EFFECTIVE REGULATIONAL CHANGES IN BUSINESS SECRET PROTECTION

EFFECTIVE REGULATIONAL CHANGES IN BUSINESS SECRET PROTECTION

SUMMARY OF the PROVISIONS OF act LIV of 2018
ON BUSINESS SECRET PROTECTION

Nowadays in our constantly changing economic environment innovation and new technologies can greatly boost a company’s development life, whatever the type of that new and exciting actual idea it may be. If one day a young man showed up at your door, claiming that he has a couple of excitingly great ideas, which would thrill your business for further success, would you not grab the instantly occurring opportunity? One would say that all company leaders would immediately live with the chance offered, though consciousness and awareness should be raised about the real consequences if that idea or technology was used by someone before or actually was owned by someone.

Would it be satisfactory to claim the fact, that you did not know that this new idea or technology originally affects another company’s business secret protection?

The Hungarian and European Union law on business secret protection is constantly evolving and developing, in order to provide suitable answers for the constantly changing challenges and also to protect the interests of those who act in good faith. In this newsletter we will intend to share the novelties of the recently introduced Hungarian act.

  1. Actual changes within the regulation of business secret protection

According to the new Hungarian act, implemented based on the European Union legislation criteria, business secret is a fact, information, or any other data and a compilation of those activities, related to one company’s economic activity, which is secretly kept – meaning that it is not generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question and therefore it has commercial value because it is secret, and it has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

The respective act defines the ‘know-how’ as a specialty of business secrecy, thus fully extends all effective and actual rules of the business secret protection regulation to know-how. Business secrets are also considered to be ‘know-how’ related facts containing technical, economic or organizational knowledge, solutions, experiences, or compilation of all those in an identifiable way. With respect to the ‘know-how’, the right holder may be a person other than the creator, so it is particularly emphasized who has made the presumption of confidentiality in the context of secrecy, since in the case of know-how, this person is essentially the holder of the business secret.

Based on the new act, the right to business secrets is clearly marketable. The right holder may transfer in whole or partially the respective business secret right (business secrecy transfer agreement) and may also authorize others in interest to exploit business secrets (commercial secret exploitation contract).

2. Renewed sanction system for business secrecy breach

Anyone who acquires, exploits, or discloses business secrets without the consent of the holder violates the business secret rights of the holder. The exploitation or disclosure of those secrets is considered unlawful if it is carried out by a person who has unlawfully acquired it or had legitimately acquired it, but it does exceed the actual agreement of the legitimate holder.

The scope of the sanctions applicable in case of business secret breach is commonly covered in the new law. The sanctions include, among others, the Civil Code’s penalties applicable in cases of personal infringements, termination or the disqualification of infringement, not at last all legal consequences of protection, competition and intellectual property law sanctions, i.e. disclosure by the infringer of the participants in production, distribution or performance of goods that violate business secrets, the destruction of objects, materials or files containing business secrets or the transfer to the creditor.

In the event of business secret breach, the claimant has the right and possibility to claim for compensation under the rules of the Civil Code of Hungary concerning liability for damages, regardless of all other applicable sanctions.

The new law introduces an additional, new legal consequence, not yet known and applied in Hungarian law, which is the possibility of financial compensation.

The court may order the payment of financial compensation if:

either a person was in good faith in the possession of business secrets and only later became aware of the fact that this information came from sources that were illegal,

the application of the financial compensation is requested by the bona fide offender,

the use of other sanctions would cause disproportionate injury to the persons concerned,

and the amount of the compensation to be granted to the claimant seems reasonably satisfactory.

It is important to highlight that the amount of compensation may be up to the limit of unused utilization fee.

We would like to emphasize that financial compensation does not affect any other claim of the claimant, especially his claim for damages.

In the case of business secrecy breach, it is important to note that business associations or any other legal persons may be responsible for violations committed by their employees during the course of their employment relation. In order to exclude such risks, it is appropriate to settle liability for the breach in the employment contract, or in a separate employee statement.

*

The foregoing summary is intended to raise awareness and does not constitute legal advice.

If you have any questions or need further information, please do not hesitate to contact us.

