In Depth: The Law on the protection of Trade secrets of 2020 (164(Ι)/2020)
The Law on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure of 2020 (164(Ι)/2020) (the “Law”) was published on 27th November 2020. The Cypriot lawmaker transposed Directive (EU) 2016/943 of the European Union (the “Directive”). Its passing was very much welcomed as an attempt to safeguard the currency of the knowledge economy that had been side-lined for a long time. Being valued on the same scale and having as much importance as any intellectual property right, trade secrets, by being confidential, promote competition and are widely used as an innovation tool. This information may include a range of commercial data, such as information on customers and suppliers, business plans, and market research and strategies. The Law takes measures to combat dishonest practices such as theft, unauthorized copying and economic espionage.
Analysis of important parts of the Law
Article 2 defines a trade secret as connoting to information that:
a) is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
b) has commercial value because it is secret;’ and
c) the person lawfully in control of the information has taken reasonable steps to keep it secret.
Thus, a trade secret is not only the information which by nature is considered being secret, but also information that the trade secret holder (any natural or legal person lawfully controlling a trade secret) has taken reasonable steps to ensure that it is kept secret. It is important to note that all the above requirements have to be assessed cumulatively in order for the information to be a trade secret. Thus, in this way the Law sets strong requirements by placing an extra responsibility on the trade secret holder in taking those reasonable steps. The reasonable steps term has yet to be decided but may include measures such as non-disclosure agreements (NDAs), specific company policies and employee restriction to such information. However, as stated by the Directive, the definition of trade secret excludes trivial information and the experience and skills gained by employees in the normal course of their employment, and also excludes information which is generally known among, or is readily accessible to, persons within the circles that normally deal with the kind of information in question.
Article 2 also provides the definition of infringing goods which means:
‘… goods, the design, characteristics, functioning, production process or marketing of which significantly benefits from trade secrets unlawfully acquired, used or disclosed.’
The importance of the Law is significantly focused around the unlawful acquisition, use and disclosure of trade secrets as mentioned in Article 5. Article 5(2) specifies two methods of unlawful acquisition. Firstly, there is the occasion that an unlawful acquisition is carried through unauthorized access to, appropriation of, or copying of any documents, objects, materials, substances or electronic files, lawfully under the control of the trade secret holder, containing the trade secret or from which the trade secret can be deduced. Secondly, there is the occasion of any other conduct which, under the circumstances, is considered contrary to honest commercial practices. Thus, the Law does not only specify information contained by any means, but goes above and beyond to any documents containing information from which the trade secret can be deduced.
It is further explained by Article 5(3) that use or disclosure of the trade secret can only be considered illegal, when consent of the trade secret holder is absent, by a person who:
a) has acquired the trade secret unlawfully, or
b) is in breach of a confidentiality agreement or any other duty not to disclose the trade secret, or
c) is in breach of a contractual or any other duty to limit the use of the trade secret.
The Law differentiates between three unlawful acts, all having as a basis the absence of consent of the trade secret holder. In assessing the above unlawful acts, factors such as the relationship between the parties and the nature of the information, will be useful.
Nevertheless, the Law does not stop there. Article 5(4) proceeds even further by indicating that any person who at the time of the acquisition, use or disclosure, knew or ought, under the circumstances, to have known that the trade secret has been obtained directly or indirectly from another person who was using or disclosing the trade secret unlawfully within the meaning of section (3).
Article 6 of the Law indicates specific cases that will act as exceptions to the unlawfulness of the acts as stated above. Such exceptions refer to the right to freedom of expression and information, revealing misconduct, wrongdoing or illegal activity, provided that the defendant acted for the purpose of protecting the general public interest and a catch-all provision for the purpose of protecting a legitimate interest recognized by Union or national law.
Article 10 lists the provisional and precautionary measures that can be taken by the trade secret holder with a Court application in the event of infringement of a trade secret. These are:
a) the cessation of or, as the case may be, the prohibition of the use or disclosure of the trade secret on a provisional basis,
b) the prohibition of the production, offering, placing on the market or use of infringing goods, or the importation, export or storage of infringing goods for those purposes,
c) the seizure or delivery up of the suspected infringing goods, including imported goods, so as to prevent their entry into, or circulation on, the market.
Recital 26 of the Directive states that an infringement could have devastating effects on the legitimate trade secret holder, as once publicly disclosed, it would be impossible for that holder to revert to the situation prior to the loss of the trade secret. Thus, this is the reason for providing fast, effective and accessible provisional measures for the immediate termination of the unlawful acquisition, use or disclosure of a trade secret without having to await a decision on the merits of the case, while having due respect for the right of defence and the principle of proportionality.
Purpose of the Law
The purpose of the Law is to supplement the already established intellectual property law with another means of appropriating the results of innovation by protecting access to, and exploit knowledge that is valuable and not widely known, such as know-how and business information intended to remain confidential, that essentially comprise the trade secret.
The content of this article is valid as at the date of its first publication. It is intended to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on your specific matter before acting on any information provided. For further information or advice, please contact Agis Charalambous, Associate and Head of IP, Nicosia, at Telephone 22447777 or via Email: firstname.lastname@example.org