Everything You Must Know about the New Business Secrets Act

On 13 March 2019, the LSE (Business Secrets Act) came into force in order to improve the legal protection of business secrets against unfair practices. Here we explain how it affects you and its consequences.

1. Importance

Nowadays, intangible assets are estimated to account for around 84% of the business value. So, it becomes necessary to implement a management and optimisation strategy, as is the case with other types of assets of a tangible nature, such as real estate, equipment, deposits, etc.
It is necessary to make an inventory of intangible assets, know their value, protect them, insure them, establish contingency plans, etc.

2. Spirit of the Act

The Act aims to improve the efficiency of the legal protection of business secrets, against misappropriation or unfair practices, in order to favour and promote innovation, research, knowledge transfer and business competitiveness activities.

3. What is a business secret?

• It is any piece of information or technological, scientific, industrial, commercial, organisational or financial knowledge that meets the following requirements:
• They are secret, meaning that they are not generally known to people who habitually use this type of information, nor is it easily accessible to them.
• They hold economic value within the business -either potential or real- precisely due to being secret.
• Reasonable security measures have been established by the owner to keep them secret.
• Trade secrets comprise formulas, patterns, databases, processes, methods, techniques, devices and, protocols, among others.

4. New features of the Act

• It recognizes new types of previously unregulated intangible assets, such as Know How, databases, etc.
• It recognizes the Right of Property, allowing the transmission, transfer, license, co-ownership, etc.
• It establishes mechanisms to guarantee the protection, security and confidentiality of business secrecy and the information provided during and after the court process.
• It includes a series of defence actions to safeguard business secrecy, as well as precautionary measures.

5. Defence actions

The following defence actions against infringers may be exercised to guarantee the protection of secrecy:

1. Declaration of infringement of business secrecy
2. Cessation or prohibition of acts infringing business secrecy
3. Prohibition of the manufacture, offer, sale or use of infringing goods (*) or their import, export or storage for such purposes.
4. Seizure of infringing goods, including their recovery for the following purposes: modification of the characteristics that determine that the goods are infringing, destruction or donation to charities.
5. Compensation for damages in the event of intent or fault of the infringer
6. Full or partial publication or dissemination of the court’s decision

Apart from the possibility of taking precautionary measures against the alleged infringer to ensure the effectiveness of the eventual court decision.
(*) Infringing goods are understood as the products and services that benefit significantly from unlawfully obtained trade secrets.

6. When must these actions be started?

These actions may be taken in the event of infringement of business secrecy, that is, when they have been obtained without the owner’s consent, they are considered illegal and no more than three years have elapsed after they are known.
The Act sets out as information obtained in a lawful manner, not constituting an infringement, when it is derived from:

1. Discovery or independent creation
2. Observation, study, dismantling or testing of a product made available to the public (reverse engineering).
3. Knowledge acquired by workers in the natural performance of their professional careers

7. Consequences

A new stage opens in the treatment and management of intangible assets, which will demand the implementation of control systems, classification of information, action protocols, training, cybersecurity, intangible asset audits, reviews of agreements with clients, suppliers and employees, favouring the valuation of new assets of intangible nature.