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Legal regulation of trade secret protection in Russian federation

About trade secret

In the Russian language secret means something hidden known to a limited group of people, i.e. some knowledge or information, circle of subjects is strictly defined and is not subject for expansion. The nearest synonym to word “secret” is the word “mystery”.

Contrary to definition dictionary, Russian Federation legislation has no unified position with regards to secret definition. On the one part, in different laws and regulations secret is the name of the information nondisclosure of which serves interests of the state (official secret), society, certain physical or legal persons (advocate, medical, tax, audit secret) – in this case judicial interpretation actually corresponds to the lexical one. At the same time, from the other part, law maker considers to be secret not the information itself but non-disclosure provisioned in order to maintain confidentiality of the information having substantial significance for its owner –exactly such approach was selected upon judicial regulation of business secret protection.

Trade secret is the non-disclosure of the information enabling its owner to increase the income under current or possible circumstances, to retain market position or receive any other commercial benefit. In other words, trade secret or business secret is the access regulation, regulation of its processing and protection supporting means. With regards to the information which is non-disclosure information, a law maker uses the term “information being a business secret (know-how)”, although its literal interpretation leads to the conclusion about the terms “sensitive information” and “relations control methods connected with such protection” equity. Subjects in the corresponding legal relations are forced to disregard such terminology discrepancies.

About the owners of the information being trade secret

Theoretically, any person can be the owner of the information being trade or business secret, physical persons and organizations of all legal forms (among them non-commercial organizations) are included. One must admit that in case a physical person not duly registered as a sole proprietor is the owner of trade secret, it will be very difficult for him to provide for non-disclosure of such information. Indirect prohibition for non-disclosure of the information owned by physical persons who do not conduct entrepreneurial activity is provisioned by Sub-item 5 Item 1 Article 10 of Federal Law “On trade secret” which establishes the means for identification of trade secret owner on the media.

In case a physical entity obtained the information that needs to be protected within the frames of trade secret, it makes sense to register such physical person as sole entrepreneur or to transfer such information to a subordinated legal person.

For any subject to have viable possibility to provide for the protection of the information being business secret he shall have documentary confirmation that this information belongs to him. Theinformationshallbereduced to tangible form out of which the essence of protected information and the moment of its formation or receipt become apparent. There are some ways to provide for such confirmation.

State registration of the exclusive right for intellectual property which contains the information to be protected is the most effective way as it provides for business secret protection from the moment of exclusive right application. In case the law does not provide for the possibility to register such exclusive rights, its use is impossible.

In the practice of law, the following custom became permanent – in order to confirm authorship andthemomentof intellectual property establishment the rights to which are not subject for registration, the tangible medium which contains a detailed description of the object to be protected is forwarded to the postal address as a valued dispatch. Later, sealed and stamped envelope can be presented to judicial authority as the confirmation of receipt date for re-sending and become a proof of right for business secret protection creation moment.

Notarial certification of the information to be protected by means of information owner signature witnessing on the document can also be a justifiable way of the right for protection confirmation.

Types of trade secret

The right to consider the information established or used or/and protected by organization or physical person to be trade secret and to determine the list and content of such information belongs to its owner, that is why a person who considers any information used or intended for use in his commercial activity are of a certain value due to their non-disclosure to third parties. He can undertake necessary and appropriate measures in order to protect business secret.

The law equates trade secret and know-how. Any information (production, technical, economical, organizational, etc.), results of intellectual activity in the sphere of science and technology, information about the ways of professional activity realization having sound or prospective commercial value due to their non-disclosure to third parties, information to which third parties have no free lawful access and those with regards to whom the owner imposed trade secret procedure are considered to be know-how. Also, judging from direct reference of the law, ledger content and content of internal accounting reports of companies and sole entrepreneurs are also considered to be trade or business secret.

