Innovative businesses are increasingly exposed to dishonest practices aimed at misappropriating trade secret, such as theft, unauthorized copying, industrial espionage or the breach of confidentiality requirements. To implement an EU Law from 2016, the Hungarian Parliament adopted a special act on the protection of trade secret.
The act starts with the definitions related to the protection of trade secret followed by clearly set procedural rules on exercising rights pertaining to the protection of trade secret.
The fundamental novelty of the act is that it ensures protection of trade secret as a special way of protection likely to the concept and regulatory framework of intellectual property rights whereas the previous concept under the Civil Code regarded trade secret as a part of privacy.
According to the new law, trade secret means business-related secret information or assembly of its components that has commercial value due to its confidentiality and in order to keep it confidential, the holder of the trade secret has taken reasonable acts and measures. (This is why it is extremely important that employment agreements with employees as well as commercial agreements of business partners who have access to sensitive information of the company include appropriate confidentiality clauses.)
Holders of the trade secret are persons who lawfully have control over the information or whose lawful economic, financial or business interest would be harmed by breaching rights related to the trade secrets. Consequently, a person who does not qualify as a holder of the trade secret, may not use or disclose trade secrets.
The act emphasizes that trade secrets are valuable and transferable rights, and names the relevant contract types: trade secrets may be transferred by an agreement on assignment and the holder of the trade secret may give permission for use by a license agreement. Therefore, trade secrets may also be used as a contribution to a company and a buy option may also be established upon them which gives plenty of opportunities for entrepreneurs to monetize their know-how and attract investors.
A violation of trade secret is when somebody acquires, uses, or discloses it unlawfully. This includes unauthorized access to data, theft of information, also usage or disclosure of unlawfully acquired business secrets.
The act provides for several remedies for secret holders against the breaching party: he may demand, along with the establishment of the infringement its cessation; the prohibition of any further infringement; the prohibition of producing or distributing illegal products; withdrawal of such products; or, in some cases, even their destruction. The secret holder may demand that the breaching party shall reveal its business relations established for unlawful exploitation; the restitution of status before infringement; or the refund of profits earned by the infringement. Furthermore, secret holders shall have the right to demand the public disclosure of the decision made in the case.
The secret holder may demand compensation for damages according to general rules. If extent of damage cannot be precisely calculated, damages may be awarded as a lump sum that shall not be less than the extent of lost royalties.