Trade secret laws and regulations in Switzerland

Switzerland is not a member of the EU. Consequently, Switzerland is not obliged to implement the Directive. Nevertheless, Switzerland is a signatory state to the Agreement on Trade Related Aspects of Intellectual Property Rights (“TRIPS”). All members of the EU are also signatories to TRIPS and therefore a certain harmonisation between trade secret legislation in Switzerland and EU-members is already pre-established.

The most relevant statutes under Swiss law are (i) the Swiss Act against unfair competition (UCA), (ii) the Swiss criminal Code (CC) and (iii) the Swiss Code of obligations (CO), in particular its sections on employment law. Finally, it is noteworthy that the Swiss federal act on data protection (“FADP”) provides for a striking particularity: unlike in countries of the European Union, Swiss data protection law not only protects personal data of individuals, but also personal data of legal entities. Consequently, the broader scope of data protection in Switzerland may also extend to trade secrets.

Finally, Switzerland is a signatory state to the TRIPS, as stated above.

There is no legal definition of a trade secret in Switzerland. But legal theory and established court practice have provided a definition as follows: any information that is neither publicly known nor accessible, as of which (ii) the carrier of the secret has a legitimate interest on the maintenance of its secrecy (objective requirement) and (iii) wants to maintain such information secret (subjective requirement).

Although the definition of a trade secret (see above) does not explicitly mention “reasonable measures undertaken to keep information secret” (as stipulated in the EUTS- Directive and in Article 39 para. 2 TRIPS), a trade secret carrier will usually manifest his subjective will to maintain information secret to ensure that information will not leak and become accessible. Thus, the requirements of a trade secret under Swiss law implicitly require the undertaking of security measures and can be considered aligned with the EU-TS-Directive. 

Yes, by means of contract law. Transfers are peculiar, since a seller still knows about the transferred trade secret after the transfer (in his mind), thus the transfer resembles more a "duplication of trade secret". In contract practice, such a transfer would usually be accompanied by an additional undertaking of the seller, not to disclose or use the trade secret anymore. (Otherwise, the trade secret would become worthless). As regards licensing, trade secret licensing is considered an atypical licensing agreement (since not based on traditional intellectual property rights), but it is frequently used. Moreover, trade secret licensing frequently occurs together with regular IP-licensing (e.g. patent and related know-how licensing, which enables the use of a patent and related trade secrets).

A party not considered owner of a trade secret is not in a position to transfer legal ownership of it and likely infringes the law when engaging in such transfer (as it would likely infringe the rights of the trade secret owner). A party not considered owner of a trade secret may license or sublicense the right to use it to a third party, provided that it is entitled to do so by the owner of the trade secret.

The definition allows for more than one trade secret owner. Therefore, it is possible to have more than one trade secret owner. This proves particularly important for joint research & development projects where joint ownership of trade secrets has been agreed. 

The UCA prohibits the exploitation or use of trade secrets (i.e. “work results” in the wording of Article 5 UCA) entrusted to someone, without the permission to further use or disclose it (Art 5 para. a. UCA), or unlawfully spied or obtained (Art. 6 UCA), including the secondary infringement of a third party, if it knew or should have known that the information was received in an unlawful manner (Art. 5 para. b. UCA). The UCA also prohibits any conduct inducing employees, agents or other auxiliary persons to betray or spy any trade secrets of their employer or principal (Art. 4 para. C. UCA).

Employment law provisions set forth that an employee must not exploit or reveal confidential information (including trade secrets) obtained while in the employer’s service. The employee remains bound to his duty of confidentiality even after the end of his employment to the extent required to safeguard the employer’s legitimate interests. 

Art. 162 of the CC also provides that anyone who divulges a trade secret that he is under a statutory or contractual duty not to reveal, or anyone who unlawfully exploits for himself or another a trade secret, such betrayal is considered a criminal offence.

A distinction must be made between a civil claim and a criminal charge. In civil procedure, the secret owner is obliged to provide evidence for the trade secret infringement, while in a criminal procedure, the criminal justice authorities will investigate ex officio all the circumstances relevant to the assessment of the criminal act and the accused.

For trade secrets-infringements based on provisions of the UCA, the law provides for (i) injunctive relief (both interim and final) (Art. 9 UCA). The UCA does not explicitly mention the right to seize trade secret-infringing goods and to have them destroyed. Nevertheless, the UCA grants a right to remediation of ongoing infringements, and scholarly opinions in Switzerland are of the view that seizure and destruction of trade secret-infringing goods can theoretically be established based on this general remediation claim. However, the proportionality requirement states that seizure/destruction must always be a proportionate measure in view of the specific threat and in many trade-secret cases, such measures would likely be deemed non-proportionate.