The legislation also contains the list of information which cannot be considered trade or business secret, namely:

  • The information presented in organizational documents of a legal person, in the documents acknowledging actual entry about legal persons and sole entrepreneurs into the corresponding public registers;
  • The information presented in the documents entitling for entrepreneurial activity carrying out;
  • The information about environmental pollution, fire prevention conditions, sanitary and epidemiological and radiological environment, food safety and other factors adversely affecting secure operation of worksites, security of each citizen and population as whole;
  • The information about size and composition of the labor force, compensation plans, work arrangements including occupational safety and health, industrial injuries data and occupational illnesses, available jobs;
  • The information about backdated wages and other welfare payments;
  • The information about the violation of RF Legislation and actual bringing to responsibility for such violation;
  • The information about terms of competitive tenders and auctions on privatization of central or municipal property;
  • The information about the amount and structure of revenues of non-profit organizations, amount and content of their property and expenses, number of employees and compensation plan, labor of love use in non-profit organizations;
  • The information about the list of people having the right to act with full authorityon behalf of a legal person.

It should be taken into the account that public information such as commonly-known facts are not considered business secret, as well as other information having unlimited access. Herewith, special structured informational system or unique conclusions done further to the results of their analysis are not considered confidential and protection demanding.

On the measures for trade secret protection

Formally, no special registration procedure is required in order to provide for business secret protection.

The owner of trade secret shall register his exclusive right only if he is entrusted to do so according to the regulations of legislation in power. Exclusive rights for trade mark and service mark, place of origin of as product, invention, utility models and industrial patterns ate subject for registration.

The only exclusive binding requirement for trade secret legal protection in case the exclusive rights for such intellectual property are not subject for proper registration is the non-disclosure of the information to a general public assured by non-disclosure treatment of such information by means of carrying out of package of legislative, organizational, technical and other actions.

According to the Russian Federation legislation, know-how owner shall make provisions for its protection, namely:

  • To determine the list of information being know-how and trade or business secret;
  • To limit the access to such information by introducing a special procedure for its application and control;
  • To record those having an access to know-how and of those to whom such information was granted or transmitted;
  • To govern the relations with regards to business secret use by those working under employment agreement and contracting party under a civil-law agreement;
  • To apply trade secret to a tangible media or to include such information as “Trade Secret” bearing the owner of such information to documents’ requisites.

Trade secret mode is considered to be established upon taking abovementioned measures on the part of the information owner. Also, information protection measures are deemed to be sufficient in case there is no access on the part of the other peopleto abusiness secret without the consent of its owner. The possibility to use such information by the workers and to transfer it to the contracting parties without any trade secret violation is also assured.

In order to provide for compliance with the abovementioned requirements, organizations and sole entrepreneurs conducting their activity using business secrets shall execute and approve the following documents:

  • Regulations on trade secret - this document regulates general procedure for trade secret handling, establishes the list of information being trade secret in a given company (sole entrepreneur), provides for general responsibility terms for the violation of trade secret protection requirements. All employees of a given company (sole entrepreneur) shall familiarize themselves with the above document;
  • List of persons having the access to trade secret bearing their positions, and those responsible for the security during storage and processing of a trade secret. The document can be approved as an attachment to Regulations on business secret. Familiarization is done in the same way;
  • List of premises (buildings, working places) in which the processing of business secret and know-how takes place. Familiarization is done in the same way. The document can be approved as an attachment to Regulations of business secret;
  • Procedure of the marking “Business secret” attachment. The document can be approved as an attachment to Regulations of business secret;
  • Regulations on some certain know-how bearing lists of information, special methods of familiarization with such information, methods of its application in cause of labor activity of some employees. All employees whose labor activity is associated with the access to the corresponding know-how;
  • Employment agreements with the employees and civil-law agreements with physical and legal persons providing for the responsibilities of the parties to keep the information received from a third party or any other party secret, or supplementary agreements to the existing agreements which are to be signed by a company (sole entrepreneur) and third parties. The cases when unauthorized access to business secret took place are also included.

