Trade secret laws and regulations in Bulgaria

With the State Gazette No 28 of 5 April 2019, a completely new Trade Secret Protection Act was promulgated. It introduces the provisions of the Directive.

Prior to the introduction of the Trade Secret Protection Act, matters concerning trade secrets were fragmentarily or indirectly regulated by the Protection of Competition Act and the Commerce Act.

The definition of trade secret under the Bulgarian Trade Secret Protection Act has been borrowed from the text of Directive (EU) 2016/943, namely: any commercial information, know-how and technological information, which meets all of the following requirements:

1. it is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
2. it has commercial value because of its secret nature;
3. it has been subject to reasonable measures under the circumstances, by the person lawfully in control of the information, to keep it secret.

One of the requirements a "trade secret" should meet is to be subject to reasonable measures to keep it secret by the person lawfully in control of the information. However, these measures may be different. They may be classified as "legal" and "factual / technical" measures.

“Legal” measures:

• concluding "non-disclosure agreements" and agreements to limit the use of secrecy – for both groups of agreements, the law provides that even if information is lawfully obtained, if it is disclosed or used in breach of an explicit obligation, liability can be claimed. In order to obtain real protection, it is important to define specific information as a "trade secret";
• negotiating penalties in these agreements – the law provides that in the event of a breach of secrecy, compensation should be paid for all damages suffered and benefits lost, but in particular with high-tech know-how it is difficult to prove the exact amount of the damage. Inserting a penalty in the agreements would save the need to prove a specific amount;
• creating an internal system of rules regarding the whole receipt, distribution, use of information – this system could regulate the kinds of information considered secrets, the persons who have access to them, how secrets are stored, how secrets are distributed, and for the purposes this information is used for, etc. These rules should also indicate the consequences of non-compliance.

"Practical" / "Technical" measures:

• carefully analysing the specific information that the company as a whole or its specific project is working with – the company should consider what information is worth protecting as a secret, what its commercial value is and what the losses are if the information is leaked;
• marking of the information as confidential – this can be done both on paper and with electronically stored information;
• ensuring that the information is actually received on a need-to-know principle and that the actual person is given access to exactly that information he is qualified to see – this can be achieved by storing individual folders or encrypting documents, and by ensuring that corresponding folders or documents can only be opened by persons with a certain identification (e.g. through password protection).

The measures are different and not all of them must be taken. The important considerations: how the information is handled in practice, the measures to prevent its disclosure to unintended third parties, and the real measures in place to prevent unauthorised access.

The Bulgarian Trade Secret Protection Act does not envisage any specific regulation with respect to the transfer of trade secrets. The only existing provision on this matter states that trade secrets may be acquired inter alia on contractual basis. General rules concerning transferability of trade secrets under Bulgarian law are applicable. Trade secrets are property rights and can be assigned or licensed to other persons. The holder of trade secret has the right to authorise a third party to access and use the trade secret information.

The general rights for protection as outlined by Directive (EU) 2016/943 are applicable.

The trade secret holder has the following rights:

• to a claim;
• to request that the court impose precautionary interim measures;
• to receive compensation for damages;
• for protection through the measures imposed in the judicial decision;
• to request that the court impose a publication of the judicial decision.

Not explicitly regulated by the legislation.

The acquisition of a trade secret without the consent of the trade secret holder will be considered unlawful, whenever carried out by:

• 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 deducted;
• any other conduct which is considered contrary to honest commercial practices within the meaning of the Protection of Competition Act.

The use or disclosure of a trade secret will be considered unlawful whenever carried out, without the consent of the trade secret holder, by a person who:

• has acquired the trade secret unlawfully;
• has been in breach of a confidentiality agreement or any other duty not to disclose the trade secret; or
• has been in breach of a duty to limit the use of the trade secret.

The acquisition, use or disclosure of a trade secret will 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.

The production, offering or placing on the market of infringing goods, or the importation, export or storage of infringing goods for those purposes, will also be considered an unlawful use of a trade secret:

• when the person carrying out such activities knew, or ought, under the circumstances, to have known that the trade secret was used unlawfully.

No such measures are explicitly regulated.

Interim measures

As a first option, before institution of a claim and at all stages of the proceedings until completion of interrogations before the appeal court instance, at the request of the trade secret holder, the court may impose the following precautionary measures:

• the cessation of or, as the case may be, the prohibition of the use or disclosure of the trade secret on a provisional basis;
• the prohibition of the production, offering, placing on the market or use of infringing goods, or the importation, export or storage of infringing goods for those purposes;
• the seizure and delivery of the suspected infringing goods, including where they are imported by third parties, so as to prevent their entry into, or circulation on, the market; the seizure and delivery will be performed in respect of the person holding them, by preservation order;
• the prohibition of offering or providing services, which significantly benefit from trade secrets unlawfully acquired, used or disclosed.

