Business Privacy

Business secrets and litigation: what?

by Cabinet Roquefeuil | Jan 22, 2021

Business secrecy is protected by material and logical measures.

Can the legal tool, the agreement or the confidentiality clause, or even the law, in addition to its organizing function, be the last resort, and if we have the means to take legal action, be the instrument a sanction of business secrecy or coercive measures? Under what conditions?

Prove contractual fault, breach of confidentiality, resulting damage.

There may be difficulties in identifying information that should be considered confidential, and in tracing its movement.

If the contractual terms are too vague, the judge will be encouraged to interpret them in his own way. Conversely, additional precautions can render the terms of the confidentiality agreement impracticable.

We can set up a system for recording meetings, depositing them with a trusted third party, or more or less sophisticated marking of the documents or creations concerned, from the famous “confidential” stamp to geolocation and anti-copying techniques. .

With regard to the damage, how will it be assessed in the absence of an agreed fixed penalty? We can refer to the classic tools of economic theory (evaluation by costs, comparables, expected income, etc.).

The Directive (EU) 2016/943 of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure, (transposed into the Commercial Code Articles L151-1 et seq.) mentions:

» all appropriate factors such as negative economic consequences, including loss of profits, suffered by the injured party, unfair profits made by the infringer and, in appropriate cases, elements other than economic factors, such as the non-material damage caused to the trade secret holder as a result of the unlawful acquisition, use or disclosure of the trade secret. Alternatively, the competent judicial authorities may, in appropriate cases, fix a fixed amount of damages, on the basis of elements such as, at least, the amount of royalties or duties which would have been due if the offender had requested the permission to use the trade secret in question. »

Continue to protect secrecy in the context of litigation

To protect a business secret during legal proceedings, the aforementioned EU Directive 2016/943 provides that the judicial authorities may restrict access to the proceedings and to the proceedings, or deliver watered down versions of the documents concerned.

A preventive measure will most often consist of sequestering evidence, for example during an infringement seizure (on the basis of articles L615-5, R615-2, R615-4 of the Intellectual Property Code)(Tribunal High Court of Paris interim order of withdrawal issued on November 22, 2019 3rd chamber 3rd section No. RG 19/10783).

Thus paragraph 1 of Article R153-1 of the Commercial Code provides:

When seized on request on the basis of article 145 of the code of civil procedure or during a measure of instruction ordered on this basis, the judge may order ex officio the placement in provisional sequestration of the documents requested. in order to ensure the protection of trade secrets.

The commercial code then organizes a subtle procedure for the protection of secrecy and the limited disclosure of confidential information:

Article R153-2 of the Commercial Code:
When, pursuant to 1° of Article L. 153-1, the judge restricts access to the exhibit only to persons authorized to assist or represent the parties, he may also decide that these persons may not copy or reproduction, except with the agreement of the holder of the piece.

Article R153-2 of the Commercial Code:
When, pursuant to 1° of Article L. 153-1, the judge restricts access to the exhibit only to persons authorized to assist or represent the parties, he may also decide that these persons may not copy or reproduction, except with the agreement of the holder of the piece.

Article R153-3 of the Commercial Code:
On pain of inadmissibility, the party or third party to the proceedings who invokes the protection of business secrecy for a document whose communication or production is requested shall submit to the judge, within the time limit set by the latter:
1° The complete confidential version of this document;
2° A non-confidential version or a summary;
3° A memorandum specifying, for each piece of information or part of the document in question, the reasons which give it the character of a business secret.
The judge may hear separately the holder of the document, assisted or represented by any authorized person, and the party requesting the communication or production of this document.

Article R153-4 of the Commercial Code:
The judge decides, without a hearing, on the communication or production of the document and its terms.

Article R153-5 of the Commercial Code:
The judge refuses the communication or production of the document when it is not necessary for the resolution of the dispute.

