Trade Secrets in Spain | How does the Trade Secrets Directive compare with current law

Written on 14 Feb 2018

Where are we now?

In Spain the implementation of the Trade Secrets Directive is still pending and very much awaited by both legal professionals and companies – particularly those whose business model relies on innovation and development. There has been a Public Consultation on the transposition of the Directive, the deadline for which was 21 December 2017. Draft legislation will now be produced following the consultation.

The Public Consultation pointed out that the rules of the various Member States on trade secrets greatly vary, in many instances as a consequence of the legal tradition or culture of every single country.

How does the law protect trade secrets currently?

At a domestic level, the Spanish law lacks a per se regulation on the matter, but trade secrets are regulated indirectly by way of prohibitions and limitations established in various texts. The first thing to point out is that the concept of a trade secret itself is not properly defined by existing Spanish law – so the upcoming Directive (Article 2) will definitely be a leap forward on the matter. Trade secrets have until now been chiefly protected through contractual limitations, whose negotiation may not be scrutinised unless it is brought to a court.

That said, the unlawfulness of the violations of trade secrets in Spain would be regulated by way of prohibitions and limitations established in various texts, from the Spanish Unfair Competition Law to the Spanish Criminal Code (as it could be prosecuted for constituting a crime). As stated by the Public Consultation, the implementation of the Directive is to bring clearer limits to the unlawful behaviours against trade secrets.

How does the Directive compare with the current law?

If we take a look at the current Spanish regulation of the protection of trade secrets and the Trade Secrets Directive, some similarities are evident. For instance, penalised behaviours in relation to information qualified as trade secrets would be the same. That is, the unlawful acquisition, use and disclosure of trade secrets, as well as the availability of civil redress for secret holders against abuses (declaratory and injunctive relief such as cessation, prohibition and withdrawal).

The most practical feature of the recognition of trade secrets as a legally protected concept would be the procedural measures and eventual appeals that the secret holder has at their disposal to fight the unlawful activities prohibited by the Directive. Such measures should be fair, equitable and effective and should not involve unjustified delays such as to let the competitor take unfair advantage of the situation.

The Directive and the current Spanish law would not, though, apply the same criteria when referring to the limitation period for bringing claims. The Directive provides for a six year maximum limitation period after the date on which the claimant became aware, or should have reasonably become aware, of the last fact giving rise to the action; which is an extension from the current Spanish laws, under which the limitation period is three years.

Furthermore, provisional and precautionary measures are also regulated in the Directive in order to effectively protect the secret holder and fight the inherent risk for claimants in the delay that may exist in judicial proceedings. These measures offered to claimants include not only the cessation of the allegedly infringing behaviour or the prohibition of the use or disclosure of the secret, but also the prohibition of taking unfair advantage of the secret and preventing the circulation of the infringer’s products/services in the market. However, to grant such relief the court may require the claimant to produce evidence to ensure that the trade secret exists and that the claimant is the legitimate secret holder, as well as the adoption of sufficient warranties to safeguard the risk of causing harm to the person against whom the measures are sought.

As well as these measures, a damaged party may also require the infringer who knew or should have known that they were engaging in unlawful acquisition, use or disclosure of a trade secret, to pay the trade secret holder damages corresponding to the actual prejudice suffered as a result of the unlawful activity. The Directive establishes that Member States may limit this liability, setting a minimum amount of damages on the basis of the royalties or fees which would have been due if the infringer had requested authorisation to use the trade secret in question. This calculation system resembles the one devised to calculate the compensation of moral damage arising out of the violation of intellectual property rights under Spanish law. Under the current regime, there is no provision on the calculation of the damages, so the claimant must determine the amount he considers legitimate and the judge is empowered to moderate it.

Resolving disputes without the court

It is noteworthy that the provisions of the Directive are clearly focused on the judicial solution of the conflict, rather than solutions involving mediation and arbitration. Nonetheless, nothing should prevent the parties, through the submission of an arbitration or mediation agreement, resolving their dispute in one of those, or another consensual way.

While Spanish law provides some protection and options for resolving disputes, holders of trade secrets are essentially left ‘on hold’ awaiting a national law in Spain that is expected to significantly change the legal landscape on the protection of immaterial assets.