Part V: Trade secrets in litigation

Topics covered in this Part:

• What to do if you discover trade secret misappropriation or contamination

• Legal remedies and preliminary injunction

• Alternative dispute resolution

• Building a strong case, burden of proof and evidence

• Defense against misappropriation claim

• Preservation of trade secrets in court proceedings

• Cross-border issues

1. Overview

Ideally, leakages and contamination of trade secrets should be avoided from the outset through a good trade secret management policy. However, even with the highest security standards, breaches happen, and trade secret holders need a plan for how to react. Part V of the Guide provides an overview of the options available when trade secret misappropriation occurs. Pursuing litigation to remedy trade secret misappropriation is just one option available for trade secret holders. Thus, this Part also addresses other options that may support resolution of disputes.

Trade secret misappropriation can happen due to espionage or cyberattack, but most frequently, it happens in day-to-day human behaviors in a business. Misappropriation occurs most often through current or former employees, but also in business relationships such as a potential acquisition or license, or through supply chains. When misappropriation occurs, it is very difficult for trade secret holders to know all the relevant facts, since misappropriation itself happens in secrecy, often without any indication that there has been a loss. In a way, by definition, finding a right track to counter the misappropriation is a difficult task.

As the TRIPS Agreement only provides a minimum standard that WTO members need to implement in their legislations (see Part III, Section 1.3), the enforcement of trade secrets through litigation, remedies and procedural rules varies significantly from one jurisdiction to another. Therefore, this Part provides a general overview of trade secret litigation, identifying the most important commonalities, differences, major trends and recurring issues in the various regional and national approaches. While it mostly focuses on civil enforcement, criminal and administrative enforcement issues are also addressed towards in this Part.

The variation in national trade secret laws as well as procedural rules makes navigating trade secret litigation challenging. Therefore, a more detailed overview of enforcement practices of some countries can be found on the WIPO website, ⁽¹⁾See the overview of trade secret systems in certain countries and regions, available at https://www.wipo.int/tradesecrets/. which covers both civil and criminal enforcement. Furthermore, the Annex to this Guide contains a list of reference materials that are published by national/regional authorities and online materials that provide country-by-country analysis of national trade secret enforcement systems.

2. What you can do when you realize that a trade secret has been misappropriated: to sue or not to sue

2.1 What is misappropriation?

When patented inventions or trademarks are used without authorization of their owners, it is called “patent infringement” or “trademark infringement.” When trade secret information is used without authorization of the trade secret holders, this is called “misappropriation” and those who carry out the misappropriation are called “misappropriators” in this Guide.

As mentioned in Part III: Basics of trade secret protection, trade secret protection does not confer exclusive rights, but regulates parties’ behavior to prevent wrongful conduct. The basic idea of prohibiting others from securing unfair commercial advantage by acquiring, using or disclosing trade secrets of another person in a wrongful manner is expressed in national laws in different ways. However, in essence, when the acquisition, disclosure or use of the information covered by the trade secret protection occurs by unlawful, improper, dishonest or unfair means, it is generally deemed to be misappropriation.

When misappropriation occurs, the misappropriator may sell or license (or otherwise disclose) the trade secret to another party, and that party may further use and disclose the trade secret information, and so on. Therefore, misappropriation of trade secrets may happen in scenarios that involve other parties beyond the trade secret holder and the direct misappropriator.

In essence, there are two scenarios where these other parties may get involved in misappropriation:

1. Third parties who knew, or were grossly negligent in failing to know, that the trade secrets had been misappropriated. In general, acquisition of trade secret information by third parties who knew, or were grossly negligent in failing to know, that the trade secrets had been misappropriated is considered misappropriation. In many countries, further use or disclosure of the information by these third parties also constitutes an act of misappropriation.

2. Third parties without knowledge of misappropriation (innocent or good-faith recipients). In general, if third parties were genuinely not aware that the information they received was misappropriated information, the acquisition of that information is not considered misappropriation. However, whether their subsequent use or disclosure is considered.

In many countries, in cases where unauthorized persons make, sell etc. products resulted or benefitted from unlawful acquisition, use or disclosure of trade secrets, in general, these products can be subject to injunction claims and other requests for relief.

2.2 Investigate and understand the situation

An effective trade secret management policy should provide guidance on how to handle the situation when the trade secret holder realizes that misappropriation has occurred. Litigation is not always the best solution to react to misappropriation. However, in order to preserve its option to seek remedies through litigation, the trade secret management should:

• preserve evidence so that the trade secret holder will be able to substantiate its claims in litigation

• investigate facts without alerting the alleged misappropriators who might be inclined to destroy evidence of their behavior, and

• take emergency measures to mitigate immediate harm.

Details of these steps are found in Part IV: Trade secret management, in particular, Section 2.4.

2.3 Out-of-court solutions or litigation: elements to consider

After having preserved the evidence, understood what happened and secured the situation to prevent further violations, the trade secret holder generally has three options for how to react: 

• pursuing an amicable settlement of the dispute

• starting litigation, or

• not taking any action.

Factors in assessing whether or not to go to court

The choice depends on a thorough assessment of a multitude of factual, legal and business considerations. These could include the following:

Legal restrictions: the options to react could be contractually or legally limited.

The value of the trade secret and the seriousness of the violation: generally, the higher the value of the trade secret and the more serious the misappropriation, the stronger the counter-reaction of the trade secret holder will be.

Need for provisional measures and risks of counter-reactions: it can happen that the trade secret holder can demonstrate some suspicious facts but has no solid evidence to build a strong court case. In that situation, many legal systems provide specific judicial inspection orders (see 4.2.3). Depending on the legal system, ex parte judicial inspection orders and preservation of evidence are possible. In these cases, the other party will not be heard before the court orders a provisional measure. This is particularly useful where any delay or alerting the other party may result in irreparable harm or evidence destruction.

Should the trade secret holder want to rely on provisional measures, in particular ex parte provisional measures, trying to pursue an amicable solution first (for example, by sending a warning letter) would put the defendants on notice and could undermine the effects of any evidentiary measures sought at a later stage.

Possibility of counterclaims or “unclean hands” objections: before taking action, it is advisable to double check whether secrecy measures have been applied properly according to the applicable law so that the trade secret information has been appropriately maintained. Missing this step could be critical. For example, if such measures have not been taken, the defendant could argue that the information no longer meets the requirements for trade secret protection, because the plaintiff has not taken reasonable steps to keep it secret.

As a separate matter, if the defendant could prove that the evidence of misappropriation submitted by the trade secret holder was collected unlawfully, courts may consider it inadmissible or unreliable (see 4.3 with respect to collection of evidence).

Costs of litigation: the costs of litigation (in terms of money, time and effort) must be weighed against the value of the trade secret and the benefit of litigation, including a potential benefit of providing a message to employees and others that the company is serious about protecting its information asset. The costs will depend on the place of litigation, the remedies sought and the kind of proceedings. A cost–benefit analysis of the litigation should be assessed case by case. It is generally advisable to do this analysis also in view of the company’s mid- and long-term business strategy.

Likelihood of success: before starting court proceedings, the likelihood of success needs to be evaluated. A main issue to consider is what kind of evidence the trade secret holder can provide (see Section 4).

