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Better Protection of Trade Secret: New Enforcement Practices

There have been two important developments in the field of trade secret, which contribute to the available protection instruments.

1. Application of "Dormant" Provision of the Criminal Code of Ukraine

For the first time the National Police has completed a pre-trial investigation in a criminal proceeding under Art. 232 of the Code – "disclosure of a trade secret or a bank secrecy" and transferred relevant indictment to court.

In this particular case an information analyst who had access to sales data sold this information to a competitor of the company he worked for. The analyst copied information on a memory stick and took photos with his mobile phone to further transfer this data to a competitor, which injured company's business.

The prospects and timeframe of consideration of this case by the court are currently unclear. Still, criminal proceeding of this type already speaks for improved enforcement possibilities as well as a good tool for collection of evidence required for protection of trade secret.

2. Antitrust Defense Option

In its very recent decision the Antimonopoly Committee of Ukraine found use of a trade secret by competitors to be an unfair competition offence.

Two employees of a company who had access to customers and suppliers databases including contacts and volume / pricing data, established their own business after leaving the company. Their business actively solicited clients of their former employer taking advantage of its stolen customer data. Following the investigation, the Committee prohibited to use such data and imposed a fine in the amount of 3.4% of the 2017 revenue.

The evidence for the Committee's decision was collected predominantly within a related criminal proceeding which enabled the aggrieved company and law enforcement agencies to seize relevant documents and ascertain the allegations.

Evidence gathered within the Committee's investigation and the criminal proceeding may also help company to recover damages in a civil court.

These developments demonstrate the effectiveness of the three-pronged approach to combating free-riding on corporate trade secrets - filing criminal complaint, complaint to the Antimonopoly Committee and civil claim. It certainly promotes new opportunities for protection of rights and interests of businesses in case of unfair use of customer data, know-how and goodwill by its former business partners or employees.

Key Recommendations:

Effective use of the above tools requires proper system of trade secret protection in place, which encompasses:

  • Implementation of a risk-based approach to internal policies and updating them as well as job descriptions of the exposed personnel;
  • Granting relevant status to documents and taking special measures to preserve the secrecy of information;
  • Recording access to files and documents covered by trade secret;
  • Establishing that partners and employees have to comply with trade secret obligations and restrictions after termination of their work for the company. 

For additional information please contact partners Sergiy Grebenyuk and Igor Svechkar.

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