As a special feature of our blog—guest postings by experts, clients, and other professionals—please enjoy this blog entry from Donal O’Connell, Managing Director of Chawton Innovation Services Ltd.

One of the key pieces of legislation related to trade secrets in Russia is the Federal Law of July 29, 2004 on Commercial Secrecy. This was passed by the State Duma on July 9, 2004, and endorsed by the Federation Council on July 15, 2004.

This piece of legislation consists of the following articles or sections …

  • Goals and scope of this federal law
  • Laws of the Russian Federation on commercial secrecy
  • Basic notions used in this federal law (including the definition of a trade secret as well as some details on the handling of trade secrets in agreements)
  • Right to classify information as information constituting a commercial secret and methods of obtaining that information
  • Data that may not constitute a commercial secret (i.e. what information may not be considered as a trade secret)
  • Supply of information constituting a commercial secret (i.e. under what circumstances may a trade secret owner have to divulge the information)
  • Protection of the confidentiality of information
  • Protection of the confidentiality of information within the framework of employee or labour relations
  •  Protection of the confidentiality of information as it is passed over to for example state authorities
  • Responsibility for violation of this Federal law (i.e. the various penalties for misappropriation)
  • Responsibility for non-provision of information constituting a commercial secret to the state power bodies, other state authorities, bodies of local self-government

Definition of a Trade Secret

A trade secret is any type of information (e.g. production, technological, economic, organizational, etc.) that is not generally known, to which the general public does not have open access, and with respect to which the owner of such information has instituted the regime of trade secrecy.

Such information could relate to the results of intellectual activity in the areas of science and technology and the methods for carrying out any professional activity having real or potential commercial value.

Russian law does not state what information can be classified as a trade secret. It is up to the court to decide whether to qualify certain information as a protected trade secret or not.

Please note that two different terms tend to get used, namely the terms ‘trade secret’ and ‘production secret’. Some have argued that the legal concepts of ‘production secret’ and ‘trade secret’ are not the same in that they play two completely different roles in the process of production and sales, and that a trade secret may consist of much broader information than a production secret.

I suggest that a ‘production secret’ is merely one category or type of ‘trade secret’ that may exist within an organisation.

Protection of Trade Secrets

Russian trade secret laws protected such information from …

  • insiders to whom the secrets have been entrusted
  • outsiders who obtain the secrets by improper means
  • government agencies that might obtain and release the secrets

What is Required of the Trade Secret Owner?

In order to receive full legal protection, the trade secret owner must pro-actively mange such assets and institute a secrecy regime. At a minimum, the owner must define the scope of the trade secret, identify the sources of the information to be protected, implement procedures for access to and utilization of this information, and maintain control over the people who have access to the information.

Trade secret owners are expected …

  • To maintain a register listing the information being considered as trade secrets
  • To limit access to such trade secrets by introducing special controls or procedures
  • To record those having an access to the trade secrets and of those to whom such information was granted or transmitted;
  • To ensure proper confidentiality provisions within employee contracts as well as sub-contractor agreements
  • To record or store the trade secret onto a tangible media and to mark the trade secret accordingly

Russian trade secret law is rather unique in requiring the trade secret owner to maintain a register of its trade secrets. It is also rather unique in specifying that the trade secret must be documented and marked accordingly.

What Are the Penalties for Trade Secret Misappropriation?

The law outlines some general principles and identifies various types of liability for trade secret misappropriation such as disciplinary, civil, administrative, or criminal liability.

Trade secret related disputes are mostly examined within the framework of civil proceedings where the remedies claimed are cessation of infringement and payment of damages.

However, there can also be criminal liability covered by Article 183 of the Criminal Code. Gathering trade secret information through theft, bribery or otherwise can be punished by fine of up to RUB 500,000 ($8,000) or imprisonment for up to two years. If the trade secret misappropriation is committed by a person to whom the information was entrusted, the punishment can be more severe, with a fine up to RUB 1 million ($16,000) or imprisonment for up to three years. If the trade secret misappropriation results in severe damage, the defendant can be punished by a fine of up to RUB 1.5 million ($24,000) or imprisonment for five to seven years. It is worth noting that compulsory or forced labor is now an alternative punishment to prison.imprisonment in Russia.

TRIPS Agreement and Trade Secrets

In many ways trade secret laws in Russia are very similar to trade secrets laws in other key jurisdictions such as in the EU (The EU Directive on Trade Secrets), in the USA (The Defend Trade Secrets Act), in China (The Anti Unfair Competition Law) and in Japan (The Unfair Competition Prevention Act).

The fact that trade secret laws are broadly similar should not be such a surprise given that Russia has signed up or acceded to the TRIPS Agreement.

The TRIPS Agreement is to date the most comprehensive multilateral agreement on intellectual property (including trade secrets). In respect of each of the main areas of intellectual property covered by the TRIPS Agreement, the Agreement sets out the minimum standards of protection to be provided by each Member.

The TRIPS Agreement requires undisclosed information—trade secrets or know-how—to benefit from protection. The protection must apply to information that is secret, that has commercial value because it is secret and that has been subject to reasonable steps to keep it secret.

The TRIPS Agreement does not require undisclosed information to be treated as a form of property, but it does require that a person lawfully in control of such information must have the possibility of preventing it from being disclosed to, acquired by, or used by others without his or her consent in a manner contrary to honest commercial practices. “Manner contrary to honest commercial practices” includes breach of contract, breach of confidence and inducement to breach, as well as the acquisition of undisclosed information by third parties who knew, or were grossly negligent in failing to know, that such practices were involved in the acquisition.

An Excellent Model

Russian law on trade secrets is actually superior to that of most countries, because it has been carefully thought through, and it is quite explicit about what is needed for a secret to be classified in law as a “trade secret.”

The statutory law is quite vague and ambiguous in most countries, and so the actual law often comes down to the vagaries of case law.

I would argue that, in fact, in most countries the holder of a trade secret would actually need to satisfy similar requirements to those laid out in the Russian Civil Code, except that it is not explicit or clear in the statutory law of these countries.

Russian IP law in general (by which I mean statutory law, as laid out in the Russian Civil Code) is much more coherent, logical and clear than is the case in most other countries.

Russian statutory law for trade secrets is an excellent model from which many other countries could learn.

Enforcement may or may not be easy to judge but the statutory law is very good.

Final Thoughts

I trust that this short overview of trade secret laws in Russia is of interest and of value.

Although many aspects of trade secrets