Trade secrets in Croatia

  1. General
    1. 1. Has the Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (“Trade Secrets Directive”) been implemented?
    2. 2. Are there any other applicable sources of law related to trade secrets?
    3. 3. How are trade secrets defined? 
    4. 4. Do specific measures or protections need to be put in place for information to benefit from protection as a trade secret?
  2. Dealings in and ownership of Trade Secrets
    1. 1. Are trade secrets transferable and/or licensable?
    2. 2. Are there specific consequences arising from transfer or licensing of trade secrets by a party other than the trade secrets owner?
    3. 3. Is co-ownership of trade secrets permitted?
  3. Enforcement of Trade Secrets
    1. 1. What actions constitute infringement of trade secrets?
    2. 2. Are there any measures allowing the trade secrets' owner to gather and/or preserve evidence of infringement of trade secrets?
    3. 3. What specific interim and final measures and remedies are available in the event of infringement of trade secrets?
    4. 4. Is there a specific period after obtaining interim measures by which the applicant must bring proceedings for a substantive decision on the merits of the claim?
    5. 5. Are there circumstances in which damages or other financial compensation may be available in place of an injunction and other measures?
    6. 6. Are any interim or final measures and remedies available through ex parte hearings?
    7. 7. How is financial compensation to the trade secrets holder calculated?
    8. 8. What is the limitation period for claims relating to misappropriation of trade secrets?
    9. 9. When does the limitation period begin to run?
    10. 10. Are there any circumstances that interrupt or suspend the limitation period?
    11. 11. Are mechanisms available to preserve confidentiality of trade secrets in the course of legal proceedings?
    12. 12. Are there any particular legitimate interests which may be invoked as an exception to the measures, procedures and remedies for trade secrets protection?
    13. 13. Are any measures available where proceedings concerning trade secrets are manifestly unfounded and / or found to have been initiated abusively or in bad faith?
    14. 14. Are separate legal proceedings required for such measures?
  4. Employee / employer liability
    1. 1. Are there any protections for “whistleblowers” or similar rights for employees in relation to infringement of trade secrets?
    2. 2. Can an employer be liable for their employee’s infringement of a third party’s trade secrets?

General

1. Has the Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (“Trade Secrets Directive”) been implemented?

Yes, the Trade Secrets Directive has been implemented in Croatian law by virtue of the Act on the Protection of Undisclosed Information with Market Value (Official Gazette No. 30/18), in force as of 7 April 2018.

Yes, apart from the Act on the Protection of Undisclosed Information with Market Value, trade secrets are also regulated by the Act on the Protection of Secret Information (Official Gazette No. 108/96, 79/07). In addition, Trade Act (Official Gazette No. 87/08, 96/08, 116/08, 116/08, 76/09, 114/11, 68/13, 30/14, 32/19, 98/19, 32/20) prescribes that unlawful acquisition or use of other person’s trade secret represents an act of unlawful trading, constituting a misdemeanour punishable by a fine.

3. How are trade secrets defined? 

Act on the Protection of Undisclosed Information with Market Value defines trade secrets as information, which fulfil all the following criteria:

  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 it is secret;
  3. it has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

This information includes, inter alia, knowledge and experience, business and technological information.

The Act on the Protection of Secret Information defines trade secrets as information, which are determined as trade secrets by virtue of the law, other regulations or internal acts of a legal entity, institution or other legal person, which represent a production secret, research or construction work results and other information the disclosure of which could result in adverse consequences to their economic interests.

Furthermore, this Act prescribes that information important for the business merger of legal entities and information related to protected technical improvement, discovery or inventions cannot be determined a trade secret. Also, it cannot be determined by an entity’s internal act that all information related to the business of that entity represent a trade secret nor information the disclosure of which is not reasonably contrary to that entity’s interests.

4. Do specific measures or protections need to be put in place for information to benefit from protection as a trade secret?

Yes, pursuant to the Act on the Protection of Undisclosed Information with Market Value, in order for information to be considered a trade secret, the person lawfully in control of the information has to undertake reasonable steps under the circumstances to keep this information a secret. The Act elaborates that such reasonable steps can include making an internal act on managing trade secrets by authorised persons and physical and technical protection of access and managing trade secrets.

