One year after the enactment of the Trade Secrets Act (Law 1/2019), we can say that the law is having a significant impact on the Spanish business community.
Some companies had already been managing this intellectual asset, but with the law’s entry into force, its use has increased considerably among organizations of all sizes and across a wide range of sectors, as it adds value to certain information that was previously neither protected nor considered an asset worth taking into account.
There are also many companies that want to transition from being service providers to sellers of technology products, and this requires establishing an IP strategy and implementing a robust model for protecting these assets. Within that strategy and model, trade secrets are audited, evaluated, and play an increasingly important role, especially in this data-driven economy toward which we are moving.
The application of the Law has a two-pronged approach, and both aspects must be taken into account. On the one hand, the Law grants a right to protect trade secrets against unauthorized access, use, and disclosure; it elevates trade secrets to the same category as other intellectual property rights and treats them as property under a regime very similar to that of patents, providing, for example, for their assignment or licensing. On the other hand, however, the Act requires companies to exercise great diligence when transmitting, receiving, or storing trade secrets or confidential information from third parties to avoid becoming the subject of legal claims.
In this regard, it is important to remember that trade secrets are protected under criminal law by Articles 278 (corporate espionage) and 279 (breach of trade secret) of the Penal Code. Article 278 of the Penal Code applies to any person who uses data, written or electronic documents, computer media, or objects to uncover trade secrets, and Article 279 of the Penal Code applies to persons who, having a legal or contractual obligation of confidentiality, engage in acts of unauthorized dissemination, disclosure, or transfer of trade secrets.
The preceding articles of the Penal Code are open-ended criminal provisions in which concepts are not defined, and it is highly likely that the criteria of civil law (Law 1/19) will apply to criminal proceedings. Likewise, it is likely that companies or institutions whose trade secrets are breached will pursue criminal proceedings. Therefore, companies, organizations, and institutions must include compliance with obligations related to third-party trade secrets in their compliance policies.
In any case, an increase in litigation regarding trade secrets is expected as companies become more aware of the importance of this intangible asset and implement the necessary measures to protect it and demonstrate compliance with the required standards.
In anticipation of this, the Competition Law Section of the Barcelona Commercial Court published a “Protocol for the Protection of Trade Secrets in Commercial Courts” in December 2019 .
The rationale for the Protocol lies in the need to specify in detail the procedural security mechanisms for secret or confidential information, as set forth in Article 15 of Law 1/2019 (“Handling of Information That May Constitute a Trade Secret”).
The scope of this Protocol is broad, as it is intended not only to cover proceedings involving alleged breaches of trade secrets but also to apply to all proceedings in which certain information is declared to be a trade secret or confidential information. For example, it can serve as a useful guide for handling confidential information in public procurement processes, where situations are increasingly arising in which certain information about a bidder must be protected from its competitors.
The Protocol provides that specific measures to protect trade secrets may be applied at various stages of the proceedings: from the outset of the proceedings (for example, by requesting them in the complaint or motion for preliminary relief); or once the proceedings have begun (for example, in the answer to the complaint or when submitting evidence). Measures to protect trade secrets and confidential information may be ordered ex officio or at the request of a party, always allowing for the possibility of a hearing or the parties’ opportunity to present their arguments.
The Protocol specifies what the request must include regarding measures to maintain secrecy or confidentiality, in accordance with the principles of necessity, appropriateness, proportionality, specificity, balancing the interests of third parties, and the least onerous measures requested; and the individuals who will comprise the “confidentiality circle.”
The Protocol also examines the various measures that may be implemented to preserve physical and digital records, ensure access to them, provide public access to hearings, and grant access to recordings and to both confidential and non-confidential versions of court documents.
A court order regarding the measures to be applied to classified or confidential information must be specific as to the applicable measures (which must be necessary to achieve the purpose, appropriate, and proportionate); it must provide a rationale for the confidential nature of the information and specify the classified or confidential information in question.
In short, one year after the law was enacted, we are seeing how trade secrets are becoming an increasingly important intangible asset— and that their importance will continue to grow. We can expect an increase in litigation in this area, with cases becoming more sophisticated. We may not reach the levels seen in the United States, but there will undoubtedly be a higher number of lawsuits, and it is advisable to be prepared for this.
Authors: Javier Fernández-Lasquetty and Cristina Espín