For trade secret-infringements occurring under employment contracts or contracts in general (with non-disclosure and non-compete obligations), contractual obligations to act or refrain from doing something can also be enforced before a court at the infringer’s cost (Art. 98 para. 3 CO).
In addition to injunctive relief or the enforcement of contracts, monetary remedies against trade secret infringements are also available (Art. 9 para. 3 UCA). 

For trade secret-infringements assessed under provisions of the CC, criminal sanctions such as imprisonment or the payment of a fine can be triggered. However, this requires the filing of a criminal complaint with a state attorney and the criminal fines must be paid to the state and will not be forwarded to the victim of the trade secret infringement. 

After obtaining interim measures in a civil dispute, the court sets a deadline in which the applicant must bring proceedings for a substantive decision on the merits of the claim (Art. 263 Swiss code of civil procedure (CCP)). It is usually an initial period of about 20 to 30 days. 

No. The available remedies of interim measures are listed in Article 262 CCP. The list is exhaustive. Generally, the payment of money is not a measure ordered in preliminary injunctive proceedings, since this has a definitive character and preliminary injunctions may not bear such a character. It is also not offered as an "alternative" to preliminary injunctive remedies.

Ex parte interim measures are available. Pursuant to Article 265 CCP the court may order an interim measure immediately and without hearing the opposing party, in cases of special urgency, and in particular where there is a risk that the enforcement of the measure will be frustrated. 

Pursuant to Article 270 CCP, the opposing party can file a protective brief in advance (in German: Schutzschrift), if it fears ex parte interim measures in the future. The protective letter only remains valid for six months following its filing.

They are assessed on the basis that the plaintiff should be placed in the position, which he would have been, if no infringement had occurred. A plaintiff may either request damages for the pecuniary loss that he has suffered or require the defendant to surrender the profits made as a result of the sale of the infringing products. Where the plaintiff is entitled to damages, he may request either compensation of lost profits or a reasonable royalty rate. 

It is recommended to back contractual confidentiality arrangements with contractual penalties for the event of an infringement (i.e. a fixed amount to pay). In practice, it can prove difficult to substantiate damages and to plausibly demonstrate in which regard they were truly caused by an unlawful disclosure of a trade secret.

For the injunctive reliefs under the UCA there is no relevant limitation period. Injunctive relief is available as long as an infringement persists.

Monetary remedies against trade secret infringements are subject to the general limitation period pursuant to Article 60 CO. Pursuant to Article 60 para. 1 CO, the right to claim damages or satisfaction prescribes three years from the date on which the person suffering damage became aware of the loss or damage and of the identity of the person liable for it, but in any event ten years after the date on which the harmful conduct took place or ceased. Pursuant to Article 60 para. 2 CO on the right to damages or satisfaction, if the person liable has committed a criminal offence through harmful conduct, this article prescribes at the earliest when the right to prosecute the offence becomes time-barred. If the right to prosecute is no longer liable to become time-barred because a first instance criminal judgment has been issued, the right to claim damages or satisfaction is prescribed at the earliest three years after notice of the judgment has been given.

As stated above and regulated in Article 60 para. 1 CO, it has to be differentiated in determining the beginning of the limitation period. The limitation period starts on the day the person suffering damage became aware of the loss or damage. Regardless of the date of recognition of the claim, its limitation period is set to ten years after the date on which the harmful conduct took place. 

The Swiss code on civil procedure (“CCP”), the Swiss code on criminal procedure (“CCrP”) and the Swiss code on administrative procedure (“CCAP”) all contain provisions providing a basis for confidential treatment of trade secrets by courts (see e.g., Article 156 CCP, Article 70 and 101 CCrP, Article 26 CCAP, e.g., in combination with Article 25 of the Federal Act on Cartels and other Restraints of Competition). If requested, courts usually ensure confidential treatment by disclosing “blackened” versions of court documents to an adversary party. However, the protection of trust must always be balanced against an adversarial party’s right to due-process, which might sometimes require gaining access to certain documents to preserve its own rights. 

According to certain Swiss scholars, a purely scientific processing or a non-material or private use of trade secrets does not constitute an offence under UCA.

Anyone can invoke that a trade secret is de facto not protected (it is public knowledge) and that disclosure and use is permitted.

Other than that, there are no legitimate interests, which may be invoked as an exception to the measures, procedures and remedies for trade secret protection. 

