New Trade Secret Protection Act – Improving the Legal Framework
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Earlier this month, the new Serbian Trade Secret Protection Act (link) came into force. The Act replaces its predecessor with the main aim to harmonize the Serbian legislation with the relevant EU legal framework and to better the overall protection of the companies’ investments in developing knowledge and other forms of intellectual capital which give them a competitive advantage on the market.
The Act abandons the concept of limiting trade secret protection to unfair competition only. Instead, by introducing a new definition of a trade secret, the Act offers protection from all acts which constitute illegal acquisition, use or disclosure of trade secrets. At the same time, the legislator places a greater emphasis on the company’s responsibility, by obliging it to adhere to the legal standard of taking “reasonable measures for preservation of secrecy”. Although the Act is a big step forward in terms of clarity, one could argue that certain terms, such as the “use” or “disclosure of trade secrets”, are left to be further specified by the jurisprudence of the Serbian courts.
Under the Act, liability for unlawful acquisition, use or disclosure of a trade secret is extended. It introduces misdemeanor liability of entrepreneurs and other natural persons who can now be fined in the amount of up to approx. EUR 4.250 and EUR 1.280, respectively. The Act also prescribes liability of an agent providing services to third parties which are used for trade secret infringement and obliges participants in court proceedings to disclose the identity of other parties involved in such infringement. Novel provisions such as these are expected to lead to a more mindful behavior towards trade secrets.
The legislator has dedicated tremendous attention to the provisions governing court proceedings arising from the violation of the Act. The statute of limitations for the civil action is prolonged and the claim can now be filed within one year from the moment the claimant became aware of the infringement and the person responsible, but no later than five years from the day the infringement has occurred. Also, the claimant cannot request for the shareholder’s exclusion from the company (provided the action is brought against a shareholder), nor a termination of employment (if the action is brought against an employee).
The Act compensates by obliging courts to grant various injunctions when there is a risk that the trade secret will be unlawfully acquired, used, or disclosed. Relieving the plaintiff of the burden of proof in terms of occurrence of damage stimulates active approach towards trade secret protection via court action. Moreover, in contrast to its predecessor, the Act is more insistent on the preservation of secrecy by persons involved in proceedings and the acting officials.
One could argue that the Act leaves room for speculation about the foreigner’s ability to exercise trade secret protection rights under the Act, as this is conditioned by the existence of either a relevant international agreement or reciprocity.
To date, trade secret protection remains an underused legal remedy. The Act undoubtedly provides solid foundation for this to change and instills hope that protection of trade secrets will gain in importance and find its place in the corporate culture of the Serbian companies. However, this remains dependent on the course of development of the business community and the ability for improving the efficiency of the judiciary system.
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