Corporate secrets are one of the most important intangible assets for companies. Until now, however, the legal protection of corporate secrets in Spain was strongly limited, and typically relegated to the contractual environment. With the adoption of the Corporate Confidentiality Act, Spain incorporates EU Directive 2016/943 of the European Parliament into its domestic legal system with a dual purpose.
Purposes of the Corporate Confidentiality Act
- On one hand, to harmonize the Spanish legislation in this matter as a member state of the European Union
- On the other hand, to ensure that the competitiveness of businesses based on undisclosed business information (trade secrets) is adequately protected.
What are the trade secrets
For the purpose of the new regulation any information pertaining to the business environment of the company, including technological, industrial, commercial, organizational or financial information, meeting the following three conditions, is considered a trade secret:
- Firstly, that it shall be considered a secret information
- Secondly, it shall contain a commercial value, which justifies it to be kept as a secret
- Thirdly, protection measures may have been adopted to keep it a secret.
The new Corporate Confidentiality Act
The regulation is structured in twenty different articles under four chapters:
- Chapter 1: It establishes the scope and description of the purpose of the Act.
- Chapter 2: It incorporates the circumstances of the disclosure, exploitation and acquisition of trade secrets, as well as the behaviour to qualify as violations thereof.
- Chapter 3: It keeps an open catalogue to protect the actions of the company, with special attention to the regulation of losses and damages, which extends both to its economic substance and to the facilitation of calculation and settlement.
- Chapter 4: It explains the specific rules in connection with precautionary measures to ensure the effectiveness of its action and immediately avoid the disclosure, exploitation or the unlawful acquisition of trade secrets.
Common minimum standards are established in terms of protection of the owners of business secrets, avoiding the unlawful obtaining, use and disclosure, as well as the non-consensual exploitation of the “infringing goods”. Infringing goods are those products or services that would have benefited significantly from business secrets obtained unlawfully.
This new legal framework seeks to improve the effectiveness of legal protection of business secrets in Spain against the misappropriation throughout the internal market. It completes Article 13 Law No. 3/1991 of January 10, 1991, on Unfair Competition as follows: It is considered the act of violation of trade secrets, which shall be governed by the provisions on the protection on business secrets.
The trade secrets
The new Corporate Confidentiality Act establishes, among others, that a trade secret is violated when, without the consent of the owner through unfair commercial practices, it is used, acquired or disclosed. Likewise, it would be unlawful to exploit the secret when it is accessed through a confidentiality agreement.
It also includes the indirect infringements of the secret, for example, when it is accessed through a person who obtained the secret unlawfully. Or if it happens under the circumstances of the case, when the secret exploits, offers or produces a product which implies its unlawful use. In any case, the person always needs to know that the trade secret has been obtained unlawfully.
Companies are more and more exposed to unfair practices that seek the misappropriation of trade secrets (theft, unauthorized copying, economic espionage or breach of confidentiality requirements). The new Corporate Confidentiality Act seeks to strengthen legal certainty and encourage the smooth functioning of the market and the investment as well as innovation in the private sector.
This article is not considered as legal advice