What qualifies as a trade secret under Maltese law?
Malta’s Trade Secrets Act, which transposes Directive 2016/943/EU, protects undisclosed know-how and business information against their unlawful acquisition, use and disclosure. To qualify, a trade secret must: be secret (i.e. not readily accessible to the persons concerned); have commercial value; and should be given reasonable protection.
What makes the acquisition of a trade secret unlawful?
Article 6 (1) of the Trade Secrets Act specifies the following: unauthorised access to, appropriation of, or copying of any documents, objects, materials, substances, or electronic files, lawfully under the control of the trade secret holder, containing the trade secret or from which the trade secret can be deduced. In addition, any other conduct which is considered contrary to honest commercial practices could also amount to unlawful acquisition of trade secrets.
The phrase “contrary to honest commercial practices” encompasses malpractices such as breach of contract, breach of confidence and inducement to breach. It also includes the acquisition of undisclosed information by third parties who knew, or were grossly negligent in failing to know, that such malpractices were involved in the acquisition.
While the law provides remedies… prevention is better than cure
Why is this definition important?
Article 1031 of the Civil Code provides that a person is liable for the damage which occurs through his own fault; whereas Article 1030 of the Civil Code further provides that a person who makes use, within the proper limits, of a right competent to him, shall not be liable for any damage which may result therefrom.
Conversely, a person who abuses of his rights is responsible for the damages caused by his actions. Consequently, if an employee is trusted with having access to a trade secret and this trust is broken, that person would be liable for damages.
Procedurally, the employer would need to prove that: the trade secret was acquired, used and disclosed unlawfully without its consent; actual loss was suffered; there is a causal connection between the employee’s conduct and the loss suffered; and that the employee’s actions were the result of malicious intent or negligence.
How can companies limit the damage suffered?
The law provides for urgent measures which may be requested in court to preserve the confidentiality of the trade secrets which may have been compromised. Further to a request to a court, the court may order specific measures or actions to preserve the confidentiality of any trade secret. Failure to comply with a court’s order exposes the person to a €500-€150,000 penalty.
While the law provides remedies, it also expects the business owner to be responsible. Prevention is better than cure, as it were, and the best business tools to protect trade secrets are robust systems to protect access through IT systems, policies and procedures and their strict implementation.
Davinia Muscat, Jonathan Muscat and Inna Tupchii are partner, associate and trainee lawyer at WH Partners, respectively.