What can you do in the event of theft or leakage of trade secrets?

Previously, my office colleague Valerie Lipman wrote an article about what trade secrets are and how you can protect them (in advance). In this follow-up article, I will describe what you can do if you are confronted with leaked or stolen company data. In short, what you can do (after the fact) to stop the breach and to limit and recover compensation for your damages.

Who can I take action against?

You can take action against the infringer. That is any natural or legal person who has unlawfully obtained, used or disclosed a trade secret. You can think for example of hackers, (former) employees and suppliers who have gained access to the trade secrets, but also of parties who profit or have profited from them such as your competitors.

Under what (legal) provisions can I take action?

Before the introduction of the Trade Secrets Protection Act, there was no specific regulation for the protection of trade secrets. However, an aggrieved party could bring an action based on the violation of agreements made (such as, for example, acting in violation of a non-competition or confidentiality clause in an employment contract or supplier contract).

If no agreements had been made, then the only action that could be taken was in tort.

Since Jan. 1, 2019, it is also possible to sue under the Trade Secrets Protection Act, which is specifically written for cases where you are facing violation of a trade secret.

What measures can I take?

Among the measures you can take today, since the passage of the Trade Secrets Protection Act, are the following:

1. You can ask the (injunction) court to order the infringer to cease or prohibit the use or disclosure of trade secrets.
2. You can ask the (injunction) court to order the infringer to prohibit him from producing, offering, marketing or using infringing goods.
3. You can ask the (injunction) court to seize the infringing goods and/or demand their release.
4. You can ask the court to order the infringer to remove the infringing goods from the market, strip them of their infringing capacity, or destroy them.
5. You can claim damages.
6. You can ask the court to order the infringer to pay all your (litigation) costs.

Either way, it is important that you take action as soon as possible. After all, experience shows that acting quickly can prevent further damage and further infringements. This also increases the chances that the infringement already suffered will be successfully stopped and the damages suffered as a result can actually be recovered.

It is also wise to consult directly with your marketing & communications department, your IT department and/or possibly report it to the police.

What can I do if the infringer offers no recourse?

As described above, you can claim damages from the infringer. Unfortunately, this does not always mean that you will actually be compensated for your damages, even if the court awards your claims. This is because after a successful verdict, the infringer may go bankrupt or may not have sufficient financial resources to pay you the full damages he is ordered to pay. This is very unpleasant, but it does not necessarily mean that you are permanently empty-handed.

In fact, under circumstances you can also take action against the directors behind an infringer - if it is a legal person. This is the case, for example, if the infringer's director is personally seriously culpable or if the director has violated a standard of care separate from his management position. In both cases, the director is liable in addition to the infringer.

Conclusion

Protection of company information must be well regulated both front and back. Much can be arranged in advance in contracts, possibly reinforced by sanctions for breach of contract. Afterwards - if not (properly) arranged contractually - action can often be taken under the Trade Secrets Protection Act or in tort. In any case, it is important to act quickly to stop an infringement, to recover damages and to limit further infringements and further damage. This article describes several ways to accomplish that.