Abstract

Trade secrets can be protected in Italy based on different sets of statutory provisions. Such a structure places the Italian legal system at the forefront of know-how protection in Europe.

In essence, under Italian civil law, business information can be protected as trade secrets stricto sensu under Articles 98 and 99 of the Industrial Property Code (IP Code), as amended to implement Directive 943/2016 (Trade Secrets Directive) or, more broadly, as confidential information against the misappropriation or misuse by competitors which amount to unfair competition under Article 2598, no. 3, of the Civil Code.

The applicable regime depends on the nature of the information and, most importantly, on the level of confidentiality and the appropriateness of the measures adopted to ensure it. The scope and effectiveness of available remedies differs under the two regimes. For that reason it is essential that you have a clear understanding of the different options, so as to meet the relevant requirements under the circumstances and avoid gaps in protection.

Trade secrets protection under article 98 and 99 of the IP code

Even before implementation of the Trade Secrets Directive, trade secrets were protected in Italy under Articles 98 and 99 of the IP Code, which already provided for exclusive IP rights in secret business information.

Article 98 defines trade secrets as “business information and technical-industrial experience, including commercial information and experience, subject to the legitimate control of the owner” that are (i) secret; (ii) economically valuable so long as they remain secret; (iii) subject to reasonably adequate measures to maintain their secrecy. If these requirements are met, the confidential information is protected by unregistered industrial property rights and enjoys the enhanced enforcement regime set up by the IP Code.

In particular, the owner of the IP rights can seek urgent measures against infringing activities and products, such as a preventive technical appraisal, preliminary search order, seizure and preliminary injunction.

Final remedies that can be issued at the outcome of ordinary proceedings include injunctions, compensatory damages, disgorgement of profits, seizure and removal of the infringing products from the market, as well as destruction or assignment in property of the infringing products to the rights holder.

Indeed, under Article 99 IP Code the trade secrets owner is entitled to prevent third parties from acquiring, disclosing or misusing the secrets without consent, except for information that was obtained legitimately, e.g. by means of reverse engineering. In fact, the Italian parliament did not expressly acknowledge the lawfulness of reverse engineering, relying on pre-existing case law on the same issue. In this respect, information accessibility has relative character, whereby the abstract possibility to carry out a reverse engineering does not suffice to exclude trade secret protection if the reverse engineering is not the effective source of the relevant information.

The implementation of the Trade Secrets Directive in Italy brought about three major amendments to Article 99 IP Code:

1. The person who uses, discloses or acquires secrets obtained from third parties will be held liable if he knows or ought to know that those secrets were obtained unlawfully in the first place.
2. The production and marketing of “infringing goods” - i.e. goods that derive a “significant benefit” from the unlawful use of trade secrets - is prohibited if the person carrying out such activities knows or ought to know that trade secrets were being used unlawfully for these purposes.
3. The statute of limitations for bringing substantive claims against trade secrets misuse is currently set to five years.

In addition, trade secrets now enjoy an enhanced confidentiality regime aimed at maintaining their secrecy during enforcement proceedings.

In particular, under Article 121-ter of the IP Code, a judge can impose on the parties, the attorneys or other individuals involved in a dispute (e.g. witnesses) a confidentiality obligation that can remain in effect even after the proceedings conclude.

Furthermore, the judge can limit access to documents and hearings to a set number of subjects and impose a redaction on public orders and decisions that refer to the secrets.

As regards preliminary relief, the judge may also replace preliminary injunctions with a specific measure provided for trade secrets, allowing the alleged infringer to continue to use the secrets against payment of a security deposit, provided that there is no risk of further disclosure of the information. On the other hand, if the preliminary measures obtained by the trade secret holder are later revoked because (i) the holder did not initiate ordinary proceedings on the merits within the prescribed deadline or (ii) in a proceedings on the merits it is ascertained that there was no trade secret worth of protection, the trade secret holder must compensate the damages suffered by the party accused of infringement (Article 132, 5-bis and 5-quarter, IP Code).

Unfair competition and confidential information

The Civil Code’s protection of confidential information pertains to the area of unfair competition and stems from the “general clause” of art. 2598 no. 3, which prohibits the unlawful behavior of those who “directly or indirectly use any other means that do not conform to the principles of correct behavior in the trade and are likely to injure another’s business.”

To seek protection against the misappropriation or misuse of confidential information, the following requirements must be met: (i) the rights holder and the infringer must be entrepreneurs and competitors; (ii) the owner of the information in question has not made it available and does not intend to make it available to the public; (iii) the disclosure or use of such information must cause actual or potential competitive damage.

In practice, this generally concerns confidential information (such as lists of customers or suppliers, for instance) that amount to the intangible assets of entrepreneurs - being the results of their investment that are not intended to be shared with third parties, although they may not be subject to strict secrecy measures. Consequently, the misuse of such information constitutes parasitic conduct exploiting the efforts of a competitor.

Entrepreneurs seeking protection of confidential information under Article 2598, no. 3, Civil Code can rely on the remedies provided for by Articles 2599 and 2600 Civil Code, i.e. injunctions, compensatory damages, publication of the judgment as well as “appropriate measures to remove the effects” of the unlawful conduct (such as an order to destroy the infringing products). However, these are not comparable to the wide array of remedies and precautionary measures available to trade secrets, especially after implementation of the Trade Secrets Directive. Moreover, unlike trade secret infringement claims under Articles 98-99 IP Code, unfair competition claims based on Article 2598 Civil Code do not fall within the jurisdiction of IP specialized courts, as the Italian Supreme Court has just clarified with its decision no. 3452 of 3 February 2022.

Conclusion

In summary, confidential business information can be protected to some extent in Italy against misappropriation and misuse even if it does not qualify as a trade secret, as the information owner can rely on Civil Code provisions governing unfair competition.

However, the threshold to access stronger - and more desirable - trade secret protection may not be as large as you think. Marginal investments could be sufficient to meet the relevant requirements resulting in the information garnering protection as an actual trade secret.

In this respect, Italian courts generally take the following view:

1. Information can be regarded as secret if it is an assembly of elements that, as such, is not obtainable by an expert in the relevant sector from individual pieces of publicly available information.
2. The efforts made by the secret holder to put together such secret information and the competitive advantage derived from it is, by itself, proof of the economic value.
3. Confidentiality obligations towards the inside and the outside of the organization are adequate to keep the information secret and express unambiguously the owner’s will to keep the secrecy vis-à-vis collaborators and employees, as long as this is coupled with appropriate internal policies and IT systems (e.g. the use of passwords is not sufficient if employees can store the relevant information on their PCs, share it with third parties by email or print it out without restrictions).

Identifying actual trade secrets - thereby allowing them to enjoy enhanced protection as IP rights under Articles 98 and 99 of the Italian IP Code - is a viable and advisable option that every organization should pursue. This can be accomplished by implementing best practices and reasonable measures. In some worst-case scenarios, unfair competition provisions can assist, but they should not be the workhorse to rely on when valuable information is at stake.

This bite has been co-authored by Carlo Scotto di Clemente.