News

Trade Secrets under Maltese Law

A “trade secret” is a somewhat straightforward concept at law: it concerns information which is considered to provide a commercial value in view of the information being kept secret. Probably, the Coca-Cola recipe is the most well-known trade secret.

Direct recognition of trade secrets under Maltese Law is a recent development having materialized only in 2018 as a result of the transposition into Maltese Law of the EU’s Trade Secrets Directive 2016/943/EU on the protection of undisclosed know-how and business information against their unlawful acquisition, use and disclosure. As such, the Maltese Law in this sphere, namely the Trade Secrets Act (Cap 589 of the Laws of Malta), is close to identical to the Trade Secrets Directive.

Requisites for Protection

For information to be considered a trade secret in terms of the Trade Secrets Act, and in turn be conferred trade secret protection, it must meet three cumulative criteria, namely:

  1. The information must be secret, in the sense that it is not, as a body of information or in the precise configuration and assembly, generally known among or readily accessible to persons within circles that normally deal in the kind of information in question;
  2. The information has commercial value in view of the fact that the information is secret; and
  3. The information has been subject to reasonable steps under the circumstances, by the person lawfully in control of the secret, to keep the information a secret.

Whilst the first two requisites of trade secret protection are somewhat self-evident, it must be highlighted that the third requirement demands that positive action is taken by the holder of a trade secret to keep the information a secret. Thus, the steps and actions taken to protect the secrecy of the information form an integral part of whether the information is considered a trade secret in the first place. However, it should be noted that the reasonable steps that are required to be taken to keep information a secret have not yet been developed on a local level in the sense that to date there is no local precedent which sheds light on this point.

Protection

The protection conferred by a trade secret is a protection against the unlawful acquisition, use or disclosure of the information deemed to constitute a trade secret.

Unlawful acquisition of a trade secret occurs in instances where the trade secret is acquired without the consent of the trade secret holder by:

  1. Unauthorized access to, appropriation of, or copying of any documents, objects, materials, substances or electronic files, lawfully under the control of the trade secret holder, containing the trade secret or from which the trade secret can be deduced; or
  2. Any other conduct which, under the circumstances, is considered contrary to honest commercial practices.

On the other hand, unlawful use or disclosure of a trade secret is considered to arise in instances where a person, without the consent of the trade secret holder, is found to have met any of the following conditions:

  1. Has acquired the trade secret unlawfully;
  2. Is in breach of a confidentiality agreement or any other duty not to disclose the trade secret; or
  3. Is in breach of a contractual or any other duty to limit the use of the trade secret.

It should also be noted that the acquisition, use or disclosure of a trade secret is also considered unlawful when a person knew or ought to have known that, under the circumstances, the trade secret had been obtained directly or indirectly from another person who was using or disclosing the trade secret unlawfully. Similarly, the production, offering or placing on the market of infringing goods, or the importation, export or storage of infringing goods for those purposes, is also considered an unlawful use of a trade secret where the person carrying out the activity knows or ought to have known that the trade secret was used unlawfully.

Crucially, trade secret protection only arises against internal personnel, such as employees or contractors, who were exposed to the trade secret. Acquisition of the same information considered to be a trade secret would be lawful in instances of:

  1. Independent discovery or creation;
  2. Observation, study, disassembly or testing of a product or object that has been made available to the public or that is lawfully in the possession of the acquirer of the information who is free from any legally valid duty to limit the acquisition of the trade secret;
  3. Exercise of the right of workers or workers’ representatives to information and consultation in accordance with law and practices; and
  4. Any other practice which, under the circumstances, is in conformity with honest commercial practices.

Thus, no rights against other third parties not exposed to the secret are granted via a trade secret protection and in fact, a trade secret can be considered to be in conceptual terms the opposite of a patent. Whilst a patent is granted against disclosure of the invention in a manner which is sufficient for the invention to be replicated by a person skilled in the art and in return for such disclosure protection against third parties is granted, in a trade secret, the information is kept secret but no protection against third parties who were not exposed to the trade secret arises.

It should also be noted that the acquisition, use or disclosure of a trade secret can however be considered to be lawful to the extent that it is required or allowed by law.

Exceptions

Notwithstanding the above, it should be noted that are a number of instances in which the acquisition, use or disclosure of a trade secret is considered to be exempt from infringement, namely:

  1. For exercising the right to freedom of expression and information as set out in the Charter of Fundamental Rights of the EU, the Constitution of Malta and the European Convention Act, including in respect for the freedom and pluralism of the media;
  2. For revealing misconduct, wrongdoing or illegal activity, provided that the respondent acted for the purpose of protecting the general public interest;
  3. Disclosure by workers to their representatives as part of the legitimate exercise by those representatives of functions in accordance with the law, provided that such disclosure was necessary for that exercise;
  4. Any disclosure by an employee to a whistle-blowing reporting officer or whistle-blowing reports unit as provided for in the Protection of the Whistleblower Act; or
  5. For the purpose of protecting a legitimate interest recognized by law.

This article forms part of GTG Advocates’ series “Basics of Maltese Intellectual Property Law”, authored by Dr Terence Cassar and Dr Bernice Saliba.

For more information on Intellectual Property Law and related areas please contact Dr Ian Gauci on igauci@gtgadvocates.com, Dr Terence Cassar on tcassar@gtgadvocates.com, and Dr Bernice Saliba on bsaliba@gtgadvocates.com.

Disclaimer: This series is not intended to impart legal advice and readers are asked to seek verification of statements made before acting on them.