Trade Secrets Erik Ficks 9 December 2015

Agenda ‒The world ‒EU ‒Sweden – the only EU member state with specific legislation on trade secrets! ‒Keeping it secret – implications of doing business in an international business environment ‒Sweden (cont'd) ‒An IP right? ‒Examples of disputes (2 cases) ‒Recommended procedures (in relation to each of the 2 cases) W/ /12

The world ‒The 1994 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) ‒Art. 39 – Protection of undisclosed information ‒1. In the course of ensuring effective protection against unfair competition as provided in Article 10bis of the Paris Convention (1967), Members shall protect undisclosed information in accordance with paragraph 2 […]. ‒2. Natural and legal persons shall have the possibility of preventing information lawfully within their control from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices so long as such information: ˃(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) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret. W/ /13

EU ‒Current situation: Great variations between national laws, while misapproptiation increasingy cross-border (NB! Digitalization) – cross-border collaborations prevented? ‒November 2013: the Commission announced a proposed Directive on trade secrets and confidential information ‒May 2014: the Council agreed on a revised draft Directive ‒June 2015: the European Parliament (EP) legal affairs committee approved the draft ‒Talks between the EP and the Council regarding a first-reading agreement ‒NB! Only civil law – criminal law will still be governed by national law! W/ /14

EU – the concerns with the draft Directive The PublicThe Companies Freedom of informationStrict statute of limitations (2 years) Protection for whistle blowersIntroducing the concept of "infringing goods" Free movement of workersPossible to pay compensation instead of injunctive relief W/ /15

Sweden ‒The Act on the Protection of Trade Secrets (1990:409) ‒Repealed the Act (1931:152) Containing Certain Provisions Against Unfair Competition ‒What does it protect (Article 1)? ‒A "trade secret" means such information concerning the business or industrial relations of a person [cf. "not generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question"] conducting business or industrial activities which that person wants to keep secret [cf. "subject to reasonable steps to keep it secret"] and the divulgation of which would be likely to cause a damage to him from the point of view of competition [cf. "has commercial value because it is secret"]. ‒The term "information" comprises both information documented in some form, including drawings, models and other similar technical prototypes, and the knowledge of individual persons about specific circumstances even where it has not been documented in some form. [Any limitations?!] W/ /16

Keeping it secret – implications of doing business in an international business environment ‒Once a trade secrets stops being secret, there is no protection ‒Disclosure through countries with less strict protection ‒"Straw man" misappropriaters ‒Good faith protection W/ /17

Sweden (cont'd) ‒From what does it protect (Article 2)? ‒The Act applies only to unwarranted infringements of trade secrets. ‒As an unwarranted infringement is not to be considered the fact that someone acquires, exploits or divulges what is a trade secret of a person conducting business or industrial activities in order to make available to the public or before a public authority divulge something that may be an offence for which imprisonment may be adjudicated, or which may be considered to be another serious incongruity in the business or industrial activity of a person conducting such activities. [I.e. whistle blowing] ‒As an unwarranted infringement is not considered the fact that someone exploits or divulges a trade secret about which he or someone before him acquired knowledge in good faith. W/ /18

Sweden (cont'd) ‒Who is liable? ‒Criminal liability (Articles 3-4): ˃Anyone who wilfully and without authorization accesses a trade secret shall be sentenced for trade espionage ˃Anyone who obtains a trade secret knowing that the person who makes available the secret, or anyone before him, has accessed it through an act of trade espionage shall be punished for unauthorized tampering with a trade secret to fines or imprisonment for not more than two years, or, where the offence is grave, to imprisonment for not more than four years. ‒The criminal liability gap: ˃Obtaining trade secrets from someone with authorized access to the trade secrets. W/ /19

Sweden (cont'd) ‒Who is liable? ‒Civil liability (Articles 6-8): ˃Anyone who wilfully or through negligence exploits or reveals a trade secret in a person's business or industrial activity of which he has been informed in confidence in connection with a business transaction with that person. ˃Anyone who wilfully or through negligence exploits or reveals the trade secret of his employer of which he has been informed in the course of his employment under such circumstances that he understood, or ought to have understood, that he was not allowed to reveal it. However, where the action took place after the termination of the employment, this shall apply only where there are extraordinary reasons for it. ˃Anyone who wilfully or through negligence exploits or reveals a trade secret which, according to what he understands or ought to understand, has been the subject of an action under this Act. W/ /110

Sweden (cont'd) ‒Injunctions ‒Interim (incl. ex parte) ‒Final ‒Only for the identified/misappropriated trade secrets ‒"Abuse" of search orders for copyright infringement (Enforcement Directive) ‒Court confidentiality ‒Max. period of 20 years ‒Not controlled by the parties ‒Challenge: how to formulate request for relief without disclosing the trade secret? W/ /111

W/ /1 Calculation of damages Compensation for: (i) economic damage; (ii) "moral" damage Principle: The misappropriator shall pay damages "on such level that it never appears more beneficial to take into account the benefits of the possibility of misapportiation anothers' trade secrets”. Moral damages – independent in that can be ordered separately from any economic damages, subject to request for such relief. Loss of profitCostsSecurity meansures Misappropriator's profit/turnover Reason for the misappopriation Intent/gross negligence Period of misappropriation Interest of keeping the informatin secret

An IP right? ‒According to the TRIPS Agreement ‒Not strictly speaking under Swedish law and (probably) neither under EU law ‒Implications? ‒The Enforcement Directive does not apply ‒Neither IP case law – e.g. regarding burden of proof W/ /113

Examples of disputes – Case 1: Misappropriation of own trade secrets W/ /1 Company A Company B (Own) notice Inform ation N New establishment

Examples of disputes – Case 2: Liability for other's misappopriation of trade secrets W/ /1 Company A Company B Redundancies Informat ion New employments

1. Company specific information Trade secret by definition 3. Commercial value Unwarranted misappropriation 4. The Act applies only to unwarranted infringements of trade secrets 16W/ /1 2. Secret 1. Do we know what is important for our business and what we want to keep secret? 2. How do we control disclosure? 3. How do we communiate the interest of secrecy? 4. How do we ensure that employees understands the implications of the disclosure? 2. How do we control disclosure? 3. How do we communiate the interest of secrecy? 4. How do we ensure that employees understands the implications of the disclosure? Secure IT environments. Block print/save. Log use. Classify information and employees. Confidentiality notices on documents. Trainings / information to employees. Contract management. Exit talks. Save equipment. Follow-up / enforce. Secure IT environments. Block print/save. Log use. Classify information and employees. Confidentiality notices on documents. Trainings / information to employees. Contract management. Exit talks. Save equipment. Follow-up / enforce. Prevent misappropriation of own trade secrets

1. Company specific information Trade secret by definition 3. Commercial value Unwarranted misappropriation 4. The Act applies only to unwarranted infringements of trade secrets 17W/ /1 2. Secret 1. General sector knowledge vs. Company specific information 2. The employee's personal knowlede 3. How was the information disclosed to the empoyee and was the confidentiality made clear? 4. Implications of disclosure? 2. The employee's personal knowlede 3. How was the information disclosed to the empoyee and was the confidentiality made clear? 4. Implications of disclosure? Due diligence when recruiting Intro talks. Connect to employment agreements and policies. Follow-up / investigations. Due diligence when recruiting Intro talks. Connect to employment agreements and policies. Follow-up / investigations. Prevent liability for other's misappopriation of trade secrets

Blasieholmsgatan 4 A Stockholm Sverige Questions? Erik Ficks Senior associate Contact +46 (0) W/ /118