PROTECTION OF TRADE SECRET AND THE EMPLOYMENT RELATIONSHIP.
The protection of trade secret is an institution that transposes European norms into the Bulgarian legislation with the adoption of the Trade Secret Protection Act (TSPA).[1]
Pursuant to § 1 of the Additional Provisions of the TSPA, the law introduces the requirements of Directive (EU) 2016/943 of the European Parliament and the Council of 8 June 2016 (the Directive) on the protection of undisclosed know-how and commercial information (trade secrets) against their unlawful acquisition, use and disclosure (OJ L 157/1 of 15 June 2016).
In the recitals to the preamble to the Directive, it is noted that innovative companies are increasingly exposed to unfair practices aimed at misappropriating trade secrets (such as theft, unauthorized copying, economic espionage or breach of confidentiality), as applied in the European Union, and abroad.
It is emphasized that the aim of the Directive is to achieve the smooth functioning of the internal market by creating a sufficient and comparable level of remedies within the internal market in the event of illegal acquisition, use or disclosure of a trade secret.
The newly adopted law regulates the terms and conditions for protection against illegal acquisition, use and disclosure of trade secrets, which are carried out in court in civil proceedings.
Legal definitions
According to the legal definition given in Art. 3 of the TSPA-trade secret is any commercial information, know-how and technological information that simultaneously meets the following requirements:
- is a secret in such a way that, as a whole or in its exact configuration and combination of elements, it is not generally known or easily accessible to those in the environment who normally use this type of information;
- has commercial value due to its secret nature;
- the person in control of the information has taken measures to keep it a secret.
A trade secret holder is any natural or legal person who lawfully controls a trade secret.
An infringer is any natural or legal person who has unlawfully acquired, used or disclosed a trade secret.
Protection of trade secret in employment relations until the adoption of the TSPA
The protection of trade secret in the field of employment relations is regulated by introducing an obligation for employees in Art. 126, item 9 of the Labor Code (LC).
According to the specified norm-in the performance of the work for which he has agreed, the employee is obliged to be loyal to the employer, not abusing his trust and not disseminating confidential information about him, as well as to keep the good name of the enterprise.
The provision of Art. 186, assoc. 1 of the LC establishes the rule that the culpable non-fulfillment of employment obligations is a violation of labor discipline.
The employment obligations referred to in Art. 186 belong to the employee, and the labor discipline is the totality these obligations.[2]
According to Art. 187, para. 1, item 8 of the LC-violations of labor discipline are abuse of trust and damage to the good name of the enterprise, as well as dissemination of confidential information about it.
Accordingly, Art. 190, para. 1, item 4 of the LC stipulates that disciplinary dismissal may be required for abuse of the employer’s trust or dissemination of confidential information about him.
Protection of trade secret according to case law
In the labor law theory, and in the case law of the Supreme Court of Cassation, the opinions are permanently accepted that the provision of Art. 187, para. 1, item 8 of the LC regulates three separate panels of disciplinary violations:
- abuse of trust of the employer (enterprise);
- damage to the good name of the employer (enterprise);
- dissemination of confidential information to the employer (enterprise).
However, in order for this breach of labor discipline to be committed, the employer must have previously informed its employees which information it considers to be a production, technological, financial or commercial secret and its dissemination is prohibited. Only under this condition will the dissemination of this information constitute a breach of labor discipline.
In other words, the employer should have drawn up a list of the information which he considers to be secret or in any way have informed his employees of the existence of such a secret. Therefore, even if some information about the company’s work has been brought to the attention of a third party, the employee’s actions do not constitute a breach of labor discipline, as there can be no breach without the employee’s conduct being determined in advance.[3]
Protection of trade secret in the employment relations after the adoption of the TSPA
The second paragraph of Art. 18 of the TSPA regulates that employees and workers are liable for damages resulting from illegal acquisition, use or disclosure of trade secret of their employer, amounting to not more than three times the amount of the agreed remuneration, when they have not acted intentionally.
By argument to the contrary, it should be assumed that when the employees have acted intentionally, then their responsibility will be engaged according to the criteria of Art. 19 of the TSPA.
In other words, the amount of compensation awarded to the trade secret holder should take into account all the necessary factors, such as lost profits for the trade secret holder or the profit unfairly received by the infringer and, where appropriate, all non-pecuniary damage caused to the holder of the trade secret.
That provision reflects the recital in the preamble to the Directive that it should not prevent Member States from providing in their national law for the liability of officials for damage to be limited where they have acted without intent.