EFFECTIVE REGULATIONAL CHANGES IN BUSINESS SECRET PROTECTION

EFFECTIVE REGULATIONAL CHANGES IN BUSINESS SECRET PROTECTION

SUMMARY OF the PROVISIONS OF act LIV of 2018 ON BUSINESS SECRET PROTECTION

Nowadays in our constantly changing economic environment innovation and new technologies can greatly boost a company’s development life, whatever the type of that new and exciting actual idea it may be. If one day a young man showed up at your door, claiming that he has a couple of excitingly great ideas, which would thrill your business for further success, would you not grab the instantly occurring opportunity? One would say that all company leaders would immediately live with the chance offered, though consciousness and awareness should be raised about the real consequences if that idea or technology was used by someone before or actually was owned by someone.

Would it be satisfactory to claim the fact, that you did not know that this new idea or technology originally affects another company’s business secret protection? The Hungarian and European Union law on business secret protection is constantly evolving and developing, in order to provide suitable answers for the constantly changing challenges and also to protect the interests of those who act in good faith.

In this newsletter we will intend to share the novelties of the recently introduced Hungarian act.

  1. Actual changes within the regulation of business secret protection

According to the new Hungarian act, implemented based on the European Union legislation criteria, business secret is a fact, information, or any other data and a compilation of those activities, related to one company’s economic activity, which is secretly kept – meaning that it is not generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question and therefore it has commercial value because it is secret, and it has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

The respective act defines the ‘know-how’ as a specialty of business secrecy, thus fully extends all effective and actual rules of the business secret protection regulation to know-how. Business secrets are also considered to be ‘know-how’ related facts containing technical, economic or organizational knowledge, solutions, experiences, or compilation of all those in an identifiable way. With respect to the ‘know-how’, the right holder may be a person other than the creator, so it is particularly emphasized who has made the presumption of confidentiality in the context of secrecy, since in the case of know-how, this person is essentially the holder of the business secret.

Based on the new act, the right to business secrets is clearly marketable. The right holder may transfer in whole or partially the respective business secret right (business secrecy transfer agreement) and may also authorize others in interest to exploit business secrets (commercial secret exploitation contract).

2. Renewed sanction system for business secrecy breach

Anyone who acquires, exploits, or discloses business secrets without the consent of the holder violates the business secret rights of the holder. The exploitation or disclosure of those secrets is considered unlawful if it is carried out by a person who has unlawfully acquired it or had legitimately acquired it, but it does exceed the actual agreement of the legitimate holder.

The scope of the sanctions applicable in case of business secret breach is commonly covered in the new law. The sanctions include, among others, the Civil Code’s penalties applicable in cases of personal infringements, termination or the disqualification of infringement, not at last all legal consequences of protection, competition and intellectual property law sanctions, i.e. disclosure by the infringer of the participants in production, distribution or performance of goods that violate business secrets, the destruction of objects, materials or files containing business secrets or the transfer to the creditor.

In the event of business secret breach, the claimant has the right and possibility to claim for compensation under the rules of the Civil Code of Hungary concerning liability for damages, regardless of all other applicable sanctions.

The new law introduces an additional, new legal consequence, not yet known and applied in Hungarian law, which is the possibility of financial compensation.

either a person was in good faith in the possession of business secrets and only later became aware of the fact that this information came from sources that were illegal,

the application of the financial compensation is requested by the bona fide offender,

the use of other sanctions would cause disproportionate injury to the persons concerned,

and the amount of the compensation to be granted to the claimant seems reasonably satisfactory.

It is important to highlight that the amount of compensation may be up to the limit of unused utilization fee.

We would like to emphasize that financial compensation does not affect any other claim of the claimant, especially his claim for damages.

In the case of business secrecy breach, it is important to note that business associations or any other legal persons may be responsible for violations committed by their employees during the course of their employment relation. In order to exclude such risks, it is appropriate to settle liability for the breach in the employment contract, or in a separate employee statement.

*

The foregoing summary is intended to raise awareness and does not constitute legal advice.

If you have any questions or need further information, please do not hesitate to contact us.

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