When is information protected as a business secret?

Do you own your own business? Then your employees will probably have certain knowledge and information that you do not want shared with others, e.g. your competitor. Examples include customer files and research results. This kind of information is protected under certain conditions under the Trade Secrets Protection Act (Wbb). Which conditions these are, I will tell you on the basis of a dispute between Schwa-Medico and its employee ‘X’.

What is the dispute between Schwa-Medico and its former employee about?

Schwa-Medico is a company specialising in the development, manufacture and sale of medical devices. One of its main products is the so-called ‘TENS’ (Transcutaneous Electrical Neuro Stimulation). This product is used to combat chronic pain. Employee X was employed by Schwa-Medico for 21 years. Among other things, X built up the customer base for the ‘TENS’ during that period. In addition, he was involved in research into the best possible frequency and parameters to be applied for the ‘TENS’. After the long tenure at Schwa-Medico, employee X joined Van Lent Systems, a competitor of Schwa-Medico, with effect from June 2022.

For Schwa-Medico, this posed a problem. Indeed, after X joined its competitor, he approached and also visited customers of Schwa-Medico. At the competitor, X also engaged in further developing the ‘TENS’ and selling and promoting it. In the latter, X allegedly shared essential product information with Van Lent. According to Schwa-Medico, this conduct by X is unlawful. For instance, the names of customers and the product information on the ‘TENS’ would be trade secrets, so X is acting in violation of the Wbb by sharing this with Van Lent.

What is a trade secret?

According to the Wbb, a trade secret is valuable business information and know-how, such as technical knowledge or formulas and recipes. A trade secret is valuable to the company precisely because it is secret. The Wbb therefore requires the company to take the necessary measures to keep the information the secret. Does the company fail to do so? Then the information is no longer protected through the Wbb.

Trade secrets and the Wbb were previously the focus of one of our articles. Would you like to know more about this? For example what measures you can take when someone breaches your trade secrets? Then read the article ‘Protection of trade secrets’ by our specialist Jop Fellinger.

Are Schwa-Medico’s relationships a trade secret?

No, the court ruled that Schwa-Medico has not sufficiently substantiated why the names of its relations should be classified as trade secrets. The court therefore concluded that employee X did not violate the Wbb by approaching and visiting Schwa-Medico’s business relations.

Is the product information on the ‘TENS’ a trade secret?

No, according to the court, the product information on the ‘TENS’ is also not a trade secret. Indeed, X successfully argued that the product information about the optimal frequency of the ‘TENS’ is public and easily traceable. For instance, the product information is easily traceable through the user manual in which manufacturers are obliged to include the programme and parameters. It would also be easy to find out the frequency by measuring the number of Hertz and the pulse width.

Schwa-Medico still defends itself by arguing that the parameters are public. But what was not public – and therefore secret – in doing so was (i) what these parameters do to pain in certain conditions and (ii) what the effectiveness of the parameters was in doing so. The court found this alone was not sufficient. In short, the product information that X shared with Van Lent was not secret, so X did not breach the Wbb by doing so.

A lesson for you as an entrepreneur

The dispute between Schwa-Medico and its employee X described here teaches that, as an entrepreneur, you should be aware of the fact that information that is public, or easily traceable, is not considered a trade secret under the Wbb. As a business owner, it is therefore important to be well aware of what information is considered a trade secret. That way, you can then take the right measures to actually keep these trade secrets secret. Examples include implementing access controls, holding internal discussions on confidentiality and drawing up written guidelines on how to deal with secret information.

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