The perils of secrecy

Trade secrets are a very specific form of IP right. In many cases it is relatively easy to assert a patent or trademark because the rights holder has a document issued by the government. This is not so in the case of know-how: the rights holder can rely only on his or her word and the contract.

The Civil Code includes provisions on the secrecy of know-how. Although the law does not discriminate between companies and individual entrepreneurs, by default it is applicable more to companies than to private persons.

Cases over know-how are rare. However, one recent case involved two entrepreneurs in St Petersburg. The plaintiff sued the recipient of confidential information for $20,000 for breach of a contract that provided for the non-disclosure of confidential information.

According to the case documents, the plaintiff and respondent signed Technology Transfer Agreement 173/250612, according to which the plaintiff gave the respondent a package of paper documents and a compact disc holding a description of "DECORLIT – manual presswork” technology for producing composite cast stone, fibreglass and liquid stone.

When concluding the contract the parties agreed that, according to Section 1.2, the transferred information was the property and know-how of the plaintiff and it enjoyed legal protection. The contract confirmed that the information fell under the commercial secrecy regime and relevant measures were taken as per the law to keep the information secret. Section 4.3.1 of the contract also provided that in case of the unauthorised disclosure of confidential information to third persons, the respondent should pay the plaintiff $20,000 for each established fact which was disclosed. The contract also confirmed that confidential information had been transferred to the respondent and a delivery report to that effect was signed.

In contravention of the contractual provisions and Article 10 of the Law on Commercial Secrets, the respondent transferred technical documents containing trade secrets to a third party. The difficulty inherent in such transfers is to prove the transmission of information. In this case the plaintiff was able to produce a notarially attested report confirming that the technical documents were indeed handed over to the third person. However, the case was far from simple. The St Petersburg Commercial Court upheld the plaintiff's claims and awarded compensation. On appeal, the appeal court upheld the commercial court's decision. Finally, the respondent appealed to the IP Court. However, the IP Court upheld the decisions of the lower courts.