As a second option, the court may determine that the respondent must furnish a guarantee instead of enforcement of the measures. The bond amount will be determined in accordance with the direct and immediate damages the applicant would suffer if the respondent continued using the trade secret. The amount of the bond may not exceed the amount of the remunerations, which would have been due had the infringer requested authorisation to use the trade secret in question.

The injunction will be granted when the applicant has submitted convincing evidence that:

• a trade secret exists;
• the applicant is the trade secret holder;
• the trade secret has been acquired unlawfully, is being unlawfully used or disclosed, or the unlawful acquisition, use or disclosure of the trade secret is imminent.

When granting an injunction, the court will take into account the following circumstances: the value and other specific features of the trade secret; the measures taken to protect the trade secret; the conduct of the respondent in acquiring, using or disclosing the trade secret; the impact of the unlawful use or disclosure of the trade secret; the legitimate interests of the parties and the effect of the security in relation thereto; the legitimate interests of third parties; the public interest; and the safeguard of fundamental rights.

When granting an injunction, the court may oblige the applicant to furnish a guarantee of money or property to secure direct and immediate damages to be suffered by the respondent if the granting of the injunction is unfounded, and where necessary, for the damages suffered by third parties affected by the injunction.

Where the precautionary measures are superseded or cease to be in force due to action or omission of the applicant, and where the absence of unlawful acquisition, use or disclosure of a trade secret or a risk thereof is found, the court may, at the request of the respondent or a third party concerned, order the applicant to pay appropriate compensation for the damages suffered. This compensation may not be lower than the amount necessary to cover the costs and the damage caused to the respondent from the unfounded request.

Final measures

With the judicial decision in the case, the court will establish the unlawful acquisition, use or disclosure of a trade secret and, depending on the claim of the applicant and the specific circumstances, may impose the following measures on the infringer:

• the cessation of or, as the case may be, the prohibition of the use or disclosure of the trade secret;
• the prohibition of the production, offering, placing on the market or use of infringing goods, or the importation, export or storage of infringing goods for those purposes;
• the destruction of all or parts of documents, items, materials, substances or electronic documents containing or bearing the trade secret or, where appropriate, their delivery to the applicant;
• the prohibition of offering or providing services, which significantly benefit from trade secrets unlawfully acquired, used or disclosed.

The court may impose these measures (without the destruction of all or parts of documents) for a certain period of time, which is sufficient to eliminate all commercial or economic benefits gained by the infringer from the unlawful acquisition, use or disclosure of the trade secret.

At the request of the applicant, the court may impose one or more of the following measures in respect of the infringing goods or services:

• withdrawal of the infringing goods from the market or at the request of the trade secret holder, delivery of the goods to non-profit legal entities in the public interest;
• depriving the infringing goods or services of their infringing quality;
• destruction of the infringing goods or, where appropriate, their withdrawal from the market, provided that the withdrawal does not undermine the protection of the trade secret in question.

The injunction may be cancelled at the request of the respondent or ex officio by the court, if no evidence for the filling of the claim on merits is submitted within the one-month time frame from the granting of the interim measures. Other proceedings are not bound by specific terms.

Compensation for damages

The infringer will indemnify the trade secret holder for any damages suffered and benefits, which arise as a direct and immediate consequence of the unlawful acquisition, use or disclosure of a trade secret. The compensation will be due when the infringer knew or ought to have known that he, she or it was engaging in unlawful acquisition, use or disclosure of a trade secret.

The employees will be responsible for the damages suffered by their employer as a result of their unlawful acquisition, use or disclosure of a trade secret in an amount not exceeding the triple amount of their agreed work pay, where they act without intent.

Payment of compensation without imposition of measures

Upon established unlawful use or disclosure of a trade secret, at the request of the respondent, the court may order pecuniary compensation to be paid thereby to the injured party instead of applying the measures of the judicial decision if all the following conditions are met:

• the respondent at the time of use or disclosure neither knew nor ought, under the circumstances, to have known that the trade secret was obtained from another person who was using or disclosing the trade secret unlawfully and after becoming aware of that circumstance continued to use it;
• imposition of measures would cause a disproportionate harm to the respondent; and
• the pecuniary compensation for the damages suffered by the trade secret holder is fair.

The amount of this compensation should not exceed the amount of royalties or fees, which would have been due, had that person requested authorisation to use the trade secret in question, for the period of time for which use of the trade secret could have been prohibited.

With respect to the interim measures under the Trade Secret Protection Act, the general provisions of the Bulgarian Civil Procedure Code are applicable, whereas imposing interim measures is based on an ex parte court procedure.

When setting the damages, the court will take into account all appropriate factors relating to the unlawful acquisition, use or disclosure of a trade secret as follows:

• the damages, including lost profits, which the trade secret holder has suffered;
• any unfair profits made by the infringer as a result of the unlawful acquisition, use or disclosure of the trade secret;
• the non-material damage caused to the trade secret holder, where applicable.

