Confidential information in a startup

It seems obvious that it is necessary to keep certain information connected with our startup’s operation secret. All the more so in the Polish market, where many young people want to pursue their own innovative activity. But it is not so easy to reach such innovativeness–that is why a trade secret has a huge economic value. Thus, it is beyond any doubt that information held by a particular enterprise can be decisive in terms of its development and position in the market.But what is exactly a trade secret which deserves protection under applicable legal provisions?According to Article 11 of the Act on combating unfair competition (subsequently: ACUC), a trade secret is meant as enterprise’s technical, technological, organizational or other information of economic value which is not in the public domain and with regard to which the entrepreneur has undertaken necessary measures to keep them confidential. It should be emphasized that this list is exemplary, so any other information which is not available to the public and with regard to which a startup has undertaken necessary measures to keep them confidential will also be regarded a trade secret. What is more, particular information will not lose its confidential character even if it is known by more than one person, as long as the access to it is reserved and the circle of persons sworn to secrecy is closed. As a consequence, it is us who decide what is and what is not a trade secret.Therefore, the key thing is to determine the notion of necessary measures to be undertaken by a startup in order to keep it confidential. What is decisive here is the entrepreneur’s will indicating that particular information is treated as protected; the will can be express or implied, still it has to be recognizable for third persons. As examples of necessary measures we can invoke any technical security means, whether in physical or electronic form, such as:

1. introducing the rules of procedure related to managing know-how and handling documentation which covers know-how,
2. prohibiting or restricting the access to places where media containing confidential information are located,
3. sealing pages of trade secret documentation as “confidential”,
4. developing a strategy of the employees’ leaving of the enterprise,
5. or confidentiality clauses which are commonly used in agreements.

Yet, let us focus on the most popular case, which can be immediately applied by every entrepreneur, namely securing information in an agreement. Below you will find a few tips on how to construct a confidential agreement or clause:

1. You should precisely determine the scope of information which is to be deemed confidential (which constitutes a trade secret) or indicate what is not considered confidential information (a trade secret).
2. Remember to determine the term of the confidentiality obligation as agreements concluded for unlimited period of time can be terminated in accordance with the Civil Code.
3. You should determine what measures against confidential information have to be undertaken by a person bound by an agreement or clause, e.g. not to provide relevant data media to third persons.
4. It is significant to set up stipulated damages for infringement of the agreement or clause, also as a form of prevention.
5. Don’t forget to determine what measures against information or data media have to be undertaken by such person upon the lapse of the term of the agreement or clause.
6. Obligation to return or destroy the data media.

What can we do if information which is our startup’s secret is disclosed?First of all, furnishing, disclosing or using another person’s information which is a trade secret or acquiring it from an unauthorized person constitutes an act of unfair competition (if it compromises or infringes entrepreneur’s interest). If the unfair competition act was culpable, the affected entrepreneur may demand:

• refraining from illicit acts, removing the results of illicit acts,
• filing a declaration of relevant wording and form, once or from time to time,
• making good the damage caused (on general terms),
• returning illegal advantages (on general terms) or
• ordering that an appropriate sum of money be paid for particular social purpose connected with supporting Polish culture or protecting national heritage.

As I mentioned above, the agreement or clause providing for the confidentiality obligation can itself determine penalties for disclosing confidential information, what further does not have to exclude the possibility for a given entrepreneur to claim damages under the Civil Code. Stipulated damages are in some way more advantageous that statutory damages claimed on general terms insofar as when demanding their payment we do not have to prove the amount of damage we incurred, what, as demonstrated by practice, can be even hindered e.g. if nobody starts to make profit on our trade secret.What is more, the provisions of ACUC provide also for criminal liability of a person who, against his/her confidentiality obligation related to a trade secret, discloses it to another person or uses it in own business activity, at the same time inflicting a significant damage on the entrepreneur. Such person is subject to fine, limitation of liberty or depravation of liberty for up to 2 years. The same penalty is applicable to a person who having acquired information which is a trade secret discloses it to another person or uses it in own business activity.