Likewise, the Act on the Protection of Secret Information prescribes that an entity’s internal act determines the use and keeping of information, which represent a trade secret, including the measures, procedures and other circumstances important for the protection of trade secrets.

Dealings in and ownership of Trade Secrets

1. Are trade secrets transferable and/or licensable?

The laws regulating trade secrets do not address this matter. However, pursuant to the civil obligations law and due to the nature of a trade secret, trade secrets can be transferred or be subject to a license.

2. Are there specific consequences arising from transfer or licensing of trade secrets by a party other than the trade secrets owner?

Only the rightful owner of trade secret can transfer or license a trade secret to a third party. Hence, should a party other than the trade secret owner license or transfer a trade secret to a third party, without the consent of the trade secret owner, this would be considered an infringement of a trade secret and unlawful use or disclosure of a trade secret.

3. Is co-ownership of trade secrets permitted?

The laws regulating trade secrets do not address this matter. However, there should be no legal impediments for a trade secret to be co-owned (e.g. if two persons co-developed technology representing a trade secret or a trade secret is transferred to two persons by a contract, entitling them to claim rights to the same trade secret).

Enforcement of Trade Secrets

1. What actions constitute infringement of trade secrets?

Pursuant to the Act on the Protection of Undisclosed Information with Market Value, the acquisition of a trade secret without the consent of the trade secret holder is considered unlawful, whenever carried out by:

  1. 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;
  2. any other conduct which, under the circumstances, is considered contrary to honest commercial practices.

The use or disclosure of a trade secret is considered unlawful whenever carried out, without the consent of the trade secret holder, by a person who is found to meet any of the following conditions:

  1. having acquired the trade secret unlawfully;
  2. being in breach of a confidentiality agreement or any other duty not to disclose the trade secret;
  3. being in breach of a contractual or any other duty to limit the use of the trade secret.

The acquisition, use or disclosure of a trade secret is also 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, and offering and providing services by which a trade secret is used, is also 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.

In addition, under the Trade Act, unlawful acquisition of trade secret owned by other person or unlawful use of other person’s trade secret represents unfair trading, constituting a misdemeanour punishable by a fine.

Also, unauthorised disclosure, delivery or making available information representing a trade secret to other persons, including acquisition of a trade secret with a view to deliver it to unauthorised person, represents a criminal offence punishable by imprisonment up to three years. If significant gain was acquired by such activities or significant damaged was incurred, the imprisonment can be up to five years.

2. Are there any measures allowing the trade secrets' owner to gather and/or preserve evidence of infringement of trade secrets?

Yes, the trade secret owner who initiated a civil proceeding for the protection of a trade secret is entitled to request from the court delivery of information about the origin and distribution channels of infringing goods or services, including information about names of manufacturers and distributors, wholesalers and retailers of the infringing goods or services, information about quantities of such goods, etc. Such a request is submitted against the defendant in the proceeding and against other persons who within the scope of their business activities have in their possession the infringing goods or use the infringing services.

Also, when a party during a civil proceeding invokes a document or other evidence and gives rise to likelihood that they are in a possession of the other party or a third party or are available to them, the court will invite these persons to deliver such evidence.

3. What specific interim and final measures and remedies are available in the event of infringement of trade secrets?

Pursuant to the Act on the Protection of Undisclosed Information with Market Value, the trade secret holder can request that the court order any of the following interim measures against the alleged infringer:

  1. the cessation of the acquisition, use or disclosure of the trade secret or the prohibition of use or disclosure of the trade secret;
  2. 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;
  3. the seizure or delivery up of the suspected infringing goods, including imported goods, so as to prevent their entry into, or circulation on, the market;
  4. the prohibition of offering or providing services by which trade secret is used.

If the trade secret holder gives rise to a likelihood that the trade secret was unlawfully acquired, used or disclosed in business activities with a view to acquiring economic gain and as a result there is a risk of irreparable damage, the court can order seizure of movable property and real-estate owned by the infringer, which are not in an immediate connection to the infringement, as well as a prohibition on the disposal of bank accounts and other property.

There are also interim measures available for securing evidence:

  1. making a detailed description of the infringing goods, including taking samples;
  2. seizure of goods which are likely infringements;
  3. seizure of materials and means, which were used for making and the distribution of goods, which are likely infringements, and related documentation.