When the claim is well founded but there is no sufficient data of its amount, the court will award compensation of no less than the amount of the remuneration, which would have been due had the infringer requested authorisation to use the trade secret in question, including the costs for identification and investigation.

When setting the type of the measures against the infringer and the infringing goods or services and their proportionality, the court, considering the specific case, will take into account the following circumstances:

• the value or other specific features of the trade secret;
• the measures taken to protect the trade secret;
• the conduct of the infringer in acquiring, using or disclosing the trade secret;
• the impact of the unlawful use or disclosure of the trade secret;
• the legitimate interests of the parties and the effects of the measures in respect of the parties;
• the legitimate interests of third parties;
• the public interest; and
• the protection of fundamental rights.

The right to a claim of the trade secret holder will extinguish upon expiry of five years from the performing of the infringement.

The right to a claim of the respondent and any third party concerned will extinguish upon expiry of the one year from the entry into force of the judicial act giving rise to the legal interest when:

• the precautionary measures are superseded, cancelled or cease to be in force due to action or omission of the applicant, and where the absence of unlawful acquisition, use or disclosure of a trade secret or a risk thereof is found;
• by an enforced judicial decision, it is established that a claim is unfounded, and that the applicant has requested the institution of the legal proceedings in bad faith or for the purposes of abuse.

From the moment of the infringement is committed.

The running of the limitation period will be interrupted:

• upon an admission of the claim by the infringing party;
• upon bringing an action or defence, or of an application for a conciliation proceeding to commence – if the action or the defence, or the application for a conciliation procedure, is not upheld, the limitation will be deemed to have not been interrupted;
• upon the undertaking of enforcement action.

At any stage of the legal proceedings, the parties and any other person concerned, including witnesses, may request from the court to set certain information on the case as confidential because it contains a trade secret or an alleged trade secret. The request will be duly reasoned.

In the cases where the court sets certain information as confidential, with the same determination the court may impose the following special measures for preserving its confidential nature:

• restrict in full or in part access to a document submitted on the case, which contains a trade secret or which is alleged to contain a trade secret by providing access to the document only to designated persons;
• restrict access to court hearings and to relevant records and minutes by ruling the case to be examined or certain actions to be performed in camera;
• issuance of a version of the final judicial act for the persons who are deprived of access to the trade secret, with removed trade secret information.

When deciding on the respective measure, the court will take into account the need to ensure the right to a fair trial and to an effective remedy, and the legitimate interests of the parties and, where appropriate, of third parties, and any potential harm for either of the parties resulting from the granting of such measure.

The number of persons who have access to the confidential information regarding a trade secret will not exceed the number necessary to ensure protection of the infringed rights.

The parties, their lawyers or other representatives, court officials, witnesses, experts and any other person participating in legal proceedings, or who have access to documents which form part of those legal proceedings, will keep the information defined as confidential and of which they have become aware as a result of such participation or access. They will be responsible for the use or disclosure of information, which contains a trade secret or an alleged trade secret defined as confidential.

The use or disclosure of information that is a trade secret or an alleged trade secret will be prohibited after the completion of the legal proceedings, unless:

• the court finds with an enforced act that the information, which allegedly contains a trade secret does not meet the requirements for a trade secret;
• the information protected as a trade secret becomes publicly available and accessible to the communities that normally use such information.

The acquisition, use or disclosure of the trade secret will not be considered unlawful in any of the following cases:

• exercising the right to freedom of expression and information as set out in the Charter of Fundamental Rights of the European Union, including respect for the freedom and pluralism of the media;
• revealing misconduct, wrongdoing or illegal activity, when this is done for the purpose of protecting the general public interest;
• disclosing a trade secret by workers to their representatives as part of a legitimate exercise by those representatives of their functions in accordance with European Union or Bulgarian law, provided that such disclosure was necessary for that exercise;
• protecting a legitimate interest recognised by EU or Bulgarian law.

When by an enforced judicial decision, it is established that a claim is unfounded and that the applicant has requested the institution of the legal proceedings in bad faith or for the purposes of abuse, at the request of the respondent the court may simultaneously or separately award:

• compensation for the damages suffered by the respondent;
• public disclosure of the information about the judicial decision.

Such a request could be made in the same or in separate legal proceedings.

No specific protection measures are envisaged by the Trade Secret Protection Act. The general exclusion concerning the infringement of trade secret for or illegal activity, when done for the purpose of protecting the general public interest, will be applicable.

There is a general protection measure under the Bulgarian Labour Code – control bodies are obliged to keep secret the source from which they received a signal for violation of the labour legislation or legislation related to the civil service.

Since this kind of liability is not explicitly regulated by employment legislation, the general rules will apply and the employer may be liable if the infringement was made under its orders or if the employer in other way was involved in the infringement.