It should be noted that non-disclosure of the contents of accounting register and internal accounting reports requires no special protection measures. Persons having then access to the contents of accounting register or internal accounting reports shall preserve trade or business secret and are liable for non-fulfillment of their obligations subject to the conditions of Federal Law “On business secret”.

About the responsibility for trade or business secret protection requirements violation

The Russian Federation legislation provides for bringing to disciplinary, civil, administrative and criminal responsibility of a person guilty of improper information being a trade or business secret disclosure and use.

Disciplinary responsibility measures are applicable only to physical persons being the employees of a company (sole entrepreneurs) – owner of a trade secret. Qualified establishment by an employer of a business secret non-disclosure treatment (those performing the duties of accounting records maintenance bear responsibility in accordance with Federal Law “On accounting” for the disclosure of the information contained in accounting register and internal accounting reports).

A remark, admonition, dismissal for the corresponding causes can be applied to an employee as a disciplinary penalty. Disclosure of a secret (official, commercial, business or another) protected by law which a person got to know in cause of his employment duties fulfillment is the basis to apply the most severe punishment – dismissal.

Civil-law responsibility for the business secret requirements violation consists of the responsibility of a violator to compensate the losses caused by exclusive right violation unless otherwise is provisioned by the law or an agreement signed between the owner of the information to be protected and the violator. The lawmaker treats losses both as actual damage and loss of expected gain, i.e. lost income. That is why such agreement can only provision the terms for losses compensation improving violator’s situation. At the same time, the law provides for additional penalty award (fees, charges), occurrence of which in the agreement wording will provide for the essential sanctions’ application towards the violator. First of all, account must be taken in case there are any difficulties upon proving lost income amount.

Administrative responsibility for the violation of business secret obligations is set forth in Article 13.14 of the Russian Federation Code of Administrative violations. According to the given regulation, disclosure of any information access to which is limited by the federal law, trade or business secret is included, except those cases when a person is punishable under criminal law for such disclosure in cause of his employment or professional duties fulfillment and is subject to administrative fines upon physical persons in the amount of 500 to 1000 RUR, and upon legal persons in the amount of 4000 to 5000 RUR.

Criminal responsibility for trade or business secrets collection by means of documents’ stealing, bribery and threatening, and also by means of any other illegal way involves the fee in the amount up to 80 000 RUR or in the amount of a salary or any other income of a convicted person for the period from 1 to 6 months, or corrective labor for the term up to 1 year, or compulsory labor for the term up to 2 years, or deprivation of the freedom for the term up to 2 years. Illegal disclosure or use of a business secret without the owner consent to whom it was entrusted or became known in cause of his employment or work, results in criminal responsibility of a person by means of a fine imposition in the amount up to 120 000 RUR or in the amount of a salary or any other income of a convicted person for 1 year period depriving him of the right to occupy certain positions, or a prohibition to be engaged in specified activity within 3 year period, or correctional labor fulfillment for the term up to 2 years, compulsory labor or freedom deprivation for the term up to 3 years. It should be noted that in case abovementioned characteristics are discovered criminal cases as public prosecution cases shall be opened irrespective of a victim statement availability.

The Russian Federation legislation governs total ordering and terms of business secret protection of a company or sole entrepreneurs. But adoption of the actual measures required and sufficient for such protection providing is associated with severe difficulties. First of all, it is connected with large volume and specific content of a business secret within a company or sole entrepreneur. From the technical point of view, fulfillment of measures regarding protection of the information: limited access, responsible people appointment, keeping of the records on access to a business secret, introducing changes into already approved employment agreements and responsibility assignment become somehow problematic.

The abovementioned difficulties are solitary examples of those problems which companies and sole entrepreneurs might face. Qualitative and efficient system of business secret protection cannot be developed as simple proposition of turn-key solutions. This task shall be settled only by means of complete and fundamental analysis of internal characteristics of each separate company (sole entrepreneur).