Public relations: sometimes, a trade secret holder wants to avoid any publicity relating to trade secret misappropriation cases. In addition, depending on the relevant national rules, the risks of trade secret information becoming public during the court proceedings or in the publication of judgments might influence the decision of a party to start court proceedings (see Section 6).

Out-of-court options

If the trade secret holder decides not to pursue court proceedings, other possible reactions may be:

Sending a warning letter: if the trade secret holder does not fear the destruction of evidence following notice, a warning letter can be a good option to:

• remind misappropriators of any confidentiality and non-disclosure obligations;

• demand that the misappropriator cease the improper behavior;

• demand the return or destruction (with provision of evidence) of the misappropriated materials; and

• make the misappropriators undertake non-disclosure and non-use of the misappropriated information.

License offer to the misappropriator: a trade secret holder may offer the misappropriator a license for its use of the misappropriated trade secrets. However, this must be done with caution and preferably with extra fees to compensate for the initial trade secret misappropriation. Otherwise, the market could learn that the best way to get a license on the trade secret is misappropriating it in the first place, and then obtaining a favorable license.

Proposing an alternative dispute resolution mechanism (see Section 3.4): a mix of court and out-of-court solutions may often be effective. Sometimes, reaching an amicable solution may become more likely after court proceedings have been initiated. If a court proceeding would likely turn out in favor of the trade secret holder, the misappropriator will face more pressure to settle. The trade secret holder may also get better terms for the settlement in that way, which could potentially compensate for the cost of litigation.

No action: the trade secret holder could also take no action. This could be appropriate if, for example, there is not enough evidence of the misappropriation, or costs of litigation are too high. However, such a decision must be made with the clear understanding that inaction could mean letting the competitor gain a competitive advantage and benefit from its unfair conduct. It could also mean that the information could lose its legal status as a trade secret.

2.4 Considerations in advance of litigation

The legal basis of trade secret protection in the relevant jurisdiction

Trade secret holders have the possibility to seek legal remedies for trade secret misappropriation, depending on the legal basis of protection under applicable national laws. For instance, trade secret protection may be based on specific trade secret laws or unfair competition laws or common law duties of confidence, or determined by contracts in accordance with applicable contract law. In some countries, trade secrets are considered as intellectual property subject to specific remedies. Naturally, to rely on a breach of contractual confidentiality clauses, enforcing a trade secret in court may not be possible without having such a clause in place. In the absence of such a clause, trade secret holders need to base their claims on other legal basis of trade secret protection.

Where possible, a trade secret holder may also combine multiple causes of action. However, a different legal basis generally means different requirements to access legal protection. For example, a contractual basis for protection implies that the parties concluded a valid and enforceable contract according to the applicable national contract law, while under unfair competition law, the misappropriator generally needs to be a competitor of the trade secret holder.

Both the enforceable legal claims and the existence of their requirements need to be assessed on a case-by-case and country-by-country basis.

Entitlement to sue

Generally, the legitimate holder of a trade secret is entitled to start proceedings for trade secret misappropriation (entitlement to sue). However, other persons in lawful possession of the information may also be entitled. Who and under which circumstances a natural or legal person is entitled to sue will depend on the respective jurisdiction. Often, licensees ⁽²⁾While the academic discussion on whether a trade secret is property or not may affect the legal qualification of the subject matter of the contract, it is almost undisputed that trade secrets (and confidential information not amounting to trade secrets according to the law) are capable of being assigned, transferred or licensed. may also have entitlement to sue, although it depends on the licensing contract and the applicable national law.

Statute of limitations

As for other legal claims, proceedings seeking remedies for trade secret misappropriation can only be brought by trade secret holders within a certain amount of time from their knowledge of, or the occurrence of, the act of misappropriation. Since no legal certainty and “legal peace” could be reached without the statute of limitations, generally, trade secret claims may be time-barred. However, rules relating to limitation periods in trade secret matters are not uniform internationally.

• Duration of the limitation period: in general, the duration of the limitation period for large scale misappropriation or for misappropriation that is considered a criminal offense, will be longer than for civil remedies. Often, the statute of limitations in different countries ranges between three to six years.

• Start, interruption or suspension of the limitation period: generally, the limitation period begins with the date of the alleged misappropriation, or the moment when a trade secret holder obtained the knowledge of the alleged misappropriation or could have obtained such knowledge with due care.

  There are also circumstances such as the initiation of legal proceedings, sending certain communication to the other party, or the acknowledgement of the misappropriation by the other party, which may suspend ⁽³⁾Suspension freezes the time already elapsed without erasing it and hence, when the event causing the suspension ceases, the limitation period begins to run again from when it had stopped. or interrupt ⁽⁴⁾Interruption of the limitation period erases the period acquired up to the interruption and starts a new period of the same duration. the limitation period.

3. What relief is available in court or in alternative fora

Trade secret holders have the possibility of seeking different types of relief measures and remedies for misappropriation. This Section discusses some of them in more detail.

3.1 Injunction

By an injunction, further acts of acquisition, disclosure or use of trade secrets can be prohibited. In cases of products that have been tainted by misappropriation, an injunction may also prohibit production, offering for sale, placing on the market or use of those products, or importation, export or storage of those products for such purposes.

Courts generally impose recurring penalty payments in the event of non-compliance with injunctive orders. In addition, many countries consider non-compliance with the court’s order as a crime.

Whether and to what extent courts have discretion to grant injunctions is a highly debated issue that goes beyond trade secret law. In common law countries, injunctions are traditionally intended as discretionary remedies, equitable in nature, that are not granted automatically but only if the court deems them appropriate, considering the specific circumstances of the case. In civil law countries, on the contrary, injunctions are traditionally intended as automatic or quasi-automatic remedies once infringement is found. The diverging positions seem to have come closer in recent years, and in trade secret matters, there may generally be a wider consideration of proportionality than in patent law, for example.

Preliminary injunction

Preliminary injunctions are granted by way of urgency, and therefore are issued in shorter time and at lower costs than injunctions following a trial on the merit. To prevent loss of secrecy of the information, preliminary injunctions are particularly important in trade secret matters.

In many countries courts may grant preliminary injunctions before or during the proceedings on the merits if:

• there is likelihood of success in the proceedings on the merits;

• there would be severe or irreparable harm suffered in the time necessary to obtain an injunction following final determination of the merits; and

• the applicant has demonstrated that the matter is urgent.

Generally, preliminary injunctions are temporary and aim to preserve the trade secret holder’s right only for the time needed to get a judgment on the merits, in which the court may grant an injunction after the full assessment of the case. Therefore, trade secret holders are required to start proceedings on the merits within a certain time after the urgency proceedings.

In cases of special urgency or when there is a risk that the enforcement of the injunction will be frustrated if a prior notice is given, many countries provide for ex parte preliminary injunctions without the alleged misappropriator being heard.

In many countries, courts have discretion to grant a preliminary injunction and may consider factors, such as irreparable harm to the trade secret holder, balance of convenience and balance of hardship (in essence, balancing the relative positive or negative effect on the parties if a preliminary injunction is granted or refused). In order to balance the rights of the alleged misappropriator, courts in many countries, such as Belgium, Japan, Poland, Sweden and the United Kingdom, may require an appropriate guarantee or bond from the trade secret holder to ensure that the defendant may be compensated for possible losses by the grant of the preliminary injunction, if the proceedings on the merits show that the preliminary injunction should not have been granted.

