The treatment of trade secrets and undisclosed know-how

It provides a good opportunity to reflect on the definition of trade secrets and undisclosed know-how in the Netherlands.

German company Cavotec specialises in designing, developing and distributing systems which provide aeroplanes with water, electricity and fuel. Cavotec acquired its IP and know-how through an asset transfer agreement from a former competitor in 2012. The defendant in the current dispute is a former employee from that third company.

It came to the attention of Cavotec that the defendant allegedly copied the digital files concerning the design of the inspection pits at the time of their employment. Afterwards the employee allegedly established a Swedish company which sells strongly similar pits. Cavotec had reached a settlement agreement with the Swedish company that prohibits any use of undisclosed know-how.

The defendant allegedly did not comply with the settlement agreement and Cavotec initiated court proceedings in the Netherlands. Cavotec claimed damages for non-compliance with the agreement and unlawful conduct concerning the use of undisclosed know-how. Furthermore, Cavotec claimed infringement of its copyright and slavish imitation of its products.

Keeping secrets

The Dutch Civil Code (DCC) does not contain any articles specifically on trade secrets and undisclosed know-how. Article 39(2) of the TRIPS Agreement is deemed to be incorporated in the DCC in the general article on torts (6:162, DCC).

In order to constitute undisclosed know-how the party must have taken reasonable measures to ensure the information is kept secret. The first response would be to check the employment contract for any non-disclosure clauses, but these were absent.

The defendant referred to the absence of a non-disclosure clause in the employment contract and stated that the information could not be considered undisclosed know-how. Other measures Cavotec had taken were the use of a heavily secured server with restricted access, strict non-disclosure agreements for third parties and the addition of a non-disclosure clause to each technical drawing.

With regard to the absence of a non-disclosure clause the court ruled that by adding a disclaimer on each technical drawing it ought to have been clear to the employees that it concerned confidential information. Therefore the court did not need to answer the question whether under Swedish law an employee is bound to secrecy when there is no such clause in the employment contract. The other circumstances already led to the conclusion that Cavotec had taken reasonable measures to ensure the information was kept secret.

Especially in the case of a former employee it can be difficult to determine whether undisclosed know-how and trade secrets are involved. A former employee under Dutch law free is to use his or her ‘knowledge, ability and experience’, which leads to the questions (i) when is the information used by the employee general knowledge, ability and experience acquired in the course of employment; and (ii) when does it concern trade secrets?

The phrase ‘knowledge, ability and experience’ dates from 1955 when the Supreme Court used it. To date a further qualification of what constitutes knowledge, ability and experience has not arisen. The implementation of the EU trade secrets directive 2016/943 will result in more attention to this subject, which could provide more clarity.

Michiel Rijsdijk is a partner at Arnold & Seidsma. He can be contacted at: mrijsdijk@arnold-siedsma.com