Member Article

In June 2008 the Protection of Trade Secrets Committee, presented to Beatrice Ask, the Swedish minister of justice, their findings, Enhanced protection for trade secrets, SOU 2008:63. Delphi’s Henrik Bengtsson was an expert on the committee.

Since the Act (1990:409) on the Protection of Trade Secrets (TSA) came into force almost twenty years ago, the conditions for enterprise have changed in many ways. More and more companies currently base their business on information and know-how rather than on traditional industrial production. The development of technology means that information can be stored and transferred in other ways other than was previously the case. At the same time, increasing globalisation has led to tougher international competition in many areas. The societal changes which have taken place in recent years mean that today companies generally have a greater need of protection than companies at the time of the enactment of the TSA.

The fundamental prerequisites for the application of the TSA are set forth in sections 1 and 2 of the act. For the act to be applied at all, it must – in simple terms - be a matter in part, of an infringement of something which constitutes a trade secret in the meaning of the act and in part, the infringement of the trade secret must be unauthorised.

The act today contains two penalty provisions: commercial espionage and unauthorised handling of trade secrets. Today, a person who has authorised access to a trade secret to carry out his/her assignment today can disclose or exploit it without the risk of having a penalty imposed under the TSA.

With the purpose of enhancing the protection of trade secrets, the committee proposes extending the scale of penalties and liability for damages. The committee also proposes that rules are introduced to the act on a new measure to secure evidence.

The committee proposes that penalties under the TSA be broadened also to cover certain types of unauthorised disclosure and exploitation of trade secrets by persons with authorised access to secrets, inter alia, employees and certain other persons who participate in the business such as board members, auditors and persons from staffing agencies.

The reasons for such an extension are mainly the following: The owner whose trade secrets are infringed can incur large losses. Infringements of trade secrets also entail a distortion of competition. Those persons working with the owner’s business must often have access to trade secrets to be able to carry out their assignments, which puts the owner in a vulnerable position. The current legislation demonstrates, according to the committee, shortcomings when, for example, an employee uses trade secrets impropriate in such a situation.

The penalty for unauthorised disclosure or unauthorised exploitation of trade secrets is proposed to be fines or imprisonment for a maximum of two years. If the crime is deemed to be grievous, the penalty is proposed to be imprisonment for no less than six months and a maximum of six years. After the employment has ceased, it is only actions which are especially disloyal or which are deemed to be grievous which are punishable. Actions which take place two years after the cessation of employment are never to lead to penalties under the TSA. The committee further proposed that a measure to secure evidence is introduced into the TSA, an "evidence search" as it is called. The proposal means that a person who suspects that his or her trade secrets have been infringed can be awarded a court order for the Crown Enforcement Service to search the suspect’s premises for secrets.

Additionally, the committee deems the protection for trade secrets to be insufficient with regard to such information which a party can obtain in proceedings in a public court of law. Therefore, the committee proposes that a new rule on damages is introduced entailing that a person who exploits or discloses, without good cause, a trade secret, which he/she obtained by virtue of their being a party in a court case, may have a liability for damages imposed upon them. According to the committee, the rule should include both documents found in the court and documents found elsewhere but which are provided to the party as a result of a court ruling.

A valid reason for disclosing the information may be, for example, that it is to be used in the case or other proceedings which have given rise to the court judgment.

By Ann-Louise Berndtzen, Associate