On 8 June 2016, the European Union adopted Directive (EU) 2016/943 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure, and Member States were required to implement it in their legislation by 9 June 2018. Although Bosnia and Herzegovina undertook its obligation to harmonize current legislation with EU legislation on the day of the Stabilization and Association Agreement, it has not yet ensured their effective implementation and protection in all segments, as the process of harmonization represent a lengthy and gradual process. In Bosnia and Herzegovina, as for the entity regulations, business secrets are regulated by the Companies Act and the Labour Law, and any unauthorized disclosure is also envisaged as a criminal offense by the Criminal Code. In EU Member States, this issue is regulated by regulations governing commercial law, the intellectual property, or, in some cases, a specific law regulates this issue. One of the objectives of the adoption of Directive (EU) 2016/943 is to establish the European Union rules on protection against illegal acquisition, use and disclosure of business secrets, as well as harmonization of national legislation on protection against illegal acquisition, use and disclosure of business secrets with these rules, and all in order to prevent the illegal acquisition, use and disclosure of business secrets without restricting fundamental rights and freedoms.
Legal protection of trade secrets is significant because companies invest huge amounts in obtaining, developing, and acquiring know-how, precisely because trade secrets provide them with a competitive advantage. As such, a trade secret can include a wide range of information that includes not only know-how, but also commercial data such as customer and supplier data or certain market analyses, all depending on the activity performed by the company, which may be of great importance to competing companies. Current regulations in Bosnia and Herzegovina do not provide an accurate definition of a trade secret, but stipulate the same is determined by a founding document or some other document of the company and that disclosure of the same to a third party may cause significant damage to the company. Defining this issue in this way leaves open the question of proving the amount of damage caused by the disclosure or use of a trade secret, assessment of the nature of the trade secret itself, as well as mechanisms for eliminating other harmful consequences caused by the disclosure of a trade secret. It is apparent that trade secrets need to be defined in a more precise way, and at the same time that it is necessary to provide effective mechanisms that would immediately prevent further illegal acquisition or disclosure of trade secrets, especially in today’s world of modern technologies, which are being applied in communication and information systems that enable faster flow and dissemination of information.
In other national legislations of the EU Member States, there were significant differences in the protection of trade secrets when it comes to the available legal remedies, rules on the treatment of goods produced using trade secrets, sanctions, and it all led to a reduced international cooperation and activity with the countries with lower level of proper protection. Therefore, Directive (EU) 2016/943 on the protection of undisclosed know-how and business information, from illegal acquisition, use and disclosure, aims to set rules at EU level which would harmonize the national laws of the Member States to enable more comprehensive protection of trade secrets in the internal market.
The Directive defines a trade secret as a collection of all information that represent a secret, i.e. if in its entirety or structure of the content of its components trade secret is not generally known or easily accessible to persons from the circles that usually deal with that type of information; if the same has commercial value; and if the person assigns to lawful control of such information has taken all reasonable steps to maintain its confidentiality.
Chapter II of the EU Directive regulates the lawful and unlawful acquisition and disclosure of trade secrets, so the lawful acquisition of a trade secret understands any acquisition of a trade secret that has occurred through the independent discovery or creation, observation, study, disassembly or testing of a product, which has been made available to the public or which is in the lawful possession of a person who is not bound by a legally valid obligation to restrict the acquisition of a trade secret. Any acquisition of a trade secret resulting from the exercise of workers’ rights in accordance with Union law and national law shall also be considered lawful acquisition. On the other side, according to the Directive, the unlawful acquisition of a trade secret shall understand any acquisition of a trade secret without the consent of the holder of the trade secret, including unauthorized access and misappropriation of any material from which the trade secret may be derived, while illegal use of a trade secret is also considered to be the production, placing on the market or on the market of the goods with which the violation was committed.
Chapter III of the EU Directive provides for the measures, sanctions, and remedies available to ensure legal protection, which must be fair, effective, accessible, and efficient. The Directive provides Member States shall, within the framework of their national legislation, ensure that, at the request of a lawful holder of a trade secret, a person who unlawfully obtains a trade secret may be temporarily banned from using the goods, producing the goods and the subject goods may be in addition seized. These measures shall be revoked if the applicant does not initiate court proceedings to resolve this issue within 20 days or a maximum of 31 calendar days. The Directive also provides for a limitation period of no more than 6 years.
In order to facilitate the uniform application of the measures, procedures and remedies provided for in this Directive, it was necessary to establish certain channels for cooperation and exchange of information in order to bring national legislation in line with the most precise and effective laws. The Directive provides for a period of two years within which Member States are required to implement the provisions of this Directive in their legislation, by implementing trade secret provisions in existing laws, or by enacting particular laws. In this manner, Austria has included a number of new provisions for the implementation of the Directive to the already existing Unfair Competition Act. The new provisions require companies to implement appropriate measures to protect trade secrets from disclosure in order to take advantage of the expanded catalogue of sanctions introduced by this Act, which means that companies must recognize their knowledge and procedures and take active steps to protect it, such as to ensure employment contracts contain a post-employment confidentiality obligation. Belgium has also implemented these provisions in present laws (“The Code of Economic Law”, “The Judicial Code” and “The Act on Employment Contracts”) by defining trade secrets, legal and illegal practices in relation to trade secrets and products dealing with violations of the law and introduced certain protection measures. This example, i.e. the implementation of the provisions of the Directive into existing laws and regulations, was followed by Bulgaria, the Czech Republic, Poland and Italy, while Member States such as Germany, Hungary, the Netherlands, Luxembourg and Croatia adopted new laws on the protection of trade secrets and with the same regulated the very definition and character of a trade secret, envisaged the measures that the holders of trade secrets must take in order to protect the same, as well as the protection procedure itself and the means available to the same in order to protect trade secrets.
As stated in the first section, Bosnia and Herzegovina regulates trade secrets by the Companies Act and the Labour Law, and in the absence of precise regulations that would regulate this issue, it primarily relies on the conclusion of Confidentiality Agreements which specify the term and the extent of trade secrets as well as the consequences of illegal acquisition and use of trade secrets, while judicial protection mechanisms nevertheless do not provide a sufficient level of protection. It is necessary to devote more attention to the regulation of this issue because information, knowledge, experience represent a significant factor of success and competitiveness in the market, and therefore need to be adequately protected.
Author: Tijana Milacic