Pursuant to Article 264 para. 2 CCP, the applicant of an interim measure is liable for any loss or damage caused by unjustified interim measures. If the applicant proves, however, that he or she applied for the measures in good faith, the court may reduce the damages or entirely release the applicant from liability. The court may make the interim measure conditional on the payment of security by the applicant if it is anticipated that the measures may cause loss or damage to the opposing part (Art. 264 para. 1 CCP). 

Yes. In principle, the claim for damages against the trade secret-requesting party must be asserted in a separate civil action. If the requirements are met, the claim can also be filed as a counterclaim to the same trade secret dispute (Art. 14 CCP).

There are no specific protections for "whistleblowers" in Switzerland. Currently, a legislative project is in process, which has the goal to improve the protection of "whistleblowers" under Swiss Law. Therefore, trade secrets are now protected against unauthorised disclosure by employees. 

Pursuant to Article 101 para. 1 CO, a person who delegates the performance of an obligation to an associate, such an employee, is liable to the other party for any damage the associate causes in carrying out such tasks, even if their delegation was entirely authorised. It is required that the damage was caused in carrying out such tasks. An employer is not liable for damages caused by an employee acting privately in personal matters unrelated to the employer's business. This requirement must be assessed on a case-by-case basis. Such liability can be contractually limited or excluded pursuant to Article 101 para. 1 CO. Internally, an employer would have a damage claim that he could enforce against the employee to recover the damages borne by him (Art. 321e OR).

Since Switzerland is not a member state of the EU, it is thus not obliged to implement the EU Trade Secrets Directive (2016/943). Neither has implementation taken place on a voluntary basis. Nevertheless, confidentiality clauses in contracts under Swiss law must be carefully drafted in order to guarantee not only the protection of trade secrets, but also to place parties in a position to take appropriate measures in case of violation of such a confidentiality clause. The following points should be included: 

1. An accurate and precise definition of the trade secrets.
2. A clause obliging the parties to take all necessary measures to protect the trade secrets in accordance with local law.
3. The possibility of extraordinary termination of the contract in case of breach of the confidentiality obligation.
4. A penalty clause (see comments to question 4 below) containing wording that, if there is damage exceeding the stipulated fine, such damage can be claimed under another title.

In addition, if the parties have entered into an NDA before signing the contract, a provision regulating the relationship of the NDA to the confidentiality clause should be included. When doing so, the parties may either chose to replace the NDA with the confidentiality clause or opt for a coexistence of the NDA and confidentiality clause. In case of the latter, it is important to clarify the relationship between the two, such as outlining any provisions for extraordinary termination or defining the contractual penalties in the agreement that would also apply in case of breach of confidentiality under the NDA. 

1. Too vague description of the trade secrets: The trade secret to be covered under the confidentiality clause must be described as precisely as possible. This may also include an annex to the contract enlisting the details of the trade secrets. 
2. Lack of provisions on the duration of the confidentiality obligation: The parties should include a clause providing for clear provisions regarding the duration of the confidentiality obligation. In this regard, it should be noted that a party's restriction to use information that is in fact no longer confidential (e.g. because it became publicly available and might be unlawful under competition law aspects).
3. No contingency plan: Parties generally consider the protection of confidential information and the consequences of a breach, but forget to stipulate the parties' obligations to limit the negative consequences of revealing a trade secret, such as the obligation to contact the accidental recipients of restricted information to limit further dissemination of the information.

It is important that the parties chose a law that offers sufficient protection of trade secrets, both under a substantive and procedural law perspective. As mentioned above, Switzerland has not implemented the Trade Secrets Directive. Nevertheless, Swiss law offers adequate protection for trade secrets, but also the procedural means to mitigate the consequences of a possible leakage and/or unlawful use of trade secrets. However, we advise that parties also include clauses in contracts obliging the owner of trade secrets to take confidentiality measures in accordance with local law. 

Yes, Swiss law allows for the inclusion and enforcement of penalties for breach of contract. In principle, parties are free to determine the amount of the contractual penalty. The penalty, however, may not be claimed where its purpose is to reinforce an unlawful or immoral undertaking or, unless otherwise agreed, where performance has been prevented by circumstances beyond the debtor’s control. At its discretion, the court may reduce penalties that it considers excessive.

It is indeed advisable to include such a clause in contracts since practice shows that it is difficult to prove damages as a result of misappropriation and/or unlawful use of trade secrets. The advantage of a penalty clause is that the extent of damage does not need to be proved.