Article R153-6 of the Commercial Code:
The judge orders the communication or production of the document in its entirety when it is necessary for the resolution of the dispute, even though it is likely to infringe business secrecy.
In the latter case, the judge designates the person or persons who may have access to the document in its integral version. When one of the parties is a legal person, he designates, after having obtained his opinion, the natural person or persons who may, in addition to the persons authorized to assist or represent the parties, have access to the document.

Article R153-7 of the Commercial Code:
When only certain elements of the document are likely to infringe business secrecy without being necessary for the resolution of the dispute, the judge orders the communication or production of the document in a non-confidential version or in the form of a summary. , in accordance with the terms it sets.

Article R153-8
When it occurs before any trial on the merits, the decision ruling on the request for communication or production of the document is subject to appeal under the conditions provided for by Article 490 or Article 496 of the Code of Civil Procedure.
The appeal period and the appeal exercised within this period are suspensive when the decision grants the request for communication or production. Provisional execution cannot be ordered.

Get stress measurements

Provisional coercive measures may be decided by the judge, in particular with the cessation of exploitation of the "offending goods", "whose design or model, characteristics, operation, production process or marketing significantly benefit trade secrets obtained, used or disclosed unlawfully”.

These measures are revoked in the event of absence of action on the merits, and may be subject to a deposit.

See as well :

Protection of business secrets

Invention patents, employee inventions

Protection of business secrets

by Cabinet Roquefeuil | Feb 27, 2017

Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 concerns the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure .

Objective

It lays down common measures against the unlawful acquisition, use and disclosure of trade secrets and aims to ensure the proper functioning of the internal market.It aims to better protect European businesses against economic espionage and industry, in particular, SMEs.

Thus in the event of theft, acquisition or illegal use of confidential information, the victim will be able to defend himself before the civil courts throughout Europe. In other words, the directive is intended to have a deterrent effect against the unlawful disclosure of trade secrets, while safeguarding fundamental rights and freedoms or general interests such as public security, consumer protection, public health, environment and labor mobility.

Object of protection

The object of protection appears broad, whether it concerns the definition of the protected secrets or their holders.

Article 1(1) of the Directive defines trade secrets as

“information that meets all the conditions

following:

– a) they are secret in the sense that, in their entirety or in the

exact configuration and assembly of their elements, they are not

generally known to people in circles dealing with

normally of the kind of information in question, or are not readily

accessible;

– b) they have commercial value because they are secret;

– c) they have been the subject, on the part of the person who has

control in a lawful manner, with reasonable provisions, taking into account the

circumstances, intended to keep them secret".

Such a definition brings together data of a technical nature (know-how and manufacturing processes, in particular) or commercial (customer files, marketing studies, supplier files) having the common characteristic of having been kept secret.

Penalties

The sanctions provided for by the text are only civil – which must be dissuasive but proportionate – but the States will retain the possibility of adding criminal sanctions (arts. 5 and 6).

After the publication of the directive in the Official Journal of the EU and its entry into force, Member States will have a maximum period of two years to incorporate the new provisions into their national law.

The directive entered into force on July 5, 2016. It must be transposed into national law by the Member States no later than June 9, 2018. In the meantime, they must still refer to their national provisions on the question.

From the French point of view

In France, far from being abandoned to any legal void, business secrets already benefit from protection in the field of action for unfair competition and by certain criminal texts (breach of trust and misdemeanor violation of a trade secret, in particular).

Strictly speaking, there is no offense of “violation of business secrecy”. (A text had been proposed, but had not gone as far as final adoption: a bill which introduced this new offense with penalties of 3 years' imprisonment and a fine of €375,000).

The trade secret

In France, we speak rather of “trade secret”, referring to know-how and inventions: this is governed by article L. 1227-1 of the labor code which provides in particular for a criminal sanction. This article is also reproduced in article L. 621-1 of the intellectual property code. Industrial secrecy is governed by article L. 124-4 paragraph 3 of the environment code and by the law of July 17, 1978 which contains exemptions.

