Trade secret laws and regulations in Hungary

Yes. By Act LIV. of 2018 (“Business Secret Act”)

The Civil Code (Act) forms the general background of the Business Secret Act and is to be applied in all matters not specifically regulated by the Business Secret Act. Specific secrets are regulated by sectoral legislation.

Pursuant to Art 1. of the Business Secret Act:

1. Business secrets shall include any confidential fact, information and other data, or a compilation thereof, connected to economic activities, which are not publicly known in whole or in the complexity of its elements, or which are not easily accessible to other operators pursuing the same economic activities, where the proprietor of the secret has taken reasonable efforts that may be expected in the given circumstances to keep such information confidential.
2. Know-how means technical, economic and other practical knowledge of value, classified as a business secret, held in a form enabling identification, including accumulated skills and experience and any combination thereof.

Basically, yes. See the above definition. However, there is no uniform court practice as to what qualifies as “reasonable efforts expected in the given circumstances”.
The reasonable efforts needed vary on a case by case basis, and may include the proper storage of documents, restricting access to the area, ensuring an appropriate level of cybersecurity, etc.

Yes, they are transferable and licensable.

Only the owner is able to transfer and license trade secrets. Sublicensing can be done by the licensee if not excluded in the licence agreement.

It is not excluded.

Infringements are the unlawful (i) acquisition, (ii) use or (iii) disclosure of business secrets.

Unlawful acquisition of a business secret refers to when the acquirer gains access to any documents, objects, materials, substances or electronic files containing the business secret under the lawful control of the proprietor, or from which the business secret can be deduced, without authorisation, including unauthorised access to, appropriation of, or copying of any such documents, objects, materials, substances or electronic files.

Unlawful acquisition of a business secret also means where access to the business secret is obtained without the consent of the proprietor by any other conduct which is considered contrary to honest commercial practices and fair dealing.

(4) The use or disclosure of a business secret shall be considered unlawful whenever carried out, without the consent of the proprietor of the business secret, by a person who is found to meet any of the following conditions:

1. having acquired the business secret unlawfully;
2. being in breach of a confidentiality agreement or any other obligation of confidentiality relating to the business secret; or
3. being in breach of a contractual or any other duty to limit the use of the business secret.

(5) The acquisition, use or disclosure of a business secret shall also be considered unlawful whenever a person, at the time of the acquisition, use or disclosure, knew or, under the circumstances, ought to have known that the business secret had been obtained directly or indirectly from another person who was using or disclosing the trade secret unlawfully within the meaning of Subsection (4).
(6) 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 business secret where the person carrying out such activities knew, or, under the circumstances, ought to have known that the business secret was used unlawfully within the meaning of Subsection (4).

The general provisions of the Code of Civil Procedure apply.

The proprietor of a business secret may request those interim measures, which it could request as final measures. In addition to this, the proprietor of a business secret may request the court to order any of the following interim measures against the opposing party:

1. the cessation of or, as the case may be, the prohibition of the disclosure or use of the business 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 of the suspected infringing goods, including imported goods to a specific person, so as to prevent their entry into, or circulation in, the market.

The proprietor of a business secret – apart from the civil claims available in connection with infringements – may request the court to order:

1. protective measures in accordance with the provisions laid down in the Act on Judicial Enforcement, if able to verify that any subsequent attempt for the recovery of profits made by the infringement or the payment of damages is in jeopardy;
2. the infringer to disclose and to present bank, financial or commercial information and documents for the purpose of ordering the protective measures referred to in Paragraph a).

In actions for infringement of the right to business secrecy, a preliminary evidentiary hearing may be conducted.

As final measures, the proprietor may demand (i) the establishment of the infringement and (ii): 

1. the cessation of or the prohibition of the use or disclosure of the business 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. destruction of the infringing goods or their withdrawal from the market, provided that the withdrawal from the market does not undermine the protection of the business secret in question;
4. recall of the infringing goods from the market or depriving the infringing goods of their infringing quality;
5. that the infringer provides information of any persons who took part in the production, offering, placing on the market of infringing goods, and on business ties established for the use of infringing goods;
6. the termination of the injurious situation and the restoration of the previous state;
7. restitution of the economic gains achieved through infringement;
8. the destruction of all or part of any document, object, material, substance or electronic file containing or embodying the business secret or, where appropriate, their delivery up to the proprietor of business secret; 
9. the publication of the decision adopted in the case; and
10. damages.

Instead of the above sanctions, under certain circumstances the court has the right to (i) establish the infringement and (ii) order pecuniary compensation. 

Yes, in its decision ordering provisional measures, the court sets a deadline for bringing action for a substantive decision. This may not be longer than 15 days after the date of delivery of the decision on the interim measure.

