HR Legal

Bill on trade secrets passed

15 June 2018

The Danish Parliament has recently adopted a new law on trade secrets. The Act contains measures to prevent the misuse of trade secrets and introduces definitions on some significant concepts. 

The new Act implements an EU directive of 2016, which we previously have written about here and has entered into force on 9 June 2018. The Act aims to strengthen the protection of trade secrets and to provide an overview of the applicable rules.

The definition of a trade secret

Danish law does not currently contain a formal definition of the notions “trade secret” or “business secret”. While the notion “business secret” within the meaning of the Danish Marketing Practices Act is defined on the basis of some guiding principles, the new law contains a definition of the concept “trade secret” as well as a number of other central concepts.

A trade secret is defined as information, which:

  • is secret in the sense that it is not, in its entirety, exact form or coherence commonly known amongst or directly accessible to individuals within the sector, who normally is occupied with this type of information,
  • has commercial value, due to its secrecy and,
  • pursuant to the given circumstances has been subject to reasonable measures to ensure the secrecy by the person, who lawfully controls the information.

In terms of content, the concept “trade secret” corresponds to the concept “business secrets” within the meaning of the Danish Marketing Practices Act and no changes are expected in relation to the subject of the protection.

Protection against misuse

Danish Marketing Practices Act’s clause 23 is replaced by clause 4 of the new Act on Trade Secrets, which covers the unlawful “acquisition, use or transmission” of trade secrets. The new Act thereby protects against the same activities, which were known from clause 23 of the Danish Marketing Practices Act, but remains distinct as it concretely lists examples of unlawful activities.

Currently, it is a condition to apply the Danish Marketing Practices Act clause 23 that the offender has a connection to the company, while actions from individuals without any connection to the company are only criminalized pursuant to the Danish Penal Code. The scope of protection is expanded by the new Act, as an individual without any connection to the company will also be covered by civil sanctions under the new rules. The previous division is maintained in relation to criminal law.

Reactions in case of misuse

In cases concerning the misuse of trade secrets, courts may order a temporary prohibition or injunction. The new rules equally afford the possibility to decide that objects must be handed over as a provisional measure or alternatively that the activities resulting in the misuse may proceed, conditioned upon the provision of a guarantee to the owner of the trade secret. Also, the Act allows the court to issue penalty payments or to require the judgement to be made publicly available.

Any potential compensation for misuse shall as a main rule correspond to the value of the damage suffered by the owner of the trade secret, but pursuant to the new rules any potential, unjustified gain of the offender may also be taken into consideration. The new Act thereby provides a greater flexibility in relation to the assessment of the compensation. Additionally, the new rules provide the possibility to provide compensation for non-economic damage. Up until now, the assessment of compensation has been an apparent weak point to the protection of trade secrets, as it is often difficult to document a direct loss due to a violation. Read more here.

The time limit of a compensation claim arising from the misuse of a trade secret is regulated pursuant to the general Danish Statute of Limitations, which as a starting point has a limitation period of 3 years. However, a time limit of 6 months is applicable to motions concerning the prohibition, injunction or the establishment of a lawsuit in relation to the determination of such a measure.

IUNO’s opinion

The new Act provides a clarification of the protection of trade secrets in Denmark. Currently, it is difficult for Danish companies to obtain compensation, but it remains questionable to what extent the new Act will make it easier for Danish companies to obtain an actual compensation in case of a violation, and it will be interesting to follow how the Danish courts will enforce the rules in relation to the assessment of compensation.

The impact of the new rules in practice remains uncertain and due to the rather poor protection of trade secrets in Denmark today, IUNO generally recommends that companies, wishing to obtain an actual protection of their trade secrets, consider using non-competition or customer clauses.

To obtain protection of trade secrets, the company must take reasonable measures to ensure the secrecy of this information. IUNO advises that companies reexamine their internal procedures in relation to trade secrets to ensure that the necessary measures are in place. Finally, from a practical point of view companies should update their current standard contracts and other document with references to the Danish Marketing Act.