Apart from the listed interim measures, the infringed person is entitled to request any other interim measure envisaged by general law regulating interim measures.

Final measures and remedies available under the Act on the Protection of Undisclosed Information with Market Value in the event of infringement of trade secrets include:

  1. declaration of the infringement before the court;
  2. cessation of infringement;
  3. prohibition of use and disclosure of trade secret;
  4. 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;
  5. adoption of the appropriate corrective measures with regard to the infringing goods (recall of the infringing goods from the market, depriving the infringing goods 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);
  6. destruction of all or part of any document, object, material, substance or electronic file containing or embodying the trade secret or, where appropriate, the delivery up to the applicant of all or part of those documents, objects, materials, substances or electronic files.

4. Is there a specific period after obtaining interim measures by which the applicant must bring proceedings for a substantive decision on the merits of the claim?

Yes, if the interim measure was issued before the infringed person submitted the claim, the court will, in the decision by which it ordered the interim measure, order to the plaintiff to submit the claim for the purpose of justifying the interim measure, within a specific deadline, which can be maximum 31 day as of the delivery of the interim measure decision to the plaintiff.

5. Are there circumstances in which damages or other financial compensation may be available in place of an injunction and other measures?

Yes, the court may, upon request of the defendant, instead of the final measures described above, order payment of damages, if all following requirements are fulfilled:

  • at the moment of use or disclosure of trade secret, the defendant was not aware and was not obliged to be aware under the circumstances, that the trade secret was acquired from other person unlawfully;
  • implementing the subject measure would result in an excessive damage to the defendant;
  • the amount of damages to the damaged party appears adequate according to reasonable judgement.

Also, the court may, based on a request by the defendant, instead of applying an interim measure, order providing a security for the damages to the trade secret owner.

6. Are any interim or final measures and remedies available through ex parte hearings?

Yes, the court can order the following interim measures without notifying the defendant if the plaintiff gives rise to a likelihood that otherwise the measure will not be effective or there is a risk of irreparable damage:

  1. the cessation of the acquisition, use or disclosure of the trade secret or the prohibition of use or disclosure of the trade secret;
  2. 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;
  3. the seizure or delivery up of the suspected infringing goods, including imported goods, so as to prevent their entry into, or circulation on, the market;
  4. the prohibition of offering or providing services by which trade secret is used.

The court can order seizure of movable property and real-estate owned by the infringer, which are not in immediate connection to the infringement, as well as prohibition of disposal of bank accounts and other property, without notifying the defendant if the plaintiff gives rise to a likelihood that otherwise the measure will not be effective or this is necessary due to especially aggravating circumstances.

The court can also order the following interim measures for securing evidence without notifying the defendant, if the plaintiff gives rise to a likelihood that there is risk of destruction of evidence or irreparable damage:

  1. making of a detailed description of the infringing goods, including taking samples;
  2. seizure of goods which are likely infringements;
  3. seizure of materials and means which were used for making and distribution of goods, which are likely infringements and related documentation.

7. How is financial compensation to the trade secrets holder calculated?

The trade secret holder is entitled to seek compensation of damages and return of proceeds, which were acquired by unlawful acquiring, use or disclosure of a trade secret due to unjust enrichment. Two claims do not exclude each other.

The amount of compensation of damages is determined by the court based on all relevant circumstances, such as negative economic consequences, including lost profit suffered by damaged person, any unfair profit acquired by the infringer and, where adequate, non-economic elements, such as non-material damage suffered by the damaged person. Instead of using the described criteria, the court may, when adequate, determine the amount of damages in the amount of royalty or fee, which could have been due had a licence for the use of the trade secret existed.

8. What is the limitation period for claims relating to misappropriation of trade secrets?

Regarding limitation period, general rules set by the Civil Obligations Act apply.

Limitation period for claims related to misappropriation of trade secrets is five years (claim for declaration of the infringement, cessation of infringement, prohibition of use and disclosure of trade secret, seizure and destruction of infringing goods). The limitation period begins to run on the first day following the day of infringement.

9. When does the limitation period begin to run?

The limitation period for claims for the compensation of damages is three years as of the day the infringed person became aware of the infringement and the infringer and five years as of the day the damage occurred.