Yes, at the request of the infringer, the court may – in addition to establishing the infringement – order pecuniary compensation to be paid to the injured party instead of applying the legal consequences applicable regardless of being at fault if:

1. the infringer at the time of use or disclosure neither knew nor, under the circumstances, ought to have known that the business secret was obtained from another person who was using or disclosing the business secret unlawfully;
2. execution of the sanctions irrespective of attributability would cause the infringer disproportionate harm; and
3. pecuniary compensation to the injured party appears reasonably satisfactory to offset the damage resulting from the infringement.
   This does not have a bearing on the injured party’s other claims, such as for compensation.

If the right in the trade secret is infringed, the trade-secret holder may, under the rules on civil law liability, also claim damages.

Where any delay is likely to cause irreparable harm or where there is a demonstrable risk of evidence being destroyed, it shall be treated as a case of urgency, and a preliminary evidentiary hearing may be ordered in ex parte proceedings.

There are no specific rules concerning the calculation of damages suffered by the infringement of trade secrets. The rules of the general law on damages apply. The perpetrator must fully compensate the proprietor (e.g. owner, licensee) of the trade secret, which is to say to make it as if the infringements had never occurred.

If the court orders the infringer to pay pecuniary compensation, the amount of the compensation shall not exceed the amount of the lost royalty.

If the court orders the infringer to pay general damages, the amount of the damages shall not be less than the amount of the lost royalty.

The general limitation period (i.e. five years) applies.

The limitation period starts with the termination of the infringement. 

Yes, in this regard the general rules of the Civil Code apply.
The limitation period is interrupted among others if an action was brought against the infringer to enforce the claim, and the court has adopted a final and binding decision in conclusion of the proceedings; or if the claim was notified in a bankruptcy proceeding.
Pursuant to the Civil Code, the limitation period is suspended if the proprietor is unable to enforce the claim for an excusable reason. It is the court practice to specify what can be regarded as excusable reason.

Yes.

The Business Secret Act provides that in civil actions for breach of business secrecy the parties, the public prosecutor and other persons participating in the action, including their representatives, court officials and any other person who has access to documents forming part of those legal proceedings, shall keep confidential any business secret or alleged business secret which they became aware of as a result of such participation or access.

In a court proceeding the court may, on a duly reasoned application by a party, order the restricting of access to any document containing business secrets or alleged business secrets, which is the subject of the action. The court may also order the restricting of access to hearings, or a part of a hearing to the public, and the restricting of the right of participation in proceedings and access to corresponding records or transcripts of those hearings.

Pursuant to the Civil Procedural Code, the court in a court proceeding has the right to declare the hearing on the whole or certain sections of the hearing closed from the public, where this is deemed appropriate for the protection of business secrets. 

Restriction of the rights for access to the file and to a hearing shall only be applicable for the necessary extent and shall not restrict the right to an effective remedy and to a fair trial and representation. When assessing necessity, the court shall also take into account the legitimate interests of third parties. The specific legitimate interests of third parties are to be ascertained on a case-by-case basis.
The Whistleblower Directive (EU) 2019/1937 is not transposed yet by the Hungarian legislator, but it is generally expected that legitimate considerations giving rise to whistleblowing may represent lawful exceptions to measures, procedures and remedies provided by the Business Secret Act.

If the action brought by the trade-secret holder is clearly unfounded and it is clear that he initiated the procedure in bad faith, the court may, at the request of the party with opposing interests, order the application of the publication of the decision adopted in the case.

Further legal protections (e.g. confidentiality clauses in employment contracts; business secret policies; trainings; clean table policies; labelling of documents containing business secrets; policies on measures to be applied in the event of infringements of business secret policies).
Technical protections (e.g. password protection system for documents; access to and distribution of documents on a need-to-know basis; lawful monitoring of employees). 

There is specific protection available for employers. Pursuant to Art. 8 subsection (4) of the Labour Code, employees shall maintain confidentiality in relation to business secrets obtained in the course of their work. Moreover, employees shall not disclose to unauthorised persons any data learned in connection with their activities that, if revealed, would result in detrimental consequences for the employer or other persons.

Off-boarding interview. Regulated job-leaving procedure. Minutes about documentation retained/passed to the successor employee. Reference to confidentiality clauses in employment contracts and business secret policies in documentation given to employees leaving a company. 

It is to be expected that – once the whistleblowing directive is transposed – such protection for employees, among other protections, will be available.   

Yes, pursuant to the provisions of the Civil Code, if an employee causes damage to a third party in connection with his employment, liability in relation to the injured person lies with the employer. 

Precise definition of the trade secrets concerned; exceptions that are not covered by the concept of trade secrets; obligations of the receiving party; the duration and precise timing of the transfer and disclosure of trade secrets by the holder; penalty clauses in case of breaches of contract and duration of the obligation of confidentiality.

The definition for trade secrets is not precise enough; the obligations of the receiving party are loosely defined; the penalty clauses in place for breaches is not appropriate.

The applicable law and the jurisdiction in case of litigation should be carefully chosen. When contracting with an entity outside of the EU, the legal framework and the relevant practices applicable in the country should be assessed.

The general penalty clauses established in the Civil Code apply to contracts concerning trade secrets as well, such as earnest money, contractual penalty, setting forth the forfeiture of right, compensation, etc.