What to consider when protecting trade secrets in court

While the amendment to the Unfair Competition Act of 2018 (BGBl I 109/2018) was intended to strengthen and expand the protection of confidential company expertise, it is now up to the courts to follow suit. The first published decision of the Austrian Supreme Court (25.06.2020, 9 ObA 7/20z) on the protection of trade secrets provides insight into the first dos and don'ts during legal pursuits.

Dos and don'ts in court

According to the Supreme Court decision, it is advisable to describe the trade secret in question in as detailed a fashion as possible in the claim and the application for a preliminary injunction, and to refrain from using generic terms. Thus, despite the reduction of the standard of proof in the initial pleading, the general rules on the burden of proof in the Austrian Civil Code still apply. In principle, the burden of proof is thus on the party claiming the existence of a trade secret and its violation. The judge must be able to assume with a high degree of certainty that this factual assertion is true.

The information to be protected as well as its commercial value for the company and the secrecy measures serving it must therefore be demonstrated in as detailed a manner as possible by means of appropriate evidence. For this purpose – as in the case of "normal" proceedings – all types of appropriate evidence are possible except the sworn testimony of the parties, i.e., witnesses, documents, etc.

What happened? Or: The disloyal employee and the external hard drive

The case in question involved an employee who, before leaving the company, stored a large amount of data from his soon-to-be former employer - including customer lists, technical plans, supplier conditions, and internal company passwords - on an external hard drive or gained access to this data through e-mail manipulation.

Such conduct would entitle the former employer to demand from its former employee injunctive relief, removal and, in case of fault, compensation for damages on the basis of the new provisions on the protection of trade secrets (Sections 26a et seq. of the Austrian Unfair Competition Act). The prerequisite, however, is that the information stored without authorization must be a trade secret within the meaning of § 26b (2) Austrian Unfair Competition Act.

A trade secret is information that is

• secret (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),
• of commercial value, and
• subject to reasonable steps to keep it secret.

However, to ensure that such trade secrets do not become known to undesired third parties in the course of legal enforcement, § 26h UWG provides for the following procedure. In the pleading in which the existence of a trade secret and its violation is asserted for the first time, this assertion must be substantiated only to the extent that the existence of a trade secret and the asserted claim can be conclusively derived from it.

The former employer therefore enlisted the court’s aid and combined its claim with an application for a temporary injunction. This was intended to prohibit the employee for the time being from using what the employer was claiming were illegally taken trade secrets for the duration of the court proceedings. In addition, he was to be ordered to return to the claimant or to deposit in court the external hard drive, together with the data on it, as well as the other unauthorized files.

In the end, the application for a preliminary injunction was not granted in any of the three instances because the former employer had not sufficiently substantiated its application.

Reasons for the courts’ decisions

In fact, in all three instances the court was of the opinion that the mere enumeration of generic terms ("customer lists, plans, supplier conditions as well as internal company passwords, supplier accesses, etc.") was insufficient to be able to properly assess whether a trade secret existed that met the legal requirements. The Supreme Court admitted that all such information may in principle be subject to trade secret protection. However, the claimant had failed to explain to the court the detailed circumstances of why this particular information should enjoy the protection of a trade secret according to §§ 26a et seq. Austrian Unfair Competition Act.

Whether the company applying for a preliminary injunction can reasonably be expected to substantiate its trade secrets in more detail depends on the individual case. In the case at hand, the Supreme Court held that it would have been reasonable for the claimant to describe its trade secrets in more detail as the defendant had enjoyed unrestricted access to all allegedly stolen data during his employment relationship, and probably still has full access today. After all, the claimant accused him of having obtained unauthorized permanent knowledge of this information.

Criticism of the Supreme Court decision

In principle, the Supreme Court is right insofar as merely listing generic terms in the initial pleading cannot be sufficient. At the same time, however, it must be feared that this decision will place very high demands on the owner of the secret. Such demands ultimately undermine the broad protection of trade secrets intended by the legislator. For it is precisely in those cases where a large amount of data has been lost, that it will be virtually impossible to specifically designate each individual trade secret and justify why it should be protected. However, the download of an abundance of data to an external storage medium is a prime example of trade secret theft. It should instead suffice to explain why a whole set of data is secret, of commercial value and subject to appropriate confidentiality measures.