used trade secret. The trade secret holder could only claim compensation, which was often difficult to estimate. Under the new act, the trade secret holder can now take action against the production, offering, placing on the market and use of the infringing goods.

The trade secret holder must always bear in mind that reasonable measures must be in place to protect the secrecy of the information. Otherwise, the information will not fall within the scope of the act of 30 July 2018. Consequently, providing conclusive contractual confidentiality obligations and registering information as an i-DEPOT will become increasingly important in the fight against the infringement of trade secrets.

Authors:

Pieter Callens, Senior Counsel 

Myrtle Gevers, Attorney