 [L 125 “Bill on trade secrets” passed 10 April 2018]

The new Act implements an EU directive of 2016, which we previously have written about here and has entered into force on 9 June 2018. The Act aims to strengthen the protection of trade secrets and to provide an overview of the applicable rules.

The definition of a trade secret

Danish law does not currently contain a formal definition of the notions “trade secret” or “business secret”. While the notion “business secret” within the meaning of the Danish Marketing Practices Act is defined on the basis of some guiding principles, the new law contains a definition of the concept “trade secret” as well as a number of other central concepts.

A trade secret is defined as information, which:

  • is secret in the sense that it is not, in its entirety, exact form or coherence commonly known amongst or directly accessible to individuals within the sector, who normally is occupied with this type of information,
  • has commercial value, due to its secrecy and,
  • pursuant to the given circumstances has been subject to reasonable measures to ensure the secrecy by the person, who lawfully controls the information.

In terms of content, the concept “trade secret” corresponds to the concept “business secrets” within the meaning of the Danish Marketing Practices Act and no changes are expected in relation to the subject of the protection.

Protection against misuse

Danish Marketing Practices Act’s clause 23 is replaced by clause 4 of the new Act on Trade Secrets, which covers the unlawful “acquisition, use or transmission” of trade secrets. The new Act thereby protects against the same activities, which were known from clause 23 of the Danish Marketing Practices Act, but remains distinct as it concretely lists examples of unlawful activities.

Currently, it is a condition to apply the Danish Marketing Practices Act clause 23 that the offender has a connection to the company, while actions from individuals without any connection to the company are only criminalized pursuant to the Danish Penal Code. The scope of protection is expanded by the new Act, as an individual without any connection to the company will also be covered by civil sanctions under the new rules. The previous division is maintained in relation to criminal law.

Reactions in case of misuse

In cases concerning the misuse of trade secrets, courts may order a temporary prohibition or injunction. The new rules equally afford the possibility to decide that objects must be handed over as a provisional measure or alternatively that the activities resulting in the misuse may proceed, conditioned upon the provision of a guarantee to the owner of the trade secret. Also, the Act allows the court to issue penalty payments or to require the judgement to be made publicly available.

Any potential compensation for misuse shall as a main rule correspond to the value of the damage suffered by the owner of the trade secret, but pursuant to the new rules any potential, unjustified gain of the offender may also be taken into consideration. The new Act thereby provides a greater flexibility in relation to the assessment of the compensation. Additionally, the new rules provide the possibility to provide compensation for non-economic damage. Up until now, the assessment of compensation has been an apparent weak point to the protection of trade secrets, as it is often difficult to document a direct loss due to a violation. Read more here.

The time limit of a compensation claim arising from the misuse of a trade secret is regulated pursuant to the general Danish Statute of Limitations, which as a starting point has a limitation period of 3 years. However, a time limit of 6 months is applicable to motions concerning the prohibition, injunction or the establishment of a lawsuit in relation to the determination of such a measure.

IUNO’s opinion

The new Act provides a clarification of the protection of trade secrets in Denmark. Currently, it is difficult for Danish companies to obtain compensation, but it remains questionable to what extent the new Act will make it easier for Danish companies to obtain an actual compensation in case of a violation, and it will be interesting to follow how the Danish courts will enforce the rules in relation to the assessment of compensation.

The impact of the new rules in practice remains uncertain and due to the rather poor protection of trade secrets in Denmark today, IUNO generally recommends that companies, wishing to obtain an actual protection of their trade secrets, consider using non-competition or customer clauses.

To obtain protection of trade secrets, the company must take reasonable measures to ensure the secrecy of this information. IUNO advises that companies reexamine their internal procedures in relation to trade secrets to ensure that the necessary measures are in place. Finally, from a practical point of view companies should update their current standard contracts and other document with references to the Danish Marketing Act.

 [L 125 “Bill on trade secrets” passed 10 April 2018]

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Anders

Etgen Reitz

Partner

Søren

Hessellund Klausen

Partner

Kathrine

Skøtt Jespersen

Senior associate

Kirsten

Astrup

Associate

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