The limits of secrecy

Generally speaking, all the data seems to be communicable, including on nuclear power and GMOs. The only limits are privacy, national security and industrial secrets, professional secrecy, information covered by confidentiality agreement.

One can also apply article 39 secondly of TRIPS (Agreement on Trade-Related Aspects of Intellectual Property Rights) which provides that

“Natural and legal persons shall have the

ability to prevent information lawfully under their control from

be disclosed to third parties or acquired or used by them without their

consent and in a manner contrary to honest commercial practice, under

provided that this information:

(a) are secret in the sense that, as a whole or in the

exact configuration and assembly of their elements, they are not

generally known to people in circles dealing with

normally of the kind of information in question or are not readily

accessible;

(b) have commercial value because they are secret; and
(c) have been the object, on the part of the person who lawfully has the

control, of reasonable arrangements, taking into account the circumstances,

intended to keep them secret.

This text thus offers a derogation for the specific field of intellectual property and is reminiscent of the provisions of Article 1 of the directive.

Economic espionage

In France, two decisions of 1time instance were able to constitute the first condemnations of economic espionage by the theft of immaterial data (“Michelin”, June 21, 2010 and “Rose”, September 26, 2011, rendered by the Criminal Court of Clermont-Ferrand).

In this case, the authors of the infringements had each appropriated what are called business secrets, that is to say non-patentable information, covered by confidentiality and having an economic or strategic value for the company. It was intangible data. This then announced itself as precursory decisions of the scope of the directive.

The critics

The fears of journalists

The world of journalism is reluctant to this directive.

Indeed, the Press considers that it flouts the right to inform journalists and

citizens' right to be informed. (Setting up a petition in particular).

It calls for the pure and simple abolition of this directive, which provides for heavy penalties in the event of the disclosure of business secrets, including by journalists.

If a source or a journalist “violates” this “business secrecy”, colossal sums could be claimed from him.

Prison sentences could even be imposed in some countries.

However, MEPs claim that journalists will be exempted from these measures in accordance with respect for the right to information and freedom of expression (Article 5 of the directive).

But journalists still think that these will only be exceptions, very rarely recognized.

Indeed, the article remains very vague and therefore subject to broad interpretation for transcription in the Member States.

Whistleblowers neglected?

Regarding whistleblowers, the directive does not provide protection for them, although they are still mentioned in the preamble

“the measures, procedures and

planned repairs […] should not impede the activities of the launchers

of alerts”.

A separate directive concerning them is still being prepared.

However, in France, they already benefit from protection, within the meaning of article 122-9 of the penal code (created by law n°2016-1961 of December 9, 2016 relating to transparency, the fight against corruption and modernization of economic life), which provides that

"is not criminally liable the person who infringes a secret protected by law, provided that this disclosure is necessary and proportionate to the safeguard of the interests in question, that it takes place in compliance with the reporting procedures defined by the law and that the person meets the criteria for defining the whistleblower provided for in Article 6 of Law No. 2016-1691 of December 9, 2016 on transparency, the fight against corruption and the modernization of economic life”.

As such, the whistleblower is defined by the aforementioned law of December 9, 2016 as

“a natural person who reveals or reports, in a disinterested manner and in good faith, a crime or an offence, a serious and manifest violation of an international commitment duly ratified or approved by France, of a unilateral act of an organization international community taken on the basis of such a commitment, of the law or of the regulations, or a serious threat or damage to the general interest, of which it has personal knowledge". (article 6 paragraph 1 of the law).

Consequently, they benefit from an exemption from business secrecy when the general interest allows it.

MR.

Updated 13 Dec. 2021:

LAW n° 2018-670 of July 30, 2018 relating to the protection of business secrets

LAW n° 2016-1691 of December 9, 2016 relating to transparency, the fight against corruption and the modernization of economic life (Sapin II)

Whistleblower bill

Trade secrets and litigation

Employee patents and inventions