TRADE SECRETS ARE BETTER PROTECTED THANKS TO NEW DRAFT BILL UNFAIR COMPETITION INDUSTRIAL PROPERTY

The Spanish Council of Ministers, at the request of the Ministry for Justice and in line with the 2018 Legislation Plan, has started the public information procedure for the new Trade Secrets Draft Bill. This bill transposes into the Spanish legal system EU Directive 2016/943 of the European Parliament and of the Council of June 8, 2016, on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure.

Although trade secrets are some of companies’ most valued assets, until now the regulation of trade secrets in Spain was limited to signing confidentiality clauses and agreements in contracts, and was briefly included in the Unfair Competition Act. Therefore, in addition to harmonization with the legislation of the EU Member States, the new Trade Secrets Draft Bill has two main objectives: (i) to guarantee the competitiveness of European investigation authorities based on trade secrets, and (ii) improve the conditions for innovation and knowledge transfer in the European Union.

The draft bill is structured in four chapters, one transitory provision and four final provisions. Chapter I, which contains the general provisions, includes, as the main new development, the description of the bill’s object, covering “any information relating to any practice or process of a company,” provided that it (i) is secret in that it is generally not known or easily accessible by persons regularly using this kind of information, (ii) has a business value for this reason, and (iii) has been subject to reasonable measures to keep it secret.

Chapter II defines the lawful ways to acquire, use and disclose trade secrets, as well as any conduct that breaches trade secrets. As new development, this chapter extends the protection to “infringing goods,” referring to those products and services that significantly benefited from trade secrets obtained unlawfully

Chapter III covers legal action to defend trade secrets, which can now be brought not only against offenders but also against “third parties acquiring goods or services in good faith.” Another new development is the possibility to replace the bringing of legal action with a reasonable financial compensation, when the result is disproportionately damaging and, always at the defendant’s request. Another aspect to point out relates to compensation for damages: it is now possible to establish this quantity considering relevant factors such as loss of earnings and unjust enrichment or calculating a lump sum considering at least the cost of the license for using the trade secret. This calculation, as well as the settlement, will be carried out in line with the section on infringements in Patent Act 24/2015 of July 24. Chapter III also includes a prescription rule for legal action: three years from the date the trade secret owner becomes aware of the infringement and could bring legal action.

Regarding the new developments in Chapter IV, in relation to jurisdiction and procedural rules, we highlight the express inclusion of precautionary measures that can be adopted by anyone that has brought or intends to bring civil action to defend trade secrets.

The first final provision amends article 13 of the Unfair Competition Act 3/1991, of January 10, referring the regulation of secret infringement to the legislation on protecting trade secrets.

The draft bill is currently in the phase of the procedure for hearings and public information and can be subject to amendments until when it is approved by the government and referred to the parliament. Once the act is approved, it should come into force 20 days after its publication in the Official Gazette of the Spanish State.

Author: Paula Conde Castro