Illegal acquisition of a trade secret
According to Art. 8, para. 1 of the TSPA -the acquisition of a trade secret without the consent of its owner is considered illegal when it is done through:
- unauthorized access, misappropriation or copying of documents, items, materials, substances or electronic documents which are subject to lawful control by the holder of the trade secret and contain trade secret or information from which the secret may be derived;
- other conduct that is contrary to good commercial practice within the meaning of the Law on protection of competition (LPC).
A definition of the term “good commercial practice” is given in § 1, item 2 of the Additional Provisions of the LPC, where it is stated that “good commercial practice is the rules determining market behavior arising from laws and customary commercial relations and do not violate good manners.”
The conduct of the business entity would be in conflict with good commercial practice when it is contrary to statutory rules governing a business or contrary to normal commercial practice, and when such is not imposed-good manners.[4]
The use or disclosure of a trade secret without the consent of its owner is considered illegal when committed by a person who is:
- illegally acquired a trade secret, or;
- violated a confidentiality agreement or other obligation not to disclose a trade secret, or;
- violated the obligation to restrict the use of trade secret.
Liability for damages of the employees
It can be seen from the texts of the TSPA that its provisions are also applicable in employment relations, as the violation of trade secret may be the result of misconduct by former or current employees.
The new law does not introduce amendments to the LC. This raises the question of the order in which the liability for damages of employees as a result of illegal acquisition, use or disclosure of trade secret suffered by their employer will be realized.
The issue of property liability
Property liability of employees for damages caused to the employer is provided in Art. 203-212 of the LC. It should be noted that this liability is for culpable non-fulfillment of the employee’s obligation to carefully guard the property entrusted to him or in contact with him in the performance of his assigned work, as well as to save raw materials, energy, the money and other funds, which are provided to him for fulfillment of the labor obligations-by argument of Art. 126, item 8 of the LC.
For the unsettled in chapter X of the LC issues on the property liability of the employee to the employer, the civil law is applied-by argument of Art. 212 of the LC.
There are unresolved issues because the LC regulates the specific issues of property liability of employees, and the general issues for each property liability are contained in the civil law.[5]
Until the adoption of TSPA, the civil law, which has in mind Art. 212 of the LC is the Law on Obligations and Contracts on tort and contractual liability.
With the entry into force of the TSPA in the field of protection of trade secret in employment relations, the property liability of employees should be realized in accordance with the newly adopted law.
The court proceedings are regulated in chapter III of the TSPA in case of subsidiary application of the Code of Civil Procedure.
Protection of trade secret regulated by other laws
With § 2 of the final provisions of the TSPA was amended Art. 98, para. 4 of the Law on Protection of Competition (LPC). The new wording of the said norm stipulates that the decision of the Commission for Protection of Competition establishing a violation of Art. 37, is not an obstacle for filing a claim before the court under the Trade Secret Protection Act.
The amendment to Art. 37 of the LPC is entitled a ban on disclosure of production or trade secrets.
According to the legal definition formulated in § 1, item 9 of the Additional Provisions of the LPC, “production or trade secret” are facts, information, decisions and data related to the economic activity, the secrecy of which is in the interest of the rightful claimants, for which they have taken the necessary measures.
In the reasons to the draft of the TSPA, the petitioners note that Art. 10 of the Law for the Normative Acts sets the requirement with one normative act to settle public relations in the same area. Therefore, the transposition of the Directive cannot affect the regulation under the current LPC, as it regulates public relations of another order related to the protection and conditions for the expansion of competition and free initiative in economic activity.
With § 3 of the final provisions of TSPA a new para is created 2 in Art. 52 of the Comme Act (CA). The text of the newly created norm stipulates that the procurator, the commercial agent, the commercial assistant, the commercial representative and the commercial intermediary will be liable under the TSPA for non-fulfillment of their obligation to keep the trade secret of their principals.
In conclusion
The trade secret is not a new concept for Bulgarian legislation, as it contains a series of rules that regulate various aspects of its protection.
Provisions on the protection of trade secret are contained in the texts of the CA, the LPC, the Commodity Exchanges and Markets Act, the Access to Public Information Act, etc.
The subsequent application of the TSPA will show whether its main goal will be achieved-to improve the effectiveness of the legal protection of trade secret from illegal acquisition, use and disclosure.
Nikolay Pangev-attorney-at-law
Literature and case law used:
[1] Prom. SG, No. 28 of 05/04/2019
[2] Thus Mrachkov, V. Labor Law ninth revised and supplemented edition. S.: Sibi, 2015, p. 506.
[3] Decision No. 1892 of 22.12.1999 on the case file No. 800/99, of the Supreme Court of Cassation of the Republic of Bulgaria, III civil department
[4] Thus, in decision No. 783 of 18.06.2014 on file ent. No. CPC-149/2014, (closed meeting) of the Commission for Protection of Competition.
[5] Thus Mrachkov, V. Op. cit., p. 553.