Article 11 August 2015

The Copyright Act as a tool for efficient trade secret protection

Companies may be able to use the Copyright Act as protection when someone misuses their trade secrets, confirms the Supreme Court of Finland. The ruling also puts pressure on companies to keep their access restrictions up-to-date.

Judgment of the Supreme Court – Trade secret provisions offered no remedy

On 11 June 2015, the Supreme Court handed down its latest judgment (KKO:2015:42) on the misuse of corporate trade secrets. The case concerned a former employee who had copied databases and files belonging to his employer after resigning his employment relationship. The employee had subsequently established a competing venture. The copied material included information containing business secrets, such as product descriptions, work instructions and price lists.

What was particularly interesting in this case was that the Court, reasoning and drawing distinction between the punishable acts of corporate espionage and violation of a business secret, dismissed charges brought against the employee on the basis of trade secret misuse. As the employee's access to information was unrestricted, and remained so also during his period of notice, rights under the Copyright Act (404/1961) were ultimately rendered as the only remedy available for the employer.

More than just a trade secret – Catalogues and databases are protected

The Mustasaari District Court and the Vaasa Court of Appeal had earlier found the copying of the databases and files to constitute a copyright offence, and the Supreme Court did not grant leave to appeal in this regard. The Supreme Court, holding the view of the lower courts, ruled that the copied databases and files compiled a large number of information items and their obtaining and presentation had required substantial investment from the employer.

It followed that the employer had an exclusive right under the Copyright Act to control the whole or a substantial part of this material as a producer of a catalogue and a database. The employee, not being entitled to reproduce this material in its entirety, had infringed the rights of the employer for profit in violation of the Copyright Act and in a manner conducive to causing considerable detriment or damage to the employer. Particular significance was given to the fact that the employee's new business was a competing undertaking.

The Supreme Court specifically stated, with regard to copyright offences, that it is irrelevant whether or not the protected material is eventually utilised. This provides an advantage in contrast to the provisions of the Criminal Code of Finland (39/1889) regarding trade secrets, which require an intention of disclosure or utilisation by the perpetrator.

Corporate espionage and violation of a business secret – where's the difference?

In the present case, the Supreme Court extensively referred to its prior precedent KKO:2013:20, reiterating its view on the difference between two relevant provisions of the Finnish Criminal Code, namely corporate espionage and violation of a business secret.

The provision concerning corporate espionage emphasises the prerequisite of unlawful circumstances in obtaining a business secret. It may apply when business secrets are abused by external parties. As the employee's rights to obtain proprietary information had, in the case at hand, not been restricted by the employer, the Supreme Court found that the employee's conduct could not be deemed unlawful, rendering this provision inapplicable to this case.

The provision regarding violation a business secret applies to abuses of proprietary information by associated parties, such as own personnel and parties performing duties on behalf of a company. In its prior precedent KKO:2013:20, the Supreme Court found two former employees guilty of an attempted violation of a business secret in circumstances that were closely similar to the recent case, ruling that the act of committing a violation of a business secret may be viewed to commence already when files containing business secrets are copied, where the intention behind this copying is clearly the committing of a business secret violation later on.

In the recent case, charges against the employee on the basis of business secret violation were dismissed under provisions concerning time-barring of the imposition of a sentence in criminal matters. Should this procedural time limit not have come to question, it would have appeared likely, in light of the prior precedent, that the Supreme Court would have found an attempted violation of a business secret.

What's the practical significance?

The recent case and the judgment of the Supreme Court elaborate and clarify the available tools for efficient trade secret protection.

Businesses should take notice of the protection that copyright provisions may confer to their trade secrets – not only may the Copyright Act provide companies with exclusive rights to certain kinds of trade secrets – but also the threat of committing a copyright offence punishable by law may aid in dissuading trade secret misuse. The invoking of rights under the Copyright Act should be considered in cases of perceived misuse.

Furthermore, it is ever more important for companies to pay attention to the updating of their access restrictions. Negligence in restricting access to trade secrets from persons not needing this information in the performance of their duties may bring undesired consequences, as it can effectively curtail the applicability of available legal remedies. It is clear under Supreme Court case-law that misuse of information to which one has access is not a question of corporate espionage, but may constitute a violation of a business secret.

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