The theft of know-how

The theft of know-how

In today’s knowledge-based economy, the value of an organization is no longer defined solely by its tangible assets. A company’s competitiveness is now measured by its ability to orchestrate an efficient supplier network, optimize manufacturing processes, or consolidate a highly segmented customer database. These elements constitute what we call know-how: a body of technical or commercial knowledge that is not in the public domain and provides a strategic advantage over third parties.

However, the legal protection of this intangible heritage poses a constant challenge. Where does a competitor’s right to replicate a successful business model end, and where does the misappropriation of another’s secrets begin? The answer is complex and requires a detailed analysis of Trade Secret laws (such as EU Directive 2016/943 and its national transpositions) and Unfair Competition regulations.

The legal framework for trade secrets

Since the harmonization of Trade Secret laws across Europe, the legal framework has provided a specific substantive status for confidential information. Previously, the protection of secrets was fragmented and relied heavily on the interpretation of contractual good faith. Today, a trade secret is configured as a full-fledged industrial property right.

For know-how regarding suppliers, costs, or processes to be legally protected, it must meet three concurrent requirements:

• It must be secret: not generally known or readily accessible to persons within the circles that normally deal with that kind of information.
• It must have commercial value: whether actual or potential, precisely because it is secret.
• It must have been subject to reasonable steps by its owner to keep it confidential.

This last requirement often determines the success or failure of a legal action. It is not enough to intend for something to be a secret; it is mandatory to demonstrate that access protocols, robust non-disclosure agreements (NDAs), and security systems have been implemented to show an active will to protect.

Unfair competition as a complementary framework

When a competitor vampirizes a supply chain or uses privileged information to poach another’s clients, we enter the territory of unfair competition. Unfair competition legislation acts here as a necessary complement to trade secret protection.

Legal frameworks typically classify the violation of industrial or business secrets as an unfair act — especially when access was gained through a breach of a duty of reserve or through illicit means. But the scenarios are much broader:

• Inducement to breach of contract: it is lawful to recruit workers or suppliers from the competition, but it ceases to be so when the sole objective is the acquisition of industrial secrets or when deception is used to make a third party rescind their previous commitments.
• Exploitation of another’s effort: a conduct that serves as a deterrent to those who seek to position themselves in the market by improperly taking advantage of the reputation or labour of others.

The complex case of executive departures

One of the most complex scenarios in practice is the departure of executives or middle management who decide to start their own business or join a competitor. This creates a collision between two fundamental rights: the freedom of enterprise and the right to work versus the right to protect the original company’s secrets.

Jurisprudence clearly distinguishes between a worker’s professional experience — which is free and belongs to them — and the trade secret of the company — which is unavailable. If a worker uses their general skills developed over years, they are acting within the law. If, conversely, they use a specific list of supplier prices that they only became aware of due to their position and which the company specifically protected, they are committing an infringement.

The difficulty lies in the burden of proof. How do you prove that a competitor reached the same supplier and obtained the same discount thanks to a leak rather than their own merit? This is where prior legal audit work becomes indispensable. Without traceability of information and without well-dimensioned — and remunerated — post-contractual non-compete clauses, the protection of know-how vanishes.

The true defense of know-how starts earlier

The true defense of know-how begins much earlier. It requires the identification of the company’s intangible assets and the implementation of a secret management system that includes:

• Personalized non-disclosure agreements (NDAs)
• Employee exit protocols
• Security audits of the supply chain

The law not only provides tools to punish the infringer but also mechanisms to deter them. A company that demonstrates ironclad control over its intellectual and industrial property is a much harder company to attack.