Implementation into Hungarian law of EU Directive 2016/943 on trade secrets

With the effect of 7 August 2018, Hungary implemented Directive 2016/943 on the protection of undisclosed know-how and business information.

The Directive grants EU Member countries a coherent legal protection which was not the case to date as there was a discrepancy in the legal arsenal available to the judge.

Act LIV of 2018 on the Protection of Trade Secrets has opted for not literally implementing the text of the Directive but to create a new legal framework which is compliant with the rules of the Directive in content. Prior to the act, trade secrets and know-how has been regulated by the Hungarian Civil Code as rights relating to personality. The new act brings a conceptual change, granting trade secrets and know-how a kind of protection similar to intellectual property rights.

Let us take a closer look at a few points of the new act and also on the deviations from the text of the Directive (if any).

Trade secret is defined in the act as follows:

“Trade secret is a fact, information, other data or the compilation of these, related to commercial activity, which is secret, in the sense that it is not, as a body or in the configuration of its components, generally known among or readily accessible to persons performing the affected commercial activity and therefore has commercial value, and which has been subject to reasonable steps under the circumstances, by the lawful beneficiary of the information, to keep it secret.”

In content the definition is in line with that of the Directive, however the Hungarian act did not take over the literal text of the Directive’s definition.

In contrary to the Directive, the Hungarian act also sets out a separate definition of know-how, being “a technical, economic and organizational knowledge, solution, experience and any combination thereof held in a form enabling identification, which qualify as trade secret.”

The Hungarian act states, that the acquisition, use and disclosure of trade secrets shall be considered lawful when it is obtained by any of the following means (we note that there are slight differences in the Hungarian act compared to the text of the Directive, we marked the additions in the Hungarian act with bold and the deletions with strikethrough):

• independent discovery or creation;
• observation, study, disassembly or testing of a product or object service that has been made available to the public or that is lawfully in the possession of the acquirer of the information who is free from any legally valid duty to limit the acquisition of or to keep the trade secret confidential;
• exercise of the right of workers or workers' representatives to information and consultation in accordance with Union law and national laws and practices to the extent necessary, with the exception of technical knowledge or solutions qualifying as know-how;
• any other practice which, under the circumstances, is in conformity with honest commercial practices.

On the contrary, the acquisition, use and disclosure of trade secrets, without the consent of the trade secret holder, shall be considered as unlawful whenever it was carried out by (these rules are literal take-aways from the Directive):

• 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;
• any other conduct which, under the circumstances, is considered contrary to honest commercial practices.

It will be also considered as unlawful when, without the consent of the trade secret holder, a person (these clauses are also in full compliance with the text of the Directive):

• has acquired the trade secret unlawfully, or
• is in breach of a contractual or any other duty to limit the use of the trade secret, or
• is in breach of a contractual or any other duty to limit the use of a trade secret.

Furthermore, the acquisition, use or disclosure of a trade secret shall also be considered unlawful whenever a person, at the time of the acquisition, use or disclosure, knew or ought, under the circumstances, to have known that the trade secret had been obtained directly or indirectly from another person who was using or disclosing the trade secret unlawfully.

Finally, the production, offering or placing on the market of infringing goods, or the importation, export or storage of infringing goods for those purposes, shall also be considered an unlawful use of a trade secret where the person carrying out such activities knew, or ought, under the circumstances, to have known that the trade secret was used unlawfully.

The Hungarian act also provides certain exceptions to protect the acquisition, use or disclosure of trade secrets when it is linked to whistle-blowers or when it is permitted by Union or national laws. The Hungarian act, surprisingly, in contrary to the Directive, does not expressly contain the freedom of expression and information as an exception.

The sanction regime of unlawful acquisition, use or disclosure of trade secrets is similar to the sanction regime of intellectual property right infringements. This involves objective sanctions, which are applicable irrespective of whether the infringement was conducted in bad faith: e.g. destruction of infringing goods, data provision on persons involved in the infringing actions, restitution of the economic gains achieved through infringement.

Instead of the above mentioned objective sanctions, the court may render, at the request of the infringer, to pay a pecuniary compensation of the right holder, if the infringer did not know that he obtained the trade secret from a person who used or disclosed it in an unlawful manner, the application of the objective sanctions would be disproportionate and the disadvantage suffered by the right holder is reasonably offset by such compensation. This opportunity is new in Hungarian law, and it will be interesting to see how it will work out in practice.

Besides the objective sanctions or the above described compensation, the right holder may also claim compensation for any further damages suffered by it as a result of the infringement.

The Hungarian courts will have the possibility to order the termination of the infringing activity, prohibit the production, offering, placing on the market, importing or exporting of the infringing goods or to order the seizure of such goods by way of interim orders.

The Hungarian act does not set out any special limitation period for the infringement of trade secrets, therefore the general rule of the Hungarian Civil Code (5 years) shall apply. In its article 8, the Directive mentions a limitation of six years which is slightly more favourable to trade secret holders

We can help you to protect your trade secrets. Please do not hesitate to contact us.

Access to the Hungarian implementing act (only available in Hungarian): https://net.jogtar.hu/jogszabaly?docid=A1800054.TV×hift=fffffff4&txtreferer=00000001.TXT

Access to the Directive: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32016L0943&qid=1536743526794&from=HU