This article by Gianpaolo Todisco was published in the September 2014 issue of the IBA Intellectual Property and Entertainment Law Newsletter of the International Bar Association Legal Practice Division.
In order to ensure that information controlled by a company is protected, it is necessary that this is economically exploitable and secret, meaning it is hardly accessible as well as adequately protected by whoever is the rightful owner.
In Italy, in order to claim adequate protection of a trade secret, the owner must demonstrate the existence of a documented and stringent protection policy and to have arranged appropriate measures like internal rules, specifications, safety procedures, confidentiality clauses etc.
The Legal Frame
Under Italian Law, the protection of trade secrets is granted under Intellectual Property and Unfair Competition Law as well as under the Criminal Code.
Before the reform of 1995 which acknowledged TRIPS Agreements, a specific and autonomous legal qualification for the protection of trade secrets could not be found in the Italian system. Until then, protection could have been found under the general principles of contract law and unfair competition law. However, the 1995 reform finally introduced a separate article (article 6-bis) in the 1939 Italian Patent Act[i] which protected general corporate information from misappropriation.
In 2005, the protection of corporate information under article 6 bis of the Patent Act was transferred and expanded in articles 98 and 99 of the Intellectual Property Code (hereinafter the IP Code).
Articles 98 of the IP Code
Article 98 defines the perimeter of what is considered secret information under the IP Code. According to such article:
1. “Corporate information, and technical-industrial experiences, which are under the legitimate control of its holder are protected, if such data:
a) are secret in the sense that they, as a whole or in the combination of their single components, are not known among (or readily accessible to) experts and professionals;
b) have economic value due to their secrecy;
c) are subject to adequate secrecy measures by persons who lawfully control such data .
2. Evidence and data which involve a considerable effort for the grant of authorization of chemical, pharmaceutical or agricultural products involving the use of new chemical substances are also protected”.
It must be underlined that art. 98 of the IP Code does not only protect general corporate information, (as it happened under art. 6 bis of the former Italian Patent Act) but also more general technical – industrial experiences as commercial information.
With the introduction in 2005 of articles 98 and 99, the IP Code finally protects:
a) technical information related to procedures and products which are patentable or not[ii];
b) trade information related to the implementation of commercial functions;
c) administrative information[iii].
With respect to trade information, before the introduction of articles n. 98 and 99 of the IP Code, Courts stated that client lists and more general information as well as economic conditions applied to clients were treated as confidential information, even in cases when such data was accessible to only certain employees or known within the company[iv]. After articles n. 98 and 99 were introduced, Courts have abandoned the concept of per se confidential information, stating that client lists and more general trade information are granted protection only if the company has adopted secrecy measures aimed in protecting such data and that such information has an economic value.
In order to seek for the protection under article 98 of IP Code, all the following requirements have to be met:
a) the information must be novel, meaning that it is not known or not easily accessible by operators of the same territorial and economic sector[v];
b) the data must have an economic value, meaning that the company in possession of trade secrets is in an economically advantageous position with respect to its competitors which do not hold such data;
c) the company must have adopted secrecy measures in order to protect such information from disclosure, meaning that it must have adopted specific measures in filing and classifying documents as well as in imparting rules to employees as to avoid disclosure.
Article 99 of IP Code
The other article contained in the IP Code governing the protection of trade secrets is art. 99, which states that:
“Notwithstanding the principles of unfair competition, the legitimate holder of the information and data referred to under Article 98, is entitled to prevent non authorized third parties, to acquire, use or disclose such information and data, except for the case in which they have been independently acquired”.
This article provides trade secrets’ holders with remedies that apply notwithstanding to the more general unfair competition discipline of article 2598, n. 3 of Civil Code, which applies only to the wrongful acts of competitors.
The relationship between know-how and trade secrets protected under article 98-99 of the IP Code.
Generally speaking, Italian Courts and Italian authors have defined know-how accordingly to the CE 04/772, CE 00/2659 and to CE 10/330, in which an explicit reference is made to such IP asset.
Here Know-how defined as “an asset of non-patented practical knowledge deriving from experience and evidence which is: (i) secret, or in other words not generally known or easily accessible, (ii) substantial, i.e. significant and useful for the production of contractual products, (iii) identified or described in a sufficient manner as to allow the compliance with the criteria of secrecy and substance”.
