European SMEs can now take advantage of a new call for proposals under the European Union’s “Intellectual and Industrial Property Diagnostic Service” (IPA4SME Program)

The program provides financial support and services for the valuation and analysis of existing technology and knowledge assets in SMEs that have received the Seal of Excellence awarded under the European Union’s H2020 Program.

The Spanish Patent and Trademark Office (OEPM) is responsible for preparing reports related to this service for Spanish companies that have requested it, in line with its commitment to promoting the use of intellectual and industrial property among innovative Spanish SMEs.

According to reports from the Spanish Patent and Trademark Office (OEPM), Spain is the country where the most companies are benefiting from this service, as it also has the highest number of companies with the H2020 Program Seal of Excellence among all European countries.

The fourth call for proposals under the IP4SME Program is currently underway, and the application period for the program’s fifth call for proposals is open from March 27 through June 5.

The OEPM will continue to offer the IPA4SME service throughout the remaining seven calls for proposals, through the end of 2021.

If you would like to learn about the program's benefits and the requirements that applicant SMEs must meet, please access the full document.

Authors: Alba Mª López and Marina Martínez Pedreño

Despite the health crisis spreading throughout Europe (let’s hope not for much longer), the Court of Justice of the European Union has not suspended its work, and on March 26 it issued an interesting ruling (Case C-622/18) regarding a claim for damages arising from trademark infringement where the trademark had lapsed due to lack of use.

The ruling addresses a preliminary ruling requested by the French Cour de Cassation arising from a lawsuit alleging infringement of the French trademark SAINT GERMAIN for alcoholic beverages, filed by the trademark owner against companies that manufactured and distributed a liqueur called “St-Germain.” In parallel proceedings, the trademark had been revoked for lack of use, but the plaintiff maintained its claim for damages for the prior period not affected by the revocation.

Specifically, the trademark had been registered in May 2006, and its expiration was declared by a judgment dated February 28, 2013, which retroactively applied the effects of the declaration to May 13, 2011—that is, five years after the grant. Therefore, the trademark had never been used. Despite this, the plaintiff sought damages for the period prior to the expiration and not covered by the statute of limitations, between June 8, 2009, and May 13, 2011.

Under French law, the effects of a declaration of invalidity are governed by the following provisions:“The rights of the owner of a trademark who, without just cause, fails to make genuine use of the trademark for the goods and services covered by the registration for an uninterrupted period of five years. The invalidity shall take effect on the date of expiration of the five-year period provided for in the first paragraph of this article and shall have absolute effect.”

This raises the question of whether the owner of a trademark who has never used it and whose rights to the trademark have lapsed following the expiration of the legally established five-year period can claim that the essential function of the trademark has been impaired and, consequently, seek compensation for damages resulting from a third party’s use of an identical or similar sign during the five-year period following the trademark’s registration.

In its judgment, the CJEU notes that the harmonization directive leaves it to the discretion of each Member State to determine the effects of a declaration of lapse. Consequently, a national provision that sets the starting date as the date on which the five-year period of non-use expires does not contravene EU law. If this is the case, there is nothing to prevent a claim for infringement of trademark rights—with a corresponding claim for damages—from being brought if national law permits it. However, there is an important caveat.

With regard to the assessment of damages, the Court notes that Directive 2004/48 provides that compensation must be “commensurate with the actual damages suffered by [the trademark owner] as a result of the infringement.” Although the non-use of a trademark does not, in and of itself, preclude compensation in connection with acts constituting trademark infringement, it is nonetheless true that this circumstance is an important factor that must be taken into account in determining the existence and, where applicable, the extent of the harm suffered by the trademark owner and, therefore, the amount of damages that the owner may eventually claim.

As for the consequences of this ruling in our country, it should be noted that the effects of trademark revocation are governed by Article 60 of the Spanish Trademark Law as follows:“A registered trademark shall be deemed, as of the date of the application for revocation or the counterclaim, not to have had the effects set forth in this Act to the extent that the rights of the owner have been declared to have lapsed. At the request of a party , the decision on the application or counterclaim for revocation may specify an earlier date on which any of the grounds for revocation occurred.” Thisprovision essentially mirrors the provisions of Article 62 of Regulation (EU) 2017/1001, so the situation for European Union trademarks is the same.

