Know-how (know-how) is the key to every entrepreneur’s survival in the marketplace, especially in times of crisis. Every company builds over time a wealth of aggregate knowledge that is the core of its strategic goodwill. It often happens, however, that some employees and collaborators misappropriate company information (confidential and otherwise) for their own purposes or, even worse, to sell it back to competitors.
What knowledge is owned by the employee and what information belongs to the company? What’s more, it is not always easy to discern which conduct of employees or contractors is lawful and which is not.
In this article we will cover the following topics:
In Italy, in case of confidential information, “Revelation of scientific or trade secrets” is even a crime. Hence, this reinforces the existing civil law protection. As a matter of fact, “trade secrets” are protected by Legislative Decree No. 30/2005 (Industrial Property Code) as long as the owner takes “reasonably adequate measures” to preserve their confidentiality. The discipline applies to several categories of information, for example:
After all, the company always incurs considerable investment reaching its know-how and for this very reason such investments deserve to be protected by the Law. Confidential information hardly needs to be new to be protected by the Law. It is indeed sufficient that it, in addition to having economic value, is not easily traceable outside the “corporate enclosure” as a whole (i.e., in aggregate).
Please note that, although employees are already bound by Law to loyalty and confidentiality (ex art. 2105 Civil Code), it is nevertheless very good to remind them (in the employment contract, company regulations and circulars) “what” should be considered confidential and what the consequences of any breach of confidentiality might be.
Confidentiality is even more relevant when dealing with co-workers external to the company. In such cases, it actually becomes essential to obtain a valid secrecy bond through a precise confidentiality agreement (we have already dealt with this topic in the article, “What is the point of a confidentiality agreement?”). Note that only when a confidentiality agreement exists then it will actually be possible to prohibit others from appropriating company information and, by extension, know-how.
The general principle is the freedom of flow of information and knowledge (not the other way around).
In an interesting case that has come before the Supreme Court [Cass. pen. sec. V, Sent., (ud. 11-02-2020) 04-06-2020, no. 16975] a group of employees, together with an external associate, had stolen company information useful for the construction of an innovative technological device. The obvious reasons for the “theft” lay in the tempting opportunity to hand over the information to a competitor in order to take advantage of it.
According to the Italian Supreme Court, the defendants … “were able to minimize the time it took to make a highly competitive product without incurring the errors that those who tackle new realizations normally encounter, resulting in a significant capital advantage.” And again, “in a capitalist system increasingly marked by speed, and the rapid obsolescence of industrial products, know-how assumes decisive value relevance.”
Article 623 of the Italian Penal Code on “Revelation of scientific or trade secrets” punishes with imprisonment of up to two years “anyone who, having become aware by reason of his state or office, or his profession or art, of trade secrets or news intended to remain secret, over scientific discoveries or inventions, reveals them or uses them for his own or others’ profit.”
However, although this offense exists, it does not automatically follow that the criminal route is always the best, in strategic terms, to protect one’s know-how. Article 124 IPC provides the civil measures and sanctions that can be requested from the Judge in case of infringement of industrial property rights (i.e., secrets), including:
The court may also order, as an alternative to the application of the measures referred to in this article and at the request of the party concerned, the payment of compensation.
Please note, in order to take action to protect secrets, it is essential that the secrets actually be secrets. It is necessary that a corporate, informational and contractual system exists to protect secrets.
In the next paragraph we will discuss how to put in place a good (and indispensable) strategy to protect business secrets and confidential know-how.
Every employee will acquire, throughout his or her working life, a certain amount of notions and knowledge that he or she will take with him or her (even after his or her employment with a specific company has ended), and, frankly, there will be no way to prevent this from happening. Nevertheless, the employee will never be able to remove confidential information “en bloc”.
It must indeed be deemed unlawful “to transfer a set of business information […] that exceeds the mnemonic capacity and experience of the individual normal person and thus configures a database that, by enriching the competitor’s knowledge, is capable of providing him with a competitive advantage that transcends the ability and experience of the acquired employee” [Cass. civ. Sec. I Sent., 12/07/2019, no. 18772 (rv. 654770-03)].
Thus, in order to implement a good corporate information protection strategy, one should keep in mind several notions, both legal and pragmatic. One should:
In our experience, the best results in terms of protecting know-how are achieved by the preparation of serious and credible company policies. They in fact empower employees, on the one hand, to take note of the value of aggregated information and on the other hand, to fear repercussions from violating those policies.
In the context of a regulatory environment such as the one described, it is also very important to have the ability to act quickly by clearly demonstrating to the court how the company is fully aware of the value of its know-how and, to that end, of the existing defense measures and the disregard for them shown by the employee or collaborator who violated them. This is the only way to quickly obtain the necessary legal dispositions.