Consequently, know-how appears to overlap only partially with the definition of secret information under article 98 of the IP Code, as the only common requirement for the protection seems to be the economic value of the information. Indeed, such partial overlap derives from the different nature of the two assets where know-how is generally protected and determined in order to be licensed, while trade secrets are not meant to circulate among third parties. Therefore, in case of violation of know-how by third parties, Courts have generally applied the principles of unfair competition under article 2598, § 3, rather than articles 98 and 99 of IP Code.
The unfair competition rules contained in the Civil Code
Art. 2598 § 3 of the Italian civil code article states that “... anyone that uses directly or indirectly any mean which does not comply with the principles of fair professional conduct and which is capable of harming other companies performs acts of unfair competition”.
It must be noted that such rule is applicable only between competing entrepreneurs so that, for example, if a consultant steals a trade secret in the furtherance of a contractual relationship, protection under such article could not be claimed.
The rule under art. 2598 § 3 protects information which is not per se confidential, but only in the presence of behavior that is deemed unfair and when the parties are competitors. This of course means that when the unfair act is carried out by the employee, the claimant cannot seek protection under this article unless the ultimate beneficiary is competitor. This occurs for example, when the employee steals trade secrets for the benefit of a competitor, unless defendant proves otherwise[vi].
More specifically Courts have also considered the theft of trade secrets through espionage as an unfair conduct[vii] as well as the appropriation of confidential information, illegally stolen, when the ultimate effect is the subtraction of commercial and industrial secrets that the company does not want to put in the hands of third party competitors[viii].
Also the theft of secrets through the hiring of a competitors’ employees constitutes an unfair competition act when the ultimate purpose is to obtain their technical knowledge in order to enter the market sooner than it would be possible on the basis of their studies and research[ix].
Again Courts have stated that the termination of an employment relationship does not prevent competitors from passing off actions for the misappropriation of trade secrets by the ex-employee when he continues to contact the competitor’s regular customers by offering the same products and omitting any communication regarding termination of employment[x].
We should also briefly mention that the misappropriation of trade secretes is recognized as an unfair completion conduct by art. 2105 n. 6 of the civil code which regulates the duty of loyalty of the employee that should refrain from any behavior that may affect the interests of the company while benefitting a competitor. Indeed, the employee has a legal obligation to secrecy for the entire duration of the employment relationship, which may be extended also after the termination by signing a non-competition agreement.
The protection granted by Criminal Law.
Apart from the rules stated in the IP and Civil Code an effective degree of protection can be found in the Criminal code under articles 621 and 623.
These articles censor the revelation of the contents of secret documents and of trade secrets with the possible punishment of imprisonment.
More specifically the Italian criminal code protects the content of secret documents and records, whether public or private against unpermitted disclosure with imprisonment up to three years or a fine. For the purposes of protecting new supports also computer devices containing data, information or programs fall within the definition of “documents”.
Protection is also granted in case a secret is revealed for the profit of third parties by reason of their status or office, or profession and without just cause with imprisonment or a fine.
The penalty is increased if the offense is committed by directors, general managers, managers responsible for preparing corporate accounting documents, auditors or liquidators, or if it is committed by those who carry out the audit of the company.In light of the system described above, data and trade secrets holders can seek for an effective protection under Italian Law and can find an adequate response to their needs in the Courts rulings that continuously evolve in order to
[i] R.D. 29 of June 1939, n. 1127
[ii] According to the Court of Rome executive designs related to the construction of plants for the production of fibers are protected as secret information (Court of Rome decision of March 31, 2004 in Giurisprudenza Annotata di Diritto Industriale, 04, p. 997.
[iii] With respect to administrative information, Courts have stated that documentation related to the UNI, EN, ISO 9001 quality certification is protected as trade secret (Court of Mantova, 12th of July, 2002).
[iv] Court of Verona, May 4th, 1996; Court of Appeal of Florence, 24th April, 1976; Court of Milan, 24th May, 1973;
[v] Italian Courts have excluded protection for lack of novelty in cases of reverse engineering, Milan Court of Appeal, 25th of January 1972 and Court of Rome, 1st of July 1985.
[vi] Court of Appeal of Bologna, June 19, 1995.
[vii] Court of Modena, July 15, 1996.
[viii] Supreme Court, 1983 n.1413
[ix] Court of Orvieto, July 4, 1996.
[x] Court of Verona, April 30, 1996.