The limitation period for return of proceeds due to unjust enrichment is five years as of the day the unjust enrichment occurred.

10. Are there any circumstances that interrupt or suspend the limitation period?

The limitation period is interrupted by the following events: (i) confession of the infringement by the infringer; and (ii) submission of claim and any other legal action undertaken by the infringed person before the court or other competent authority. When the interruption of limitation period occurs, the limitation does not run. After the interruption, the limitation period starts again and time lapsed prior to the interruption is not calculated in the limitation period.

The limitation period is suspended during marriage, between family members and in other situations listed in the Civil Obligations Act.

Yes, under the Act on the Protection of Undisclosed Information with Market Value, the parties, their lawyers or other representatives, court officials, witnesses, experts and any other person participating in legal proceedings relating to the unlawful acquisition, use or disclosure of a trade secret, or who has access to documents which form part of those legal proceedings, are not permitted to use or disclose any trade secret or alleged trade secret which the court has, in response to a duly reasoned application by an interested party, identified as confidential and of which they have become aware as a result of such participation or access. The subject obligation remains in force after the legal proceedings have ended.

The court can, upon a request by a party, take specific measures necessary to preserve the confidentiality of any trade secret or alleged trade secret used or referred to in the course of legal proceedings relating to the unlawful acquisition, use or disclosure of a trade secret. These measures include: (i) exclusion of the public from the proceeding or part of the proceeding; (ii) restricting access to any document containing trade secrets or alleged trade secrets submitted by the parties or third parties, in whole or in part, to a limited number of persons; (iii) restricting copying of documents containing trade secrets or alleged trade secrets and locking them in a special envelope, which can be opened only before the court; (iv) restricting access to hearings, when trade secrets or alleged trade secrets may be disclosed, and the corresponding record or transcript of those hearings to a limited number of persons; (v) making available to any person other than those within the limited number of persons referred to in points (ii) and (iv) a non-confidential version of any judicial decision, in which the passages containing trade secrets have been removed or redacted.

12. Are there any particular legitimate interests which may be invoked as an exception to the measures, procedures and remedies for trade secrets protection?

Act on the Protection of Undisclosed Information with Market Value prescribes that the court will dismiss an application for the measures, procedures and remedies where the alleged acquisition, use or disclosure of the trade secret was carried out for the purpose of protecting a legitimate interest recognised by EU or national law. However, the Act does not further elaborate which legitimate interests could be invoked, nor provides examples.

13. Are any measures available where proceedings concerning trade secrets are manifestly unfounded and / or found to have been initiated abusively or in bad faith?

No such measures are available under the Act on the Protection of Undisclosed Information with Market Value.

See answer to question 13 above.

Employee / employer liability

1. Are there any protections for “whistleblowers” or similar rights for employees in relation to infringement of trade secrets?

Yes, it is explicitly prescribed in the Whistle-blowers Act (Official Gazette No. 17/19) that reporting of an irregularity according to the subject Act does not represent an infringement of trade secrets.

Under the Act on the Protection of Secret Information, it will not be considered an infringement of a trade secret if a person who is familiar with a trade secret discloses it in a notification to the supervisory authority for the purpose of exercising rights under the employment relationship.

The Act on the Protection of Undisclosed Information with Market Value prescribes that the court will dismiss an application for the measures, procedures and remedies where the alleged acquisition, use or disclosure of the trade secret was carried out in disclosure by workers to their representatives as part of the legitimate exercise by those representatives of their functions in accordance with EU or national law, provided that such disclosure was necessary for that exercise.

2. Can an employer be liable for their employee’s infringement of a third party’s trade secrets?

Yes, when it comes to civil liability, an employer may be liable for an employee’s infringement of a third party’s trade secret. Under the Croatian Civil Obligations Act (Official Gazette No. 35/05, 41/08, 125/11, 78/15, 29/18), the employer is liable for the damages caused by an employee to a third person during employment or in relation to employment (e.g. by infringement of a trade secret). The infringed person is entitled to seek damages directly from the employee, as well. However, if the employee caused damage with intent or gross negligence, the employer that paid damages to the third person is entitled to request compensation from the employee.

Portrait of Marija Mušec
Marija Mušec
Partner
Zagreb