In addition, in accordance with Article 50.4 of the TRIPS Agreement, in the case of ex parte preliminary injunction, the affected parties shall be given notice, without delay after the execution of the measures, and a review shall take place upon request of the defendant.

As an alternative to a preliminary injunction, in some EU member states, for example, it is also possible that courts require from the alleged misappropriator an appropriate guarantee of payment for the continuation of the alleged unlawful use of the trade secret to ensure that a trade secret holder may obtain compensation, should the trade secret holder’s right be found violated in the subsequent proceedings on the merits.

Time limit of the injunction

Generally, injunctions last as long as the information remains a trade secret. Once the information loses its secret nature through, for example, disclosure, and consequently loses its trade secret status, the injunction may be lifted.

Obviously, once the misappropriator has gained knowledge of the trade secret, it cannot be erased from his/her mind. If trade secret protection has expired and the injunction has lapsed or been lifted, the misappropriator can use the misappropriated knowledge in the market with a lead time advantage over others who have just learned of the information. Therefore, in some countries such as Australia, Canada, Singapore and the United Kingdom, a so-called “springboard injunction” may be granted, considering that an injunction against a competitor should at least last the time it would otherwise have taken to lawfully obtain the information. Hence, in some cases, a court may extend the injunction even beyond the life of the trade secret, until the rest of the market has caught up. Generally, the duration of the springboard injunction is calculated as the time that the infringer would have taken to legitimately reverse-engineer and obtain the trade secret or independently discover the trade secret.

Injunction to limit subsequent employment

In those jurisdictions that allow non-compete agreements between employers and their employees, in order to indirectly protect their trade secrets, employers may restrict employees from competing with them after they leave the company. However, even without such agreements, when the trade secret misappropriation is carried out by a former employee who joins a competitor, the trade secret holder could try to prevent the employee from working for the competitor to avoid the threat of further disclosure and use of the trade secret. As the employer’s rights to trade secrets and the employee's right to professional mobility must be well balanced, in general, such injunctions that limit the employee’s subsequent employment opportunities are granted only in extreme circumstances.

Under the so-called inevitable disclosure doctrine, which is applicable in, for example, Argentina and some states in the United States of America, a plaintiff may obtain an injunction if it proves that a former employee will inevitably use or disclose the former employer’s trade secret during the new employment, causing injury to the former employer as a result.

3.2 Monetary remedies

Monetary remedies are the second major tool for trade secret holders against trade secret misappropriation.

As seen previously, the legal basis for protecting trade secrets could significantly vary in different jurisdictions and many countries do not have specific trade secret provisions. Instead, they rely on different causes of action such as claims for breach of unfair competition law, breach of tort law, breach of contract, breach of confidence and breach of equitable obligations under common law. Such differences also affect related claims for damages. For example, in case of breach of contract claims, the quantification of damages is mainly based on the agreement. Additionally, contractual liability is often limited to damages that were foreseeable when the parties entered the contract, while such limitation is generally not provided for tort law damages.

However, despite the different legal basis, there is a broad consensus on the monetary measures available, at least in their core features. First, there must be a causal link between the alleged trade secret misappropriation and the losses claimed by the trade secret holders or unjust enrichment of the misappropriator. Second, trade secret holders bear the burden of proving the amount of the damages. In practice, quantification and proof of damages can be a complex task.

Monetary remedies can be classified according to their functions.

Compensatory damages

The purpose of compensatory damages is to place the injured party in the same position as if the injury had never occurred. Therefore, in the case of trade secret misappropriation, the trade secret holder may claim compensation for the damages it has suffered by losing control over the information. Generally, compensatory damages include loss suffered and lost profits caused by the misappropriation.

Loss suffered (potentially including non-economic damages)

The “loss suffered” may include, depending on national approaches, the lost investment for, for example, R&D of products or delivery of services to which the trade secrets pertain, and the expense incurred for investigating misappropriation and preparing for litigation.

Lost profits

Quantifying lost profits requires operating a counterfactual analysis consisting of calculating the difference between the cash flows in the factual scenario (i.e., the actual cash flows after the misappropriation occurred) and in the counterfactual scenario (i.e., the foreseeable cash flows had the misappropriation not occurred).

Reasonable royalties

Another way to calculate damages is relying on the so-called “reasonable royalty” that a willing licensor and a willing licensee would have agreed on for a license in a hypothetical negotiation. Therefore, the reasonable royalty should reflect the market royalty, which is the royalty usually practiced in the marketplace. A reasonable royalty may be based on a running payment, a lump sum or a combination of both. Its application to trade secret cases, however, may face particular challenges due to the confidential nature of trade secrets and scarce availability of comparable licenses to determine a reasonable royalty.

Calculating damages in their exact amount could be a very burdensome task for the trade secret holder. Thus, courts and legislators have introduced some mechanisms that can help trade secret holders by easing that burden.

The laws in some countries explicitly provide guidance for determination of damages. In addition, a few countries provide a fixed range of amount of damages for trade secret misappropriation cases in certain circumstances, for example, if neither actual loss by the trade secret holder nor the misappropriator’s profits are available.

Restitutionary damages

The purpose of restitutionary damages is to reverse the unjust enrichment of the misappropriator at the expense of the injured party. The damage is therefore generally calculated by looking at the benefit of the misappropriator and not the loss of the trade secret holder/injured party.

One of the difficult questions to be addressed case by case is that where only a part of the product or service of the misappropriator is related to the trade secret, what portion of the misappropriator’s profits should be calculated as the unjust enrichment.

Punitive damages

Generally, punitive damages are granted against a deliberate infringer who has behaved in a particularly egregious manner. At the court’s discretion, damages that go beyond the actual damages may be awarded. Their function is to punish the misappropriators and deter them and third parties from carrying out similar actions. Punitive damages are traditionally granted in common law jurisdictions such as the United States of America and Canada, but are also available in some civil law jurisdictions such as China.

Attorney’s fees and costs

In addition to damages, it is common that the successful party can recover, at least partially, the attorneys’ fees and legal costs incurred in litigation. The court may typically quantify the recovery of fees and costs according to the circumstances of the case within a minimum and a maximum amount set by applicable law, depending on the complexity of the case.

Which monetary remedies are available and how they are calculated depend on the jurisdiction and the specific case. Many laws combine monetary remedies with different functions with different methods of calculation. The general principle in combining them is not to duplicate the compensation for the same harm. Where available, exemplary damages, having their own independent punitive purpose, are often granted in addition to other monetary remedies.

In litigation, the calculation of damages may be determined separately, after the issues concerning the existence of the trade secret and its misappropriation have been decided. In some countries, it is also common that the courts receive testimony from experts providing their opinion on the economic issues, helping the court to quantify and justify damages.

3.3 Other remedies

In addition to injunctions and monetary remedies, courts and legislations generally provide additional remedies to protect the trade secrets. They include:

• Destruction, or return to the trade secret holder, of any document, object, material, substance or electronic file containing or embodying the trade secret (examples: Canada, China, India and Singapore).

