Need of the Law

Innovation is a major stimulus for the development of new knowledge. Organizations value their business secrets as much as industrial and intellectual property rights and use confidentiality as a business competitiveness management tool. Innovative entities are increasingly exposed to unfair practices that seek the misappropriation of trade secrets. This is why a regulation on trade secrets is needed.

The lack of effective legal instruments for the protection of business secrecy causes innovation and creativity to be discouraged and investment to decrease.

Competitiveness needs to be adequately protected, in addition to improving the conditions and framework for the development and exploitation of innovation as well as the transfer of knowledge in the market.

Strengthened legal security would help to increase the value of the innovations that organizations try to protect as business secrets, since the risk of misappropriation is reduced.

Law 1/2019, of February 20, Regulation on Trade Secrets, enters into force on March 13. It transposes EU Directive 2016/943, on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure. It does not cover information of little importance, nor the experience or skills acquired by workers during the normal course of their professional careers, nor information that is broadly known or easily accessible in the circles in which the type of information is normally used.

This law will be applicable for the protection of any business secrets, regardless of the date on which the ownership over them was legitimately acquired.

So far, there was no specific Law for Regulation on Trade Secrets. They used to be protected by different rules:
  • The Criminal Code.
  • The Law of Unfair Competition (section 13 of which is modified by the first Final Provision of this Law 1/2019, the regulation of the violation of secrets making reference to the legislation on protection of business secrets recently published).
  • In the different confidentiality clauses or covenants in the contractual field.
Principal procedural novelties
  • The incorporation of a series of rules to preserve the confidential treatment of information that may constitute a business secret.
  • A regulatory framework is offered for fact-checking procedures, for access to sources of evidence held by the counterpart or third parties and, where appropriate, for the assurance of evidence.
  • Singular rules are included as precautionary measures, including special rules concerning the substitute bond, the adoption of measures in the event that, while litigation is pending, there is a subsequent disappearance of the business secret and for the protection of third parties that could be or have been adversely affected by precautionary measures.
  • The final part highlights the amendment of Article 13 of Law 13/1991, of January 10, on Unfair Competition, maintaining the qualification as unfair competition of the violation of business secrets, and stating that this will be governed by the provisions of Law 1/2019, which acts as a special law with respect to the provisions of Law 3/1991, which, as any general law and insofar as it does not oppose the special law, may be used for the integration of gaps.

The main novelty of the Law is the definition of trade secret, which covers any information or knowledge, whether technological, scientific, industrial, commercial, organizational or financial, provided that three conditions are met:

  • There must be an actual secret, in the sense of not being generally known or easily accessible by those who make use of that information on a regular basis.
  • It must have a business value, whether real or potential, precisely because it is secret.
  • It must have been subject to reasonable measures by its owner to keep it secret.
For its part, the new Law also defines:
  • The legal means for obtaining, revealing and using business secrets. A secret will be deemed to have been lawfully obtained in the event of independent discovery and creation; observation, study, dismantling or testing without obligation of confidentiality; exercise of the right of workers and their representatives to be informed and consulted, and where action should be considered fair.

Similarly, whenever a business secret has been obtained, used or disclosed in the exercise of the right to freedom of expression and information; with the purpose to discover any illegality in defence of the general interest; disclosed by employees to their legal representatives, when necessary for the exercise of their functions, and the conduct has been carried out to protect a legitimate legal interest, the business secret will be deemed to have been lawfully obtained.

  • Conducts that would imply a violation of such secrets. Conversely, it is considered unlawful to obtain a trade secret without the consent of its owner when done through the access, appropriation or unauthorized copy of any medium that contains the trade secret or from which it can be inferred; or any other action contrary to fair business practices; or the use or disclosure of a business secret without the consent of the owner provided that it is preceded by an unlawful obtaining, or breach of any express obligation of confidentiality or any other obligation not to reveal the business secret, or breach of a contractual obligation or of any other nature that limits the use of business secrecy.

On the other hand, it is established that professional secrecy is transmissible and can be subject to a license, and that it may jointly owned by several people. Should professional secrecy be surrendered or a license granted to a third party to use it, it must be granted jointly by all co-owners.

Liability for violation of business secrecy

The Law for Regulation on Trade Secrets establishes a system of objective liability, under which liability is incurred both by those who obtain, use or disclose the business secret, knowing that they do so without the consent of the owner and by those who should have known that its origin was illegal. In addition, as a novelty, legal action may also be taken to defend business secrets against third-party acquirers who acted in good faith.

In relation to the latter, it should be noted that action cannot be exercised to seek compensation for damages (compensation that may be fixed either in response to loss of profit or unjust enrichment, or in a lump sum amount, at least at the price of the corresponding license for the use of business secrecy) although, in cases where this third party in good faith is sued, the latter may request the judge to replace the actions of cessation, removal, seizure of property, etc. provided for by Law for the defence of secrecy (in addition to the declaration of infringement, seizure of the infringing goods, attribution of the infringing goods in ownership or publication of the judgment), for the payment of pecuniary compensation whenever the action exercised is disproportionately harmful.

It contains an open catalogue of defence actions, with special attention to the regulation of compensation for damages, which extends both to its economic content and to the facilitation of its calculation and settlement. These defence actions are statute-barred after three years from the date on which the defendant became aware of the person who violated the business secret. The statute of limitations will be interrupted for reasons provided in general by the Civil Code.

Defence actions commenced before the entry into force of this law will be dealt with using the same procedure under which they were taken.

Any civil litigation that may arise under this law will be settled by the judges and courts of civil jurisdiction and will be resolved in the relevant proceedings according to the Law of Civil Procedure. The Commercial Court of the province where the infraction was carried out or its effects would have taken place will have territorial jurisdiction to deal with the actions foreseen in this law.

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