According to the World Intellectual Property Organisation, Sweden is the runner-up for the most innovative nation in the world. Protecting innovations for which patents or other IP rights are not sought, as well as other valuable know-how, is essential for maintaining an inventive environment. However, employees must be able to report any abuse or wrongdoing at work and change jobs without restricting their right to use the professional knowledge and experience acquired in a previous position.
This balance of interests was the focus of Swedish legislators when drafting the Trade Secrets Act 1990 and EU legislators when drafting the EU Trade Secrets Directive (2016/943).
A new Swedish Trade Secrets Act, which implements the directive, entered into force on 1 July 2018. While the changes to Swedish law are not drastic, the noteworthy are outlined below.
Scope of protection for trade secrets
The revised Trade Secrets Act brings the definition of 'trade secret' more in line with the definition under the EU Trade Secrets Directive while retaining certain aspects of the earlier definition.
Under the new act, the existence of a trade secret assumes that the owner takes reasonable steps to keep the know-how secret. However, the concept of a trade secret continues to be limited to information relating to commercial activities and operations, which is a broad concept under Swedish law. Equally, the directive requirement that the information has commercial value is considered to correspond to the traditional Swedish law requirement that the disclosure of the information may harm the owner when competing on the market.
The term 'infringement' is not used in the new act, which instead prohibits attacks on trade secrets. A definition of what constitutes an attack – a concept which has been expanded relative to the previous act – has been introduced.
The acquisition of a trade secret is now considered an attack regardless of whether the attacker had lawful access when taking it. The new act expressly defines 'attack' as the production without the owner's consent of goods that benefit significantly from an attacked trade secret with regard to its design, properties, function, manufacture or marketing, as well as the offer for sale, placing on the market or to import, export or store them for such purposes.
Under the new act, the courts' injunctive powers are increased so that an injunction may be entered against imminent attacks, including those which are neither wilful nor negligent. Additionally, the attacker which caused the unlawful disclosure of a trade secret (thus making it public and outside the scope of protection) may be prohibited from using the information for a reasonable period.
Injunctions may be granted as relief on the merits and interim relief.
Courts are also empowered to grant corrective measures, such as the recall, destruction, alteration of a document or object that contains an attacked trade secret.
One significant improvement is that a duty not to disclose or use trade secret information obtained by virtue of a court's decision during court proceedings or a hearing in camera, subject to certain conditions, has been introduced into Swedish law. Breach of the duty is penalised as an attack on the trade secrets with the remedies set out under the new Trade Secrets Act.
The confidentiality of trade secrets filed in court in disputes relating to an attack or imminent attack on a trade secret is made without limitation periods, provided that the court does not find, on the merits, that the information does not constitute trade secrets. However, the earlier requirement that the party might suffer significant damages in the event of a disclosure remains. In other disputes, a trade secret filed with the courts cannot be kept confidential for more than 20 years.
The liabilities for damages caused by attacks are set out by separate provisions, all of which require that the attack is wilful or negligent. The various provisions set out conditions for liability which differ depending on the nature of the attack. The condition that an employee who uses or discloses a trade secret after the term of their employment can be held liable only in exceptional cases remains. The minimum sentence for aggravated corporate espionage is increased to six months imprisonment, which allows for the use of (for example) electronic surveillance in the investigation of such crimes.
The previous Trade Secrets Act, which was rather unique from an EU perspective, was considered mostly in line with the EU Trade Secrets Directive. The government has expressly stated that in most cases, the previous act's case law and doctrine will remain relevant when interpreting the new act.
The strengthened trade secret protection conferred by the directive aims to advance entrepreneurship, particularly regarding cross-border operations in the single market. However, trade secret protection remains considerably less harmonised on an EU (and international) level than IP rights.
The government chose to retain certain aspects of the previous act and it remains to be seen whether these are deemed to align with the directive. In this respect, the courts are expected to apply the new act in a manner which conforms to EU law to the extent possible.
The explicit requirement that reasonable steps must be taken to keep information secret implies a duty of activity for businesses. Courts might foreseeably hold that the concept of 'reasonable steps' depends on the nature of the information for which protection is claimed. However, businesses will continue to benefit from unambiguous confidentiality clauses in contracts and clear policies regarding the treatment of confidential information within the organisation. This will be particularly important for businesses operating in innovative fields which are highly dependent on proprietary know-how that cannot be protected by IP rights.
Even if the strengthened position for trade secret owners is welcome, discrepancies remain between trade secrets and other IP rights. For example, the act does not give trade secret owners access to orders on infringement investigations and information, remedies which are available under Swedish statutes in the IP field and are often a good tool when fighting unlawful use of IP rights.
Equally, any dispute on trade secrets will not be subject to the jurisdiction of Sweden's specialised IP courts – juristiction will remain vested in the courts of general jurisdiction and often subject to labour dispute rules.
For further information on this topic please contact Björn Rundblom Andersson or Siri Alvsing at Advokatfirman Lindahl by telephone (+46 8 527 70 800) or email ([email protected] or [email protected]). The Advokatfirman Lindahl website can be accessed at www.lindahl.se.
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