• Measures regarding infringing goods, including: (a) removing from the market; (b) destruction; and (c) seizures (examples of jurisdictions that adopted one or more of the listed measures: Brazil, India, Japan, Russian Federation, South Africa and the United Kingdom as well as EU member states implementing the EU Trade Secret Directive).

• Destruction or removal of the materials and/or equipment (predominantly) used to produce infringing goods (examples: Italy, Japan and Russian Federation).

• Assignment of ownership of the infringing goods and/or the means uniquely designed to manufacture the infringing goods or implement the infringing method (example: Italy).

• Publication of the judgment, in full or in part, with due preservation of confidentiality, ⁽⁵⁾See Section 6.4, below. or other measures for the dissemination of the information concerning the decision (for example, see the EU Trade Secret Directive). Generally, publications are made in newspapers or online, in specialized magazines in the relevant industry. A court may order a publication about the court’s ruling on the misappropriator’s website. ⁽⁶⁾See, for example, Salt Ship Design AS v Prysmian Powerlink SRL [2021] EWHC 3583, where a UK court ordered the defendant to display on its website, for six months, a statement declaring that the court had ruled that the defendant had misused the claimant’s confidential information, with a link to the full judgment.

Some of these remedies can also be obtained in the form of provisional measures, such as the seizure or delivering up of the suspected infringing goods, with the aim to preserve the status quo during the time needed to reach a full decision on the merits.

The availability and applicability of those most common remedies depend on national legislation and case law. In addition, special additional remedies may be available. For example, the federal U.S. trade secret law allows a court to prevent the further dissemination of trade secrets with ex parte seizures. ⁽⁷⁾Claudia Ray, Joseph Loy, Miriam Kontoh and Andrew (Keum Yong) Lee (2024). USA: Law and Practice. In Chambers Global Practice Guides, Trade Secrets 2024, p. 229. https://chambers.com/downloads/gpg/1014/trade_secrets_2024.pdf. The peculiarity is that the property that may be seized is potentially quite broad and not limited to the infringing goods, as is typically the case for intellectual property seizures. Another example is found in the law of the Russian Federation, where the court may direct that a legal entity be dissolved, if the entity repeatedly violates intellectual property rights. ⁽⁸⁾Art. 1253 of the Civil Code of the Russian Federation (Russian Federation). English translation available at WIPO Lex Database. https://www.wipo.int/wipolex/en/main/legislation.

3.4 Alternative dispute resolution

General consideration on ADR mechanisms

As an alternative to litigation, parties to disputes involving trade secrets may attempt to solve them amicably through direct negotiation or have recourse to alternative dispute resolution (ADR) mechanisms, such as mediation or arbitration, in which a third party assists in or directs resolution.

Referral to ADR is consensual and can be made at different times through:

• an ADR contract clause for the submission of future disputes under a particular contract (e.g., employment contract or R&D contract), or 

• a submission agreement for existing disputes, including those referred by courts. ⁽⁹⁾The website of the WIPO Arbitration and Mediation Center (https://www.wipo.int/amc/en/) provides information about benefits of ADR mechanisms and various services offered by the Center. It also makes available model contract clauses and submission agreements in several languages to facilitate referral of intellectual property and technology disputes, including trade secrets, to WIPO ADR procedures. See also the Annex to this Guide (A List of Reference Materials).

As time- and cost-efficient alternatives to litigation, ADR options can offer significant advantages in the context of disputes involving trade secrets. ADR gives parties flexibilities to customize their dispute resolution process in a single and neutral forum. Another key advantage of ADR is confidentiality of the dispute resolution process and its outcome, which is of fundamental importance where commercial reputation and trade secrets are involved.

Mediation

Mediation is an ADR mechanism where a neutral third party, the mediator, assists the parties in reaching a mutually satisfactory settlement of their dispute, based on the parties’ respective interests. ⁽¹⁰⁾According to the statistics published by WIPO, over 70 percent of the mediation procedures administered by the WIPO Arbitration and Mediation Center result in a settlement agreement. See WIPO Caseload Summary, available at: https://www.wipo.int/amc/en/center/caseload.html. Any settlement can be enforced as a contract or, depending on the jurisdiction, even as a court order.

In addition to being particularly time- and cost-efficient, mediation offers many other advantages to parties involved in trade secret disputes. It is a non-binding and interest-based procedure. It gives parties control over the process and its outcome, as there is only a binding result if parties agree to it. Mediation provides a high control of confidentiality and parties cannot be forced to file or disclose documents. Further, the parties can engage themselves to not disclose, even as evidence in future judicial or arbitral proceedings, any information or document exchanged.

Arbitration

In arbitration, the parties stipulate an agreement wherein they submit a dispute to arbitrator(s) often specialized in the relevant field, who make a binding decision on a dispute. Unlike mediation, once the parties have validly agreed to submit the dispute to arbitration, neither party can unilaterally withdraw from the procedure, and the final award of the arbitrator(s) is binding. Therefore, court options are normally foreclosed when arbitration is agreed. Also, the arbitral decision is not based on the parties’ respective interests, but on the parties’ respective rights and obligations as determined by the arbitrator(s). The arbitration aims to resolve the dispute according to the applicable law, and not to settle the case in a manner agreeable for all the parties.

Arbitration can have several advantages compared to litigation: (i) an arbitration procedure can be flexible - the arbitrator(s), the applicable law, the language of the procedure and the seat of arbitration are typically selected by the parties; (ii) if the unsuccessful party fails to voluntarily comply with the award, the decision can be enforced in most parts of the world pursuant to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958; and (iii) costs may be lower under a single arbitration procedure, compared to litigating complex cross-border disputes in various parallel national court proceedings.

Whether arbitration is a better choice than litigation depends both on the specific circumstances of the case and where a lawsuit could be filed. In some instances, trade secret holders might come to the conclusion that relief that can be obtained through judicial provisional measures to protect its rights or to preserve evidence, such as ex parte search or seizure orders, outweighs the benefits of arbitration.

4. How to build a strong trade secret case

If a trade secret holder or a licensee (where applicable) decided to start litigation, there are several issues that need to be looked at before taking action.

4.1 Choosing defendants

An important choice to make is whom to sue. The action will likely be directed primarily against the direct misappriopriator. However, under certain circumstances, it could be appropriate to file the action against additional parties. ⁽¹¹⁾See Section 2.1 regarding misappropriation of trade secrets.

For example, if a former employee who had left to work for a competitor unlawfully acquired, distributed or used the trade secret of the former employer, it could be appropriate to sue the competitor who hired the former employee. The legal basis of the action would be the direct or indirect liability of the new employer, according to the circumstances of the case and the applicable law. One can imagine different scenarios.

• If the new employer knew about the misappropriation in advance, the employer would likely be directly liable for the misappropriation, along with the new employee who performed the wrongful action (such as unlawfully using the trade secret or sharing the trade secrets with colleagues at the new employer).

• Similarly, the new employer could be held liable if its employee is induced or misguided by the new employer to engage in an act of misappropriation.

• In general, the new employer could still be liable if it knows, or it should have known with the diligence and care normally expected, that the employee committed trade secret misappropriation.

