Business confidentiality: how effective is it?

During the 11th edition of Circle Discussions, held on Thursday 13 April 2023, the following people met for a workshop on trade secrecy:

• Sabine MARCELLIN, lawyer and lecturer – HEC / Université Paris 2 ;
• Céline LEROY, Partner – Eight Advisory ;
• Vanessa MICHOUD, General Councel of the Group – Sequens ;
• Yann UTZSCHNEIDER, Partner – White & Case.

There have been many attempts to legislate on trade secrecy in France, but always without success. Only with the Directive (EU) 2016/943 of 8 June 2016, transposed into French law by Law No. 2018-670 of 30 July 2018, there is a legal framework for trade secrecy.
Thus, any information that meets the following criteria can be protected as a trade secret

• it is confidential ;
• it is of actual or potential commercial value by virtue of its secret nature;
• it is subject to reasonable safeguards on the part of its rightful owner to maintain its secrecy.

It is also important to note that all data less than 5 years old at the time of the decision on the application are covered by commercial confidentiality. Conversely, any data older than 5 years is no longer covered by trade secrecy.

Risks in company sales and acquisitions

When considering the acquisition of a company, one must know important information about the company that is covered by trade secrecy and that constitutes strategic knowledge for the buyer.
the buyer must know important information about the company that is covered by trade secrets and that constitutes strategic knowledge for the buyer to know whether or not to complete the purchase.

The seller, on the other hand, takes a risk in disclosing this information to the potential buyer, because the latter might withdraw his decision.
The potential buyer of a business must remember to protect its own knowledge and know-how so as not to be accused of copying the knowledge and know-how of the seller, whose confidential information it may have obtained through the proposed acquisition. This implies that a system has been set up to trace all information covered by trade secrets within one’s own company.

Be aware of the importance of sensitive information

Awareness of the importance of protecting corporate data is the result of the regulation of various sectors where information is highly sensitive: Professional Secrecy, Medical Secrecy, Personal Data, Cybersecurity.
A company can only protect sensitive information if it is aware of the importance of keeping this information confidential and that it must be protected.It must therefore identify sensitive information, classify it and then secure it.

upstream protection, evidence and summary proceedings

In order to protect sensitive data in the best possible way, processes must be put in place that both reduce risk (protecting client data from access by employees through a confidentiality agreement) and traceability of information, both in technical terms (blockchain, infrastructure, etc.) and in human terms (employee training to raise awareness of the level of sensitivity of information).
It should be noted that know-how develops over time, with different phases and different levels. One must be able to demonstrate ownership and precedence of this know-how.
For this, the blockchain is ideal because it makes it possible to prove the precedence of a document with a history of the process, which gives it probative value in France and in many other countries. Moreover, it can be integrated into the digitisation system.
In order to prevent an imminent infringement or to put an end to an unlawful infringement of a trade secret, the judge may, on application or in summary proceedings, prohibit the disclosure of a document.
Of course, this presupposes that the development of one’s know-how is well documented beforehand.
Above all, do not forget to submit the matter to the judge on the merits within 20 working days in order to have the decision of the interim judge confirmed.

The penalty for violating a trade secret is the payment of compensation, the amount of which is assessed according to the damage suffered and taking into account the profit of the person who violated the secret.

To read the article in Le Monde du Droit: click here