Trade Secrets and Know-How
Know-How and Trade Secrets
The Biesse firm supports its clients in protecting and pursuing the unlawful misappropriation of confidential business information, known as company know-how.
Protecting Confidential Business Information
Company technical and commercial know-how is an important asset whose value has often been underestimated, in the first instance by the entrepreneur holders themselves.
Awareness of its importance and value has led the legislature to enact specific provisions protecting know-how.
Obviously, not all company know-how constitutes protectable assets. For example, generally known business processes do not have particular economic value for the company and therefore cannot obtain special recognition or protection.
The protectable know-how is that which is secret.
Business information and technical-industrial expertise, including commercial information, are protected by Articles 98 and 99 of the Italian Industrial Property Code. To benefit from the protection afforded by law, such information must be subject to the legitimate control of the holder and must:
- be secret, in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
- be subject to measures that may reasonably be considered adequate to keep it secret;
- have commercial value because it is secret.
Data relating to tests or other secret data whose elaboration involves considerable effort are also protected. This is typically the case of tests carried out in connection with obtaining authorisation to place chemical, pharmaceutical, or agricultural products involving new chemical substances on the market.
The unlawful disclosure or use of secret or confidential information also constitutes an act contrary to the principles of professional correctness under Article 2598(3) of the Civil Code.
The unlawful misappropriation of confidential business information is often carried out by resigning employees who copy CD-ROMs, CAD files, projects, etc., to use after joining a competitor.
It is essential to protect company know-how by implementing the measures referred to in points 1 and 2 above. The holder of know-how has a duty to exercise legitimate control over their confidential information assets and, therefore, has the right to prohibit others from acquiring, disclosing, or using it without consent.
Technical, commercial, organisational, and procedural information that represents economic value for a company may be considered know-how.
Data such as experimental data relating to tests or other secret data whose elaboration involves considerable effort are also protected. This is typically the case of tests carried out in connection with obtaining authorisation to place chemical, pharmaceutical, or agricultural products involving new chemical substances on the market.
Generally, this information is secret and its misappropriation causes economic or competitive damage to the company.
In EU Regulation 772/2004, know-how is defined as a package of non-patented practical knowledge, resulting from experience and testing, which is:
(i) secret, i.e. not generally known or easily accessible;
(ii) substantial, i.e. significant and useful for the production of the contract products;
(iii) identified, i.e. described in a sufficiently comprehensive manner to enable verification of whether it fulfils the criteria of secrecy and substantiality.
Business information and technical-industrial expertise, including commercial information, are protected by Articles 98 and 99 of the Italian Industrial Property Code. To benefit from the protection afforded by law, such information must be subject to the legitimate control of the holder and must:
- be secret, in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
- be subject to measures that may reasonably be considered adequate to keep it secret;
- have commercial value because it is secret.
The unlawful disclosure or use of secret or confidential information also constitutes an act contrary to the principles of professional correctness under Article 2598(3) of the Civil Code.
The unlawful misappropriation of confidential business information is often carried out by resigning employees who copy CD-ROMs, CAD files, projects, etc., to use after joining a competitor.
Resorting to business secrecy is the most effective tool for protecting know-how against unfair competition by competitors or (former) employees. One way to address the problem of disclosure of confidential business information by employees or former employees is the possibility of contractually binding them.
It is also essential to protect company know-how by implementing security measures, restricted or controlled access, etc. The holder of know-how has a duty to exercise legitimate control over their confidential information assets.
BIESSE's professionals are able to assist clients in defining security procedures, drafting confidentiality agreements, non-compete clauses, interactions with employment contracts, etc.
Like all intangible assets, know-how may be transferred to third parties through assignment agreements or licence contracts. A know-how assignment or confidential business information assignment contract consists in a sale of such information subject to certain contractual clauses, under which the owner transfers ownership of their know-how in exchange for the agreed consideration.
A licence contract consists in the transfer of the right to exploit the know-how for a specified period of time in exchange for consideration. In this case, the licensee is required to maintain the confidentiality of the information made available by the licensor.
A know-how licence contract is generally complex and difficult to conclude because of the confidential nature of the information it contains. The contracting parties have conflicting interests: the party holding the know-how is often reluctant to describe extensively the information that forms the subject-matter of the contract, while the potential licensee has every interest in verifying the adequacy of the content to its needs.
Know-how benefits from both civil and criminal protection.
Civil protection of confidential business information may be activated in cases where it has been misappropriated by a competitor. The court may enjoin the continuation of unfair competition acts and implement measures aimed at eliminating the effects of such actions, and may also order payment of damages.
Criminal protection may be activated, for example, in cases of seizure of material resulting from unlawfully misappropriated know-how.