• If the new employer, even if it has taken proper due diligence and care, did not known that the trade secret of the former employer was misappropriated by its employee, the new employer generally becomes liable when it becomes aware of such misappropriation and nevertheless continues to use or disclose the information.

• There may be vicarious liability rules due to the special relationship of the employer with the employee, depending on general tort law, labor law or eventually unfair competition law, which vary among jurisdictions.

Once unlawfully acquired by a third party, trade secret information can be passed easily from one person to another, without any indication that the information belongs to the legitimate trade secret holder. Therefore, there can be recipients who innocently believe that they lawfully receive, use or distribute that information. Trade secret holders, however, generally cannot claim damages for misappropriation against such innocent recipients before they know (or should have known) of the misappropriation. Consequently, the trade secret holder may decide to also sue innocent recipients, since notification of the initial complaint would make them aware of, and henceforth liable for, any subsequent act of use or disclosure of the trade secret. To be on the safe side, however, whether the applicable law provides any conditions or requirements relating to pre-suit action of the claimant should first be checked.

4.2 Burden of proof

General principles

A widespread civil procedure rule in almost all legal systems is that the burden of proof is usually on the person who makes a claim. This generally applies also in trade secret cases. The subject matter of proof obviously depends on the legal claims put forward in the trade secret misappropriation proceedings.

For example, if contractual confidentiality obligations are enforced, the plaintiff shall provide evidence of a valid binding contract and breach of the contract. If unfair competition claims are made, the plaintiff shall generally provide evidence that the parties are competitors and that there is an act amounting to unfair competition. If the action is based on tort law, the plaintiff shall generally prove the defendant's willful misconduct or negligence.

Regarding trade secret misappropriation cases, in general, the trade secret holder must:

• show its entitlement to sue (see 2.4)

• identify the trade secret for which it is seeking protection; this is a delicate part of the claimant’s pleading because courts generally require sufficient specificity, otherwise the court could dismiss the case

• prove that the information qualifies as a trade secret, which means that all the legal requirements for trade secret protection are met

• prove the misappropriation, and

• if monetary remedies are sought, the trade secret holder shall prove the amount of the damages suffered or the profits of the defendants (see 4.3).

The next paragraphs focus on the third and the fourth points, while the other points have already been discussed.

Proving that the information qualifies as trade secret

Patents, for example, are granted by an administrative authority, which examines compliance of the claimed invention with applicable legal requirements. However, since trade secret protection is not subject to any registration, there is no assumption that the information alleged by its holder meets the criteria for trade secret protection. Thus, the trade secret holder generally bears the burden to show that the legal requirements for trade secret protection ⁽¹²⁾See Part III: Basics of trade secret protection for the three criteria to be met for information to be trade secrets. are met.

Proving “secrecy”

It is almost impossible to prove negative facts, such as whether the information is “not” generally known or readily accessible among persons within the relevant circles. Consequently, trade secret holders generally demonstrate the confidentiality and security measures that they have taken to maintain secrecy and explain why the information is deemed not generally known (for example, by showing competitors’ activities and market trends) or readily accessible.

Depending on the facts of the case and applicable law, examples of the factors that may be considered to prove secrecy include:

• the extent to which the information is known outside your business

• the extent to which the information is known to your employees and others involved in the business

• the level of the engineering or technological development and the complexity of the information

• the investment made to create the information or the difficulty that competitors can face in properly acquiring the information.

Proving commercial value due to secrecy

The link between the commercial value of the information and its secrecy may be established, for example, when the unlawful acquisition, use or disclosure is likely to harm the trade secret holder because it undermines the holder's business or financial interests or its strategic and competitive position in the market. There are various ways to prove the commercial value due to secrecy. For example:

• the savings or the competitive advantage of the trade secret holder vis-à-vis its competitors

• the time and money invested by the trade secret holder in obtaining and developing the information

• the investment that would be incurred by a third-party competitor if it were to acquire or duplicate the information.

The fact that competitors are trying to obtain the information (through licensing, for example) may indirectly demonstrate the commercial value of the trade secret.

Proving “reasonable steps”

It is advisable for the trade secret holder to show in court all the different measures and steps implemented to maintain the secrecy of the information.

Although what is “reasonable” necessarily depends on the unique circumstances of the trade secret holder, the evidence to prove reasonable steps could include:

• internal policies and guidelines for the management of confidential information

• non-disclosure agreements (NDAs) and contracts including confidentiality clauses signed by employees, vendors, suppliers, external partners etc.

• adequate security measures, including diligent management of information and communication systems and physical controls, and

• affidavits and witnesses testifying to the implementation of any of the above or of any additional protection. ⁽¹³⁾See Part IV: Trade secret management, in particular 2.3 regarding operational and contractual protection measures.

Proving the misappropriation of the trade secret

Proving the misappropriation means proving that the defendant acquired, disclosed or used the trade secret with unlawful, improper or dishonest means, according to different national applicable standards (see also Section 2.1).

In this context, the trade secret holder must prove:

• the misappropriation specifically concerned its trade secrets – the misappropriated information should be the same as the enforced trade secret, and

• the unlawful, improper or dishonest means used by the misappropriator, for example, breach of confidentiality obligations, breach of confidentiality duties arising from special relationships (e.g., employer–employee relationship), industrial espionage, hacking, inducement to breach, coercion etc.

Generally, proving actual or threatened misappropriation is sufficient. Eventually, proof of harm to the trade secret holder is necessary for claiming damage compensation.

When a third party has used or disclosed the trade secret information, in general, trade secret holders do not need to prove that the information originated from the trade secret holder, but they still may need to prove that they are the legitimate holder of the information.

Particular challenges for proving misappropriation

Misappropriators are often aware that their actions are improper, and thus try not to leave any evidence of their unlawful behavior. In addition, if the purpose of misappropriation is to obtain the valuable trade secrets of a competitor, a misappropriator will try to keep such trade secret information tightly within his/her company and use it secretly. Thus, in general, it is difficult for trade secret holders to obtain direct evidence proving the key facts of misappropriation. As will be explained in the next subsection, certain measures and procedural rules to obtain additional information and evidence from another party may help trade secret holders to collect evidence.

In trade secret cases, indirect or circumstantial evidence plays a major role in proving the misappropriation. Although such evidence does not directly prove the key fact, they establish facts from which a reasonable person can make an inference that the key fact existed. Admissible “inference” must be distinguished from impermissible “speculation.”

According to some legal systems, indirect evidence can build a presumption that the key fact happened, and shift the burden of proof on the defendant.

To conclude, indirect evidence or, better, a mix of direct and indirect evidence, can still provide the court with a sufficiently convincing picture of the misappropriation depending on the facts of the case and applicable law.

4.3 Collecting evidence for proceedings

It is best to collect relevant evidence as early as possible and before alerting the misappropriator through a warning notice or a cease-and-desist letter, since after such notice, the misappropriator could conceal or destroy evidence of the misappropriation.

To make sure that collected evidence is admissible in court, it must be collected according to applicable rules of procedure and in compliance with other areas of law (such as privacy law or labor law). For instance, tracking and monitoring employees’ activities can be done in certain jurisdictions only and to a certain extent, in compliance with limitations set by labor and privacy laws.

