Sometimes things that never should happen, suddenly happen – some outsider has got hold of the company’s trade secrets. It may be calculations, computer programs, customer lists, drawings and more. Suddenly and without warning, a new competitor emerges in the market that is suspiciously close to my own company’s quotes, or uses models that appear to be copies of one’s own or suddenly contacts people at key positions that it has taken my own company years to collect.

In such cases it’s not uncommon that it is former employees that have started the new company and it is obvious to the damaged company that the material must have been accessed improperly. The economic damages could be enormous.

But then the question arises – how can this be proven in court? Because without proof, it is hardly even worthwhile to take legal action. Of course, the best thing is to try to prevent theft of corporate secrets and copyrights in the first place. In this context, it is important that the company has well-developed password routines as well as routines for which employees that should have access to company secrets, physical shell protection for computers, routines for the use of computers outside the company’s premises and more.

Furthermore, one shall not underestimate confidentiality and copyright clauses. Admittedly, a confidentiality or copyright clause does not in itself prevent a dishonest employee from stealing corporate secrets. However, it can prevent copying that occurs from pure ignorance or thoughtlessness. In addition, a violation of a confidentiality clause is often regarded as an aggravating circumstance in assessments under the Swedish Trade Secrets Act, (Sw. Lagen om Företagshemligheter “FHL”). If the company has very economically valuable company secrets, it can even be worth the trouble and money to have a so-called IT forensic to scan through the employee’s computer to check, for example, that it has not been suspiciously connected to another hard drive, USB stick or other devices. If, after the employee has left the employment, suspicions of theft of company secrets arise, it is important to contact a legal counsel immediately, who should in turn hire IT forensics. It can be downright devastating to start researching the former employee’s computer yourself as you may risk accidentally destroying the traces. In this situation, the computer should be regarded as a closed off crime scene to which only experts have access.

The IT forensic is the one who will try to find traces if the former employee has attacked company secrets in violation of FHL and / or copied the company’s software or compiled information, such as price information, customer lists etc. which may constitute a violation of the Copyright Act, (Sw. Upphovsrättslagen “URL”). Unfortunately, FHL does not offer any possibility of an infringement investigation, which, on the other hand, is possible according to URL if one suspects that someone has attacked one’s copyright. If there is no suspected infringement of the company’s copyright, you are instead referred to attempting to obtain an interim penalty against the use of corporate secrets. However, this does not solve the difficulty of evidence. Still, through the so-called edition injunction, you have the opportunity to try to persuade the opposing party to release the suspicious material. This procedure is by no means as effective as an infringement investigation where the Enforcement Service (Sw. Kronofogdemyndigheten) can review all suspected digital media that the counterparty has. Therefore, the possibility of claiming copyright infringement is usually the main step in trying to establish an infringement investigation without the counterparty’s hearing before the investigation, so that the infringement investigation can take place before the counterparty can destroy or move the evidence.

Sometimes a complicated situation can arise because there may be doubts as to which court to turn to. As a general rule, according to the Rules of Procedure, (Sw. Rättegångsbalken “RB”), Chapter 10, § 1, you must sue physical persons where they have their residence, i.e. where they normally live. Companies must be sued where the company has its registered office in accordance with the articles of association. However, there are a number of exceptions to this general rule. If the dispute concerns copyright, the lawsuit must instead be submitted to the Patent and Market Court in accordance with URL 7, Chapter 58, as a main rule. What also can complicate the situation is the question of the alleged copyright infringement in the context of the employment. In that case, the Act on Labour Disputes (Sw. Lagen om rättegång i arbetstvister) must also be taken into account. The question of whether the intrusion occurred within or outside the scope of the employment is not always obvious.

It is important to think carefully about which court to turn to, to not risk the action being dismissed so that the counterparty becomes aware that an infringement investigation is ongoing and quickly destroys the evidence.

Thus, with the right tools, it is quite possible with the help of the legislation and the court to stop a competitor using unjust means to compete. However, it is important to have a carefully thought-out strategy before you start a legal process, so that you do not succeed in giving the opposite party trump on their own.

Michael Pålsson                                                             Alf Johansson

Senior Partner                                                                Legal Counsel

Juhlin & Partners Law Firm                                           Juhlin & Partners Law Firm

#tradesecrets #secrecyclauses #copyrightclauses #software