لاتفيا

This is an informal case summary prepared for the purposes of facilitating exchange during the 2024 WIPO IP Judges Forum.

Session 3: Confidential Information and Trade Secrets

Supreme Court of the Republic of Latvia [2021]: SIA “Colemont FKB Latvia” v Person A, Person B, Person C, and SIA “Partner Broker”, Case No. C33670516 (SKC‑15/2021)

Date of judgment: January 28, 2021

Issuing authority: Supreme Court of the Republic of Latvia (The Senate)

Level of the issuing authority: Final Instance

Type of procedure: Judicial (Civil)

Subject matter: Undisclosed Information (Trade Secrets)

Plaintiff: SIA “Colemont FKB Latvia”

Defendants: Person A; Person B; Person C; SIA “Partner Broker”

Keywords: Database, Sui generis right, Trade secret misappropriation, Unfair competition, Confidentiality protection in proceedings, Reputation, Infringement, Damages, Data protection, Evidence, Balance of interests, Proportionality

Basic facts: The Claimant SIA “Colemont FKB Latvia”, which provides services of insurance agents and brokers, brought an action against its three former employees for the recovery of damages, claiming that the Defendants had infringed the agreements restricting competition concluded with their employer SIA “Colemont FKB Latvia” when immediately after the termination of their employment relationship, they joined the competitor company SIA “Partner Broker” and won over the Claimant’s clients.  The claim further alleged that the Defendants had unlawfully used the Claimant’s databases, violated the Claimant’s right to the protection of its trade secrets against unlawful acquisition, use and disclosure and, in some cases, had not collected the insurance premiums in due time.

The action also includes a claim against the former employees and SIA “Partner Broker” for the joint and several recovery of non-material damages caused by the damage to the Claimant’s reputation as a result of infringement of the prohibition of unfair competition, infringement of trade secret rights, and the dissemination of information harmful to reputation.

Riga Regional Court (the Court of Appeal) dismissed the action.

Held: The Supreme Court of Latvia upheld the judgment in respect of a part of the damages (caused by uncollected insurance premiums) and a part of the non-material damages, as the appeal in cassation did not contain adequate reasoning regarding those claims.

However, the Supreme Court annulled the remainder of the judgment of Riga Regional Court, remanding it for a new examination, having found that Riga Regional Court misinterpreted and incorrectly applied substantive law and infringed the procedural law regarding the request for evidence, the assessment of evidence and the grounds for the judgment.

Relevant holdings in relation to confidential information and trade secrets: This case dealt with a number of issues concerning rights.  In particular, the Latvian caselaw clarified for the first time the ways in which databases are protected, as well as the basis of each type of protection and the criteria to be evaluated.

The Supreme Court explained that databases can be protected in two ways, either by copyright or by a specific type of right (sui generis).  A database may be protected by copyright if, in terms of the selection or arrangement of its materials, it is the result of creative work.  A database may be protected by a specific type of right (sui generis) if the acquisition, verification or demonstration of its contents requires a substantial qualitative or quantitative investment.  The concept of investment should be interpreted broadly, including not only financial investment but also consumption of time and energy, since the investment must refer to the acquisition, verification or demonstration of the contents of the database, but not to the acquisition of the database itself or the creation of the contents in question.  Moreover, such an investment must be substantial.

The Supreme Court noted that a distinction must be made between the right to protection of the contents of a database and the right to protection of a database.  This applies both to databases protected by copyright and to databases protected by the sui generis right.  Information as an intangible benefit cannot be the subject of property rights, but it may be protected by other types of rights, such as rights to protection of trade secrets.

The Supreme Court also found some violations of procedural law by the Court of Appeal (Riga Regional Court) regarding the request for evidence and assessment of evidence, which were caused, inter alia, by the misunderstanding of Riga Regional Court of the status of trade secrets and protection of personal data.  The Supreme Court explained that, when deciding on a party’s request for evidence, the legitimate interests of both parties (and other parties involved) must be considered by determining what right must be protected more in the particular circumstances of the case.  The principle of proportionality must also be taken into account.  In order to establish that the evidence to be disclosed includes the other party’s trade secret, the court must ascertain if the respective information complies with the characteristics of a trade secret established by Articles 2 and 3 of the Latvian Law on the Protection of Trade Secrets.

It is important to note that the Supreme Court of Latvia, as a court of cassation, does not rule on the substance of the case, but rather provides clarification on the interpretation and application of substantive and procedural law. 

Relevant legislation: Rec. 7, 23, 40, Art. 1(3), 3, 4, 7(1) of Directive 96/9/EC of the European Parliament and of the Council; Regulation (EU) 2016/679; Art. 1(3), 5(3), 57 of the Latvian Copyright Law; Art. 18 of the Latvian Competition Law; Art. 84, 85(3), 86, 100(5) of the Latvian Labour Law; Art. 112(1) of the Latvian Civil Procedure Law; Art. 2, 3 of the Latvian Law on the Protection of Trade Secrets.