Also, best practices and standards in digital forensics should be followed.

During or in preparation for court proceedings, the trade secret holder can usually rely on some measures and procedural rules to obtain additional information and evidence to strengthen its case. These measures generally seek to strike a balance between the interest of the trade secret holder to have access to evidence and the interests of the alleged misappropriator to maintain the secrecy of its own valuable information. While they differ from one country or region to another, in principle, two types of measures may be available: provisional measures for preserving evidence and discovery proceedings.

Provisional measures for preserving evidence

In many jurisdictions, courts have the authority, even before commencement of the proceedings on the merits, to order provisional measures for preserving evidence, provided that certain conditions are met. Generally, these conditions require the claimant to provide at least prima facie evidence of the case.

Discovery proceedings

Pre-trial discovery in common law countries

Pre-trial discovery is the formal process of exchanging information between the parties about the evidence the parties will present at trial. The rationale is to ensure that the parties have mutual knowledge and access to all relevant facts that are essential to litigation ahead of the trial. Common law countries such as Australia, India, and the United States of America tend to favor some amount of voluntary pre-trial disclosure between the parties, outside of the direction and compulsion of the court.

The United States of America, in particular, provides for very extensive pre-trial discovery, both under state and federal law, including documentary review, written questions and answers, pre-trial depositions under oath, requests for the productions of documents, and inspections.

Complex issues of international comity may arise when evidence supporting the parties’ claims and defense in a trade secret case is located outside the country where the litigation is pending, and therefore cross-border discovery is needed. ⁽¹⁴⁾See The Sedona Conference, Commentary on Cross-Border Discovery in U.S. Patent and Trade Secret Cases, The Sedona Conference Working Group Series, Public Comment Version (2021); The Sedona Conference, Commentary on Cross-Border Discovery in U.S. Patent and Trade Secret Cases (“Stage Two”), The Sedona Conference Working Group Series, Public Comment Version (2023). Both available at: https://thesedonaconference.org/.

Court orders to provide documents in civil law countries

In civil law countries, in principle, the party bearing the burden of proof is responsible for collecting evidence to support its case and may obtain only limited documentary evidence through and under the supervision of the court. 

However, a limited form of discovery may be available. Generally, a party needs to show that certain documents are relevant for the case and that the other party, or a third party, holds such documents and request the court to order a party to submit those documents. Such orders typically concern not only material showing the misappropriation, but also business records, banking, financial or commercial documents, which are under the control of the alleged misappropriator and are useful to determine the extent of the misappropriation or its unlawful profits.

Finally, parties can generally rely on ordinary means of evidence, such as hearing witnesses, experts and third party examination.

In many countries, more evidence could be gathered through criminal proceedings, since the prosecution authority generally has extensive powers to search and seize evidence (see Section 8.1). In a limited number of countries, a similar goal can be pursued also through administrative authorities (see Section 8.2).

5. Defense against trade secret misappropriation claims

In response to the accusation of the trade secret holder, the alleged misappropriator should be given the opportunity to defend itself against the accusation. In general, there are two main lines of defense:

• the information is not a trade secret, and 

• acquisition, use or disclosure of the trade secret by the alleged misappropriator was accomplished without unlawful, improper or dishonest means.

5.1 Non-existence of trade secret

The first and most common defense in a trade secret misappropriation case is that the information for which protection is sought does not qualify as a trade secret. As discussed, generally the trade secret holder needs to prove eligibility of the information as a trade secret. The defendant typically tries to rebut the trade secret holder’s claim by proving that:

• the information had already fallen into the public domain before the alleged misappropriation, and it is generally known among persons in interested circles

• the information was readily accessible to persons within the interested circles. For example, the persons in the interested circle could collect raw data from the Internet, and with the assistance of a computer, could extract the alleged trade secret information with a trivial effort, or

• the trade secret holder had not taken reasonable steps to keep the information secret. For example, the defendant may demonstrate that standard protection measures taken by competitors in the market are usually higher than those taken by the trade secret holder, or the trade secret holder had not taken reasonable diligence to update its IT systems or close security loopholes.

5.2 No trade secret misappropriation occurred and exemptions from liability

A second common defense against misappropriation claims is that unlawful, improper or dishonest acquisition, use or disclosure of the trade secret has never occurred. This is mainly a matter of facts and evidence.

Authorized access and use defense

The defendant may argue that it acquired, used or disclosed the trade secret in a lawful, proper or honest manner, and hence, no misappropriation occurred.

For example, if the trade secret information was obtained with an NDA defining the contractual boundaries of the authorized use of the information, the defendant may provide evidence that its use of the information was inside the boundaries of the NDA, and hence it did not misappropriate the trade secret.

Bona fide defense

As explained in Section 2.1 above, if third parties acquired the trade secret information in good faith, they may be entitled to use or disclose such information lawfully, depending on applicable law. Therefore, the defendant may bring the so-called bona fide defense, if applicable.

Independent discovery defense

The defendant may assert that it had independently discovered, and subsequently used, the same trade secret information protected by the trade secret holder.

To successfully raise this defense, keeping track of the status and the progress of research and development activities and other business activities is important to show that the information was acquired autonomously.

Reverse engineering defense

The defendant could claim that the trade secret was obtained through reverse engineering, which is generally not considered a trade secret misappropriation unless a valid and enforceable contract forbids reverse engineering.

To bring the reverse engineering defense, the defendant needs to prove that it did in fact acquire the information through its own reverse engineering, not merely that it would have been possible to do so. Therefore, similar to the independent discovery defense, it is advisable to record the reverse engineering operations in a way that it can be used as evidence.

Employee's skills and experiences

To protect employees’ mobility, it is widely understood that departing employees are free to use their general knowledge, skills and experience acquired in their normal course of employment.

In practical terms, it can be difficult to distinguish the employees’ general knowledge, skills and experience from the former employer’s trade secrets. To make such a distinction, courts have adopted various approaches, considering, for example:

• whether the employee took documents and information in a written or some other tangible form, or whether the employee merely remembered it

• whether the employee’s knowledge and skills were acquired before or while working for the employer who claims such knowledge and skills as a trade secret

• whether the employee’s knowledge and skills are general to the particular industry or trade, or whether they are specific to the employer’s particular business

• whether the employee has acquired specific expertise, techniques or know-how in using an employer’s trade secret during his or her employment

• whether the employer used secrecy measures making it sufficiently clear to employees and third parties that certain information is considered a trade secret and proprietary to the company.

Public interest and whistleblower defense

In special cases, and according to national/regional laws, the defendant may be able to argue that its act of acquisition, use or disclosure of the trade secret is excluded from liability due to the fact that such action was made to further the public interest, such as public health or safety. For example, Article 1472 pf the Civil Code of Québec, Canada, states “A person may free himself from his liability for injury caused to another as a result of the disclosure of a trade secret by proving that considerations of general interest prevailed over keeping the secret and, particularly, that its disclosure was justified for reasons of public health or safety.” ⁽¹⁵⁾In the United Kingdom, according to Regulations 12(2) and 15(1) of the Trade Secrets (Enforcement, etc.) Regulations 2018, a court must take into account certain specific circumstances, including public interest and safeguard of fundamental rights, in assessing the proportionality.

