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21 January 2015
The Act on the Protection of Trade Secrets (SFS 1990:409) covers two types of damages:
On November 13 2014 the Western Sweden Court of Appeal ruled on a case (T 3375-13) regarding three women who had taken two databases from their previous employer and started a competing company. Both companies conducted market research. The court stated that the three former employees had committed copyright infringement. The databases were also considered trade secrets and the employees' actions constituted a breach of the duty of employee loyalty.
The starting point for calculation of pecuniary damages can be the lost profits of the injured party or, if these are difficult to estimate, the cost savings that the infringer made through the infringement. However, the purpose of the liability provisions is both restorative and preventive. The Act on the Protection of Trade Secrets states that compensation for damages must be high enough to ensure that trade secret infringement does not appear to be more advantageous than obtaining information legally.
When calculating the pecuniary damages in this case, the court of appeal considered the cost saving which the three former employees had made as a result of the trade secret infringement. The court found that there was no reason to question the injured company's statement that it had taken six years to achieve the turnover which the competing company achieved in its first year of operation, and that the development costs for the trade secrets amounted to almost Skr11 million. However, the court could not ignore the fact that it is now easier and cheaper to find and compile contact information online. The court found that it was almost impossible to show how much money the competing company had saved through exploiting trade secrets or what profits the injured company had lost due to the infringement. Therefore, the court made a reasonability assessment according to Section 5(35) of the Code of Judicial Procedure and set the pecuniary damages at Skr8.5 million.
According to Section 5(35), in cases where a loss has occurred and full evidence may not be presented, or may be presented only with great difficulty, the court can estimate the loss to a reasonable amount. This provision does not mean that the party seeking damages is relieved of the obligation to present all evidence that could reasonably be found. However, if the party seeking damages presents its findings to the extent that this is possible, the court must estimate the extent of damage in general.
Compensation for damages relating to trade secret infringement also includes the injured party's interest in keeping the trade secret from being exploited or revealed and other circumstances not of financial importance. In this respect, the court considered that the three former employees had attacked a vital interest of the injured company. The copied databases were the base of the company's business and had taken six years to build. The court found that the former employees' actions were wilful, underhand, systematic and done with obvious intent to profit financially. The court set damages at Skr2 million.
The three employees and their company were ordered to pay a total of Skr10.5 million in damages to their former employer. One of the women was ordered to pay a lower amount, as the court found her involvement to be less than the others.
The case has been appealed to the Supreme Court.
For further information on this topic please contact Jörgen Larsson or Karolina Sarhagen at Wistrand Advokatbyrå by telephone (+46 31 771 21 00), fax (+46 31 771 21 50) or email (firstname.lastname@example.org or email@example.com).TheWistrand website can be accessed at www.wistrand.se.
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