Approval of the law on the protection of trade secrets

Written on 21 Mar 2019

Law 1/2019 of 20 February 2019 on trade secrets was published in the Spanish Official State Gazette (Boletín Oficial del Estado) on 21 February 2019. This law aims to adapt Spanish law to the EU Directive on trade secrets (Directive (EU) 2016/943) and replaces the regulation on this matter contained in the Unfair Competition Law.

The Trade Secrets Law ("TSL") entered into force on 13 March 2019. It aims to strengthen the legal certainty of trade secrets, which are one of the most appreciated intangible assets for companies. It is worth mentioning that, until now, the regulation on this matter in Spain was somewhat fragmented and divided into several regulations such as the Unfair Competition Law, the Criminal Code or the Patents Law. Thus, the TSL is the first law enacted in Spain specifically dedicated to regulate the protection of trade secrets.

Definition of trade secret according to the new TSL

According to the TSL trade secret means any knowledge and information, including any technological, scientific, industrial, commercial, organizational or financial information or knowledge, which meets the following requirements:

  • It is a secret in the sense that it is not generally known or readily accessible among the individuals within the circles that normally deal with the kind of information in question;
  • It has commercial value, whether actual or potential, because it is secret; and
  • It has been subject to reasonable measures by its holder in order to keep it secret.

Unlawful acquisition, use or disclosure of trade secrets

The TSL establishes that the acquisition and use of a trade secret shall be considered unlawful whenever it is carried out without the consent of the trade secret holder by unauthorised access to, appropriation of, or copying of any material containing the trade secrets or from which the trade secret can be deducted (documents, objects, substances, electronic files, etc.), or by any other conduct which, under the circumstances, is considered contrary to honest commercial practices. The acquisition, use or disclosure of a trade secret shall also be considered unlawful whenever the acquirer of the trade secret, at the time of the acquisition, use or disclosure, knew (or ought to have known) that the trade secret had been unlawfully obtained (i.e. by being in breach of a confidentiality agreement or any other duty not to disclose the trade secret).

One new feature of the TSL is that it prohibits the production, offering or placing on the market of infringing goods the design, characteristic or marketing of which benefits from trade secrets unlawfully acquired, used or disclosed.

It should be noted that the previous requirement established under article 13 of the Unfair Competition Law, which imposed that there had to be an intention by means of which the infringing conduct was carried out with a view to obtaining profit, for oneself or another, or harming the competitor, is now repealed. In the absence of this requirement, the TSL establishes a series of actions where the acquisition, use and disclosure of trade secrets shall be treated as lawful and, therefore, are not affected by the safeguards against the abuse of trade secrets.

Trade secrets subject to property rights

For the first time in Spain, the TSL regulates trade secrets as being subject to property rights. This law recognises that trade secrets can be transferred by means of assignment or license and be jointly owned. Furthermore, the TSL establishes that any person transferring a trade secret or granting a licence over it shall be liable to the acquirer for damages if he was acting in bad faith and it is subsequently proved that he was not the owner of the trade secret or lacked the necessary authority to transfer the trade secret or grant the trade secret licence.

Measures for the protection of trade secrets

The TSL provides a wide range of remedies against trade secret violations: (a) declaration of the infringement in legal proceedings (b) cessation or prohibition of the use of the trade secret (c) delivery to the claimant of any material containing the trade secret (d) compensation for damages, (e) seizure of the infringing goods (f) transfer of the ownership of the infringing goods to the claimant and (g) publication of the judgement. The statute of limitations is three years from the date of acknowledgement of the infringing act.

Protection of sensitive and confidential information during court proceedings is one of the most significant novelties brought in by the TSL. The judicial authorities have the discretion, ex officio or following a reasoned request by a party, to take specific measures necessary to preserve the confidential information provided in the course of legal proceedings, including the possibility of restricting the circle of persons entitled to have access to evidence or hearings. Furthermore, the TSL introduces a series of specific provisions regarding the preservation of the confidentiality of trade secrets during legal proceedings.

On the whole, the TSL unifies, updates and completes the legal regime of trade secrets with the aim of providing effective legal instruments for their protection. In conclusion, this law strengthens legal certainty and protects competitiveness, and should serve to improve the innovation capacity of Spanish companies.