Similarly, in countries/regions such as the United States of America or EU member states, the law allows for disclosure of trade secrets when it is necessary to act in the general public interest and reveal misconduct, wrongdoing or illegal activities. Under these specific and limited circumstances, a defendant may raise this defense providing evidence for the act of whistleblowing.

Workers’ rights to information

The EU Trade Secret Directive ⁽¹⁶⁾Article 3(1)(c) of the EU Trade Secret Directive (EU) 2016/943. provides a safe harbor when trade secret disclosure occurs as part of the legitimate exercise by workers’ representatives in the exercise of their functions, or by workers engaged in legitimate consultation with their representatives. Such exception seeks to prevent trade secret protection from undermining workers’ rights to obtain assistance from representatives during negotiations with the management.

6. Preservation of trade secret during court proceedings

In many countries, it is common that court hearings are public, and judgments are usually published. The transparency and accessibility of court proceedings are cornerstones of the rights to justice. However, in trade secret cases, a trade secret holder generally needs to identify its trade secrets and to disclose them in the court files to support its claims.

Thus, measures that preserve confidentiality of trade secrets during court proceedings are necessary to avoid jeopardizing trade secret protection. On the other hand, the defendants sued for trade secret misappropriation need access to the alleged trade secrets to defend themselves properly. For these reasons, legislators and courts of many countries provide and apply measures to preserve confidentiality of trade secrets, which aim to strike a balance between the competing interests of the parties as well as the general public.

These measures to preserve confidentiality during the proceedings ultimately depend on applicable national procedural law. Nevertheless, there are some widely accepted measures in various jurisdictions.

6.1 Access restrictions

Courts typically restrict the access to proceedings and court’s files that are likely to contain and describe trade secrets. The restriction can be ordered for access to:

• the (parts of) documents containing (alleged) trade secrets

• the (parts of) hearings and the minutes of the hearing where (alleged) trade secrets are likely to be disclosed. In some countries, courts may hold in camera proceedings (i.e., proceedings under legal secrecy in, for example, judge’s chambers instead of in open court).

6.2 Protective confidentiality orders

Courts typically impose duties of confidentiality on anyone who participates in the proceedings or has access to the documents of the proceedings, including judges, lawyers, witnesses and court personnel. Often, the imposition of such duties requires a specific court order, usually upon the request of the interested party. However, in some countries, such as Singapore, the implicit duty of confidentiality applies under certain circumstances.

The duty of confidentiality generally lasts until the order is removed, the final decision that the alleged trade secret does not qualify as trade secret is established, or until the information no longer meets the criteria for trade secret protection.

6.3 Confidentiality clubs

The court may decide to restrict access to trade secrets or related information to a limited number of participants to the proceedings, creating a so-called “confidentiality club” or “confidentiality ring” (for example, in Canada, India, Singapore, Switzerland, the United States of America and according to the EU Trade Secret Directive).

While protective orders impose general duties of confidentiality on all the participants in the proceedings and those who have access to the court’s files, the confidentiality club orders restrict access to specific documents to specific individuals. In addition, a confidentiality club order typically points out how the documents should be handled by the members of the club, for example, if and how documents may be copied or where the documents may be viewed.

The most debated issue regarding confidentiality clubs concerns the individuals included in the club. Very restrictive confidentiality club orders are attorneys-eyes-only or expert-eyes-only. However, excluding the parties and their representatives from the club could create frictions with the fair trial and adversarial principles, since defendants may complain that the prohibition puts them in a weak position without adequate defensive means. A court needs to keep the balance between rights and interests of both parties depending on the concrete circumstances of the case.

6.4 Non-disclosure of trade secrets in judgments

In many countries, a redacted version of the judgment, without disclosure of the trade secret information, is published by the courts. An unredacted version of the judgment will be made available to the parties only, together with protective orders not to disclose its content.

7. Cross-border issues

Cross-border litigation relating to trade secret disputes is not very common. ⁽¹⁷⁾Based on a data set of 700 trade secret-related decisions in the EU, all parties were based in the same EU member state in 86 percent of cases. See Trade Secrets Litigation Trends in the EU, European Union Intellectual Property Office, 2023, p. 29. Available at: https://data.europa.eu/doi/10.2814/565721. However, as trade secrets are not subject to any form of registration, they can theoretically be immediately protected in any jurisdiction where they meet the conditions for legal protection.

Information in general and digital information in particular crosses national borders easily. Trade secrets may be unlawfully acquired in one country by a misappropriator located in another country, and used and publicly disclosed by other parties in yet other countries, without any authorization of the trade secret holder.

In such cross-border disputes, determining jurisdiction and applicable law becomes a more important question, compared to those cases where the parties reside, and the misappropriation occurred, in the same jurisdiction. In addition, the extraterritorial reach of the remedies granted by courts has an impact on both parties.

General rules and doctrines on these issues, also applicable to trade secret disputes, are covered by private international laws, and have been developed at the international, regional and national levels. ⁽¹⁸⁾See, for example, Bennett, A. and S. Granata (2019). When Private International Law Meets Intellectual Property Law - A Guide for Judges. WIPO Publication No. 1053. https://www.wipo.int/publications/en/details.jsp?id=4465&plang=EN.

7.1 Jurisdiction

Where the trade secret holder can file a suit is a matter of jurisdiction. Jurisdiction is the authority of a court to hear and decide on the merits of the case. Generally, each country sets its own jurisdiction rules, and courts themselves should decide on their own jurisdiction. Jurisdiction rules can also be regulated by international conventions or regional legislative acts such as the EU Regulations.

Courts generally rely on the so-called “connecting factors” to establish their competence to decide a case. As the national jurisdiction rules and the related case law differ, the assessment must be done on a jurisdiction-by-jurisdiction basis. Additionally, the legal basis of the protection sought (for example, tort or contract law) can affect applicable jurisdiction rules.

Despite the complexity of the topic, a few recurring rules that ground jurisdiction on similar connecting factors can be identified in the different legal systems:

Domicile of the defendant (or similar territorial connecting factors)

Many laws provide that the defendant can be sued in the country of its domicile, permanent home, habitual residence or similar territorial connecting factor. Regarding companies, connecting factors that ground jurisdiction are generally the place of the registered office, principal office or business office.

Domicile of the claimant

Less frequently, national laws ground jurisdiction on the base of the domicile of the claimant.

Forum commissi delicti and/or forum damni

The law generally provides jurisdiction if there is a territorial connection between the country and the unlawful activities.

Nationality of the defendant

According to other approaches, the place where the illicit conduct was carried out (place of action) and/or the place where the damages occurred or may have occurred (place of effect) are relevant.

A few countries’ laws also look at the nationality of the defendant to determine jurisdiction.

Forum (non) conveniens

Mainly in common law countries, courts apply the forum (non) conveniens doctrine, which allows courts having jurisdiction over a case to stay or dismiss the case upon a determination that another court where the case might have been brought is a more appropriate forum for the interests of all the parties and the ends of justice.

7.2 Applicable law

After the determination of its jurisdiction, a court needs to determine the applicable law. A court may be deemed to have the jurisdiction to decide the case, but according to foreign law.

