Soon, because 9 June 2018, substantial changes will enter into force to strengthen the protection of know-how in the European Union. The need for change is due to regulation Directive 2016/943 dated 8 June 2016 on the protection of confidential know-how and classified commercial information (the company's secrets) against their unlawful acquisition, use and disclosure (hereinafter referred to as the ‘Directive’).
In the light of the provisions of the Directive, it is intended to establish a minimum standard for the protection of confidential information of a company. National rules on the protection of know-how currently in force in the European Union create an uneven level of protection of business secrecy across the EU.
These differences may discourage entrepreneurs from taking up cross-border activities, especially in the field of R & D. Strengthening the protection of confidential business information is intended to serve as a tool for managing competitiveness and innovation.
What is very important is the need to transpose the provisions The directives to the Polish legal order will change the legal definition of business secrecy. The objective of this change is to increase the protection of business secrecy, and the long-term effect is to increase business innovation. Let us therefore examine together what will change and what the results of these changes will be.
Know-how – what exactly is it?
To begin with, a few words about the concept of know-how that everyone has heard of, but few people can tell exactly what is behind it. Well, according to the definition of know-how adopted by the International Chamber of Commerce in Paris under this concept, the whole range of information, that is, expertise and experience in technology and production processes for a particular product should be understood.
Specialist literature defines the term ‘know-how’ as a technical or non-technical team of knowledge and experience which is characterised by the ability to identify and describe and the potential or actual possibility of practical use in business.
In European Union law, the definition of know-how is contained in the Commission Regulation (EU) No Regulation (EU) 316/2014 dated 21 March 2014, on the application Article 101(3) The Treaty on the Functioning of the European Union to categories of technology transfer agreements. According to the above Regulation, know-how means a package of practical information resulting from experience and research, which are:
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- classified, i.e. not commonly known or readily available;
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- relevant, i.e. important and useful for the manufacture of contract products; and
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- identified, i.e. described in a sufficiently understandable manner to verify that they meet the criteria of confidentiality and materiality.
In practice, we can include:
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- databases, including customer databases,
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- recipes and regulations,
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- strategies and projections,
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- data archiving system,
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- procedures relating to company management.
What is the definition of know-how in the Polish legal order? Contrary to what might seem, the legal protection of “know-how” was not established either in the Act – Industrial Property Law, or in the Copyright and Related Rights Act. The concept of know-how is not even defined in Polish law.
On the other hand, the anti-unfair competition law (hereinafter referred to as UCHR) regulates this issue, specifically Article 11(4) U.z.n.k., according to which the secret of an undertaking is understood to mean undisclosed technical, technological, organisational or other information having economic value, for which the entrepreneur has taken the necessary measures to preserve their confidentiality.
It should be explained that business secrecy is a much broader concept, and in addition to know-how it also includes information on the company's wealth and financial obligations, employees' data and many other information. However, it is this piece of legislation that grants legal protection to know-how (and other business secrets) and it is this piece of legislation that needs to be amended in connection with the forthcoming deadline for the implementation of the Directive.
What will the amendment bring?
The Ministry of Justice has prepared a bill amending the Act – a law on combating unfair competition and some other laws. At the beginning of this year, this project was addressed for consultation.
The biggest changes envisaged in the project are first and foremost to clarify the concept of business secrecy. The project assumes that the company's secret, as so far, will be technical, technological, organisational or other information of economic value.
However, it is not enough to grant legal protection to these informations that, in order to keep them confidential, the entrepreneur has taken the necessary measures - they will have to be justified, in the circumstances in question, the actions taken to keep this information confidential.
It is also new to indicate that business secrets will not constitute information not disclosed to the public, but ones that are not commonly known to people who usually deal with this type of information or are not easily accessible to such persons.
In addition to the disclosure and use of confidential information, unfair competition will also be treated as an act of unfair competition, which constitutes another novum. The acquisition of information shall mean unauthorised access to, misuse or copying of documents, objects, materials, substances or electronic files covering that information or enabling them to be claimed.
Not all behaviour that will enable the trader to obtain trade secrets without the consent of the legitimate trader will be an act of unfair competition. The project provides that the acquisition of information which constitutes the secret of an undertaking does not constitute an act of unfair competition if it has been the result of an independent discovery or production, observation, investigation, division into parts or testing of an object which is accessible to the public or legally owned by the person who obtained the information.
According to the project, not only the direct perpetrator will be responsible for the breach of the company's secrecy, but also any person who knew or could easily find out about the illegal origin of the information. Good faith will not protect from liability if the legal act on the basis of which the entrepreneur obtains this information is free of charge.
For breach of the company's secrecy, the court will be able to order the trader to make public the information about the judgment or its content. Alternatively, at the defendant's request, the court will be able to oblige him to pay compensation for using this information.
Instead of compensation, the claimant will be able to claim compensation for damages by paying the amount of cash corresponding to the remuneration that would be due to him if he had given his consent to the use of information constituting the company's secret.
Finally, the project envisages a significant extension of the limitation period for such claims, stating that, where an act of unfair competition is at the same time a crime or an offence, the limitation period for a claim for damages cannot end later than years twenty from the date of the crime.
Expectations vs Reality
In response to the consultation, the draft legal environment submitted opinions. Although the project was generally well assessed, some concerns were raised about the correct implementation of the Directive.
Paradoxically, the most doubtful is the extension of the limitation period for claims. The directive provides for a maximum period of six years. This problem was highlighted by both the Supreme Court and the Legislative Council at the Prime Minister.
It is also controversial that the scope of the definition of business secrecy covers only the players involved. Meanwhile, the Supreme Court noted in its opinion that there are also entities that do not participate in business activities and are to be protected under the Directive, for example research institutes. The possibility of recognising ‘non-commercial research institutions’ as entities of the right to information already indicates point 1 The preamble to the Directive.
The Government Legislative Centre pointed out another major problem, i.e. consideration of the appropriateness of removal from the design Article 11(3)(4) the term ‘in particular’, since those provisions regulate actions which constitute unlawful acts and the definition of conditions for unlawful acts should be a closed catalogue. Mr Giodo also drew attention to this issue, but to the need to specify all cases related to the acquisition of information containing personal data.
The National Judicial Council noted that the proposed Article 11(5) contains more stringent sharpening than required by the Directive.
It is also a question of recognising as the company's secret that information was obtained on the basis of an unpaid right action, where, with due care, it could not be known that the information was obtained directly or indirectly from who used or disclosed it without the consent of the legitimate trader.
Such solutions already exist Article 11(3) The Council drew attention to the negative effects of such regulation when using, for example, licensed, alternative and free software.
There are more doubts as to the compatibility of the draft amendment with the Directive. Time will show whether consensus can be achieved on the final wording of the rules and whether the main objective of implementation will be to discourage unfair competition and facilitate cooperation in the field of innovation and sharing know-how values.
Justyna Kyć
Legal adviser in the Legal Department
From 2017 associated with Russell Bedford Poland. He specializes in corporate customer service, in particular in drawing up and negotiating commercial contracts and providing ongoing legal advice.
Her experience includes the service of Clients from many industries, including public sector entities. He also has extensive experience in conducting disputes and representing clients before general and administrative courts.
At the Chancellery Russell Bedford It deals primarily with civil and economic law matters and comprehensive M&A transaction handling.
She is a graduate of the Faculty of Law and Administration at the University of Silesia in Katowice and of the Interdepartmental European Studies at the College of Europe/C olège d'Europe in Bruges (Natolin Campus). She also completed postgraduate studies in public procurement conducted by the Warsaw School of Economics. From 2015 Member of the District Chamber of Legal Advisors in Katowice.