Therefore, provided that the party seeking revocation requests it, in Spain it is also possible for the declaration of revocation to be retroactive to the moment when the five-year period of non-use of the trademark expired. Even so, the trademark owner could claim compensation for damages suffered if the infringement of their trademark occurred during a period not covered by the declaration of invalidity. It remains to be seen, however, how Spanish courts will assess such compensation.

Author: Carlos Morán

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

This past February marked the one-year anniversary of the enactment of Law 1/2019, dated February 20, on Trade Secrets. The preamble states that organizations use confidentiality as a tool for managing business competitiveness, facilitating public-private knowledge transfer, and fostering innovation in research, with the aim of protecting information that encompasses not only technical or scientific knowledge but also business data relating to customers and suppliers, business plans, and market studies or strategies.

However, innovative companies are increasingly exposed to unfair practices aimed at the misappropriation of trade secrets, such as theft, unauthorized copying, industrial espionage, or breaches of confidentiality requirements. Globalization, increasing outsourcing, longer supply chains, and greater use of information and communication technologies all contribute to an increased risk of such practices.

Criminal law scholars have always agreed that the most serious violations of industrial or trade secrets should also be subject to criminal penalties, in line with neighboring countries. Currently, corporate espionage is criminalized under Article 278 of the Penal Code.

The wave of technological innovation has emboldened certain threat actors, who are capable of wiping out large amounts of a company’s data in seconds, exposing businesses to a greater risk of being hacked by competitors, foreign governments, and hacktivist groups. State-sponsored corporate espionage is a reality and is on the rise in a globalized, cyber-driven economy.

However, many companies will not realize the true value of their confidential information until it is stolen, which can have devastating consequences. Even the intelligence services of EU member states acknowledge that they are “groping in the dark” when it comes to cases of economic espionage. A key reason for the lack of data on the cybertheft of trade secrets is that many intrusions go undetected.

Cyber theft of trade secrets affects small and medium-sized businesses morethanlarge companies

According to ECIPE (February 2018), the negative impact on the EU resulting from the cybertheft of trade secrets amounts to approximately 60,000 million euros in lost economic growth, which translates into a loss of competitiveness and jobs and a reduction in R&D investment. More specifically, 289,000 jobs may have been at risk in 2018, and that number is projected to rise to one million jobs by 2025. Cyber theft of trade secrets affects SMEs more than large companies, due to their limited budgets, a lack of awareness that they are targets of espionage, and a shortage of qualified IT professionals.

We found a surprising 64% increase in security incidents attributed to competing companies, some of which may be backed by governments. When carrying out attacks, competitors often combine sophisticated high-tech techniques with other methods such as recruiting employees from the target company, bribery, extortion, and the promise of a new job. The rise in cybercrimes attributed to states and competitors coincides with an increase in the number of thefts of intellectual property and other sensitive information.

One of the most significant current conflicts in the field of technology and security worldwide is the Huawei case, with the U.S. accusing the company of industrial espionage, among other crimes. The issue has many facets, ranging from industrial espionage involving the use of foreign equipment to the advent of new technologies such as 5G and the trade war between China and the U.S.

Reluctance to award projects to Chinese companies out of fear of espionage has reached Europe

Chinese talent programs —which recruit experts from companies and universities around the world with various incentives to work in China—have been under FBI scrutiny since 2015 due to the threats they pose to U.S. companies and universities.

Reluctance to award projects to Chinese companies out of fear of espionage has also reached Europe. The EU is the top destination for Chinese companies. In 2017 alone, they invested more than 35 billion euros in Europe, with nearly 60% of that capital going toward infrastructure and communications. This has led several countries to view the influx of Chinese public capital into strategic companies with particular concern and to fear that these acquisitions could result in a transfer of technology to Beijing.

Cyberspionage as a common practice of certain governments is recognized by the National Cryptology Center and, similarly, by the 2019 National Cybersecurity Strategy.

The more technologically advanced a country is, the greater the risk that its companies will be targeted by attacks

These attacks are typically directed against industrial sectors and critical and strategic infrastructure around the world with the aim of gaining geopolitical advantages, state and/or corporate secrets, intellectual or industrial property, as well as data and information from strategic sectors.

The volume of trade secrets stored electronically, coupled with the rise in cyber intrusions, has created a perfect storm for economic espionage. The more technologically advanced a country is, the greater the risk that its companies will suffer attacks of this kind. Consequently, companies will find themselves embroiled in commercial and technological wars not only with other companies but also among states themselves. Hence, it is of the utmost importance to have effective and swift criminal responses to corporate espionage.

Author: Juan José Caselles