The applicable law may be determined under national law, international conventions or regional legislative acts such as EU Regulations. Different connecting factors according to private international law apply to breach of contract, tort law, unfair competition law and intellectual property. Therefore, the court will generally need to analyze the nature of the claim.

In essence, determination of the applicable law involves choosing between different bodies of law (contract law, tort law etc.), consideration of the national law of the court (particularly mandatory rules), connecting factors and choice of law principles and the applicable law agreed between the parties, if any.

7.3 Extraterritorial reach of the remedies

When acts of misappropriation, or different fractions of the same conduct, are carried out in different countries, questions may arise as to whether the court with jurisdiction can also address the acts carried out in another jurisdiction, i.e., extraterritorial acts, and whether the court can issue cross-border measures that concern or affect extraterritorial activities.

If the extraterritorial trade secret misappropriation occurs within a contractual context, the breach will largely be governed by the contract. Outside the contractual context, the principle of territoriality is generally applied – at least as a starting point – to trade secrets. ⁽¹⁹⁾The Sedona Conference, Framework for Analysis on Trade Secret Issues Across International Borders, 23 Sedona Conf. J. 909 (2022), p. 951. Available at: https://thesedonaconference.org/publications. There seem to be tendencies and cases in which courts in different jurisdictions may assess extraterritorial misappropriation of trade secret and issue cross-border remedies, such as injunctions and damage awards. ⁽²⁰⁾For example, Motorola Solutions, Inc. v. Hytera Commc'ns Corp., 436 F. Supp. 3d 1150 (N.D. Ill. 2020) allowed the recovery of the defendants’ profits on the sale of products incorporating the misappropriated trade secrets outside of the United States of America. See also Kappes K. and L.Laguna (2021), The Defend Trade Secrets Act and Extraterritoriality, American Bar Association. https://www.americanbar.org/groups/litigation/committees/business-torts-unfair-competition/articles/2021/dftsa-extraterritoriality/.

Even in cases in which a court may decide on misappropriations abroad and issue cross-border measures, the real effectiveness of such measures will largely depend on their recognition and enforcement. They are often regulated through international judicial cooperation mechanisms.

8. Criminal and administrative enforcement of trade secrets: an overview

In general, civil proceedings are the most common proceedings sought in case of trade secret misappropriation. According to a recent study, in the EU, the vast majority of proceedings are categorized as “civil cases” (89%), with a minority categorized as “administrative cases” (5%) or “criminal cases” (6%). ⁽²¹⁾Trade Secrets Litigation Trends in the EU. European Union Intellectual Property Office, 2023, p. 24. https://data.europa.eu/doi/10.2814/565721. Although the absolute number of criminal cases is small, according to the 2024 annual report published by the Japanese National Police Agency, the number of arrests relating to trade secret crimes in Japan has been rapidly increasing in recent years.

8.1 Criminal enforcement

In many countries, criminal law offers additional protection to trade secret holders. Often, availability of criminal sanctions regarding trade secret misappropriation is limited to the most serious conduct, and the punishment differs according to the seriousness of the violation, reaching from a fine to months/years of imprisonment. In some countries, the punishment with a higher penalty may be applied if misappropriation was carried out with the intention of benefiting a foreign government. In some other countries, more severe punishment applies if a misappropriator intended to use the trade secrets in a foreign country or he/she committed the unlawful acquisition or disclosure of the trade secret, knowing that it would be used in a foreign country.

In general, criminal punishments have a deterrent effect against trade secret misappropriation. In some countries, such as Australia, trade secret misappropriation is not a crime. However, such misappropriation is usually carried out with means that are subject to criminal sanctions, for example, theft, fraud, coercion or electronic intrusion. Therefore, trade secret holders still have, to a limited extent, recourse to criminal proceedings in those countries.

Criminal proceedings, depending on national laws, can be pursued ex officio (i.e., on initiative of the prosecuting authority) or subject to a criminal complaint filed by the victim, or both. In any case, the trade secret holder can generally provide “hints” to the prosecuting authority about the trade secret misappropriation. However, once a criminal case is open, the public authorities might take full control of the investigations and the proceedings.

Civil law and criminal law proceedings are often raised in different fora and do not necessarily influence each other, since the two proceedings and available remedies are separate and independent from each other. However, depending on national/regional rules of procedure, what is established in criminal proceedings can be binding on civil proceedings to some extent, or at least be relevant in the context of civil proceedings.

Advantages and disadvantages of criminal proceedings

From a strategical point of view, enforcing trade secrets through criminal proceedings could have both advantages and disadvantages. It can be easier to obtain evidence in criminal proceedings, since public authorities generally have broader investigative power. If the national rules allow the use of evidence collected in criminal proceedings for civil proceedings, requesting criminal proceedings can be beneficial for the trade secret holder, who still needs evidence for civil proceedings.

However, once the criminal action is started upon the request of a party, public officials are in charge of the proceedings. Thus, a trade secret holder has generally only limited control over the investigation, the development of the case and its timeline. In addition, depending on the national rules of procedure, the prosecution of a civil case may be delayed pending the criminal proceedings. More importantly, if trade secret holders have any willingness to settle the case amicably, pursuing criminal proceedings can eliminate those settlement options.

8.2 Administrative enforcement

A limited number of countries provide for enforcement of trade secrets by administrative procedures. In general, administrative proceedings are reportedly rarely used.

In China, ⁽²²⁾Articles 13 and 16 of the Law of the People's Republic of China Against Unfair Competition (as amended up to April 23, 2019). English translation available at the WIPO Lex Database. https://www.wipo.int/wipolex/en/main/legislation. a trade secret holder may file an administrative complaint with the local Administration for Market Regulation, which has the power to investigate trade secret misappropriations. The local Administration can order the misappropriator to cease the misappropriation, confiscate any illegal profits and impose fines.

In the Republic of Korea, trade secret holders may file a request with the Korea Trade Commission for a preliminary injunction to prohibit or prevent international unfair trade practices. They may also seek other corrective measures, including:

• suspending the import, export, sale or manufacture of the infringing goods

• banning the landing of such goods

• making corrective advertising

• publishing the fact of receiving a corrective order from the Trade Commission, or

• other necessary measures to correct unfair international trade practices. ⁽²³⁾Articles 7(2) and 10(1) of the Act on the Investigation of Unfair International Trade Practices and Remedy Against Injury to Industry (Republic of Korea). English translation available at: https://elaw.klri.re.kr.

In the United States of America, when an act of trade secret misappropriation occurs outside the country, the trade secret holder may seek relief through an action brought before the International Trade Commission (ITC). ITC is a federal agency that adjudicates cases involving imports that allegedly infringe intellectual property rights, including trade secrets. It has the authority to exclude imports, if it finds anti-competitive practices and unfair acts in the importation of articles.

9 Trade secret litigation in practice

Since the value of trade secrets derives from their secrecy, many unique challenges arise where trade secret holders detect potential trade secret leakage or misappropriation. Navigating trade secret litigation is complex. Trade secret holders need to make critical decisions to prevent, or minimize, damages caused by misappropriation or leakage. Built on the Case Example of “Serve Machine 1100” in Part IV, the following story shows an example of how a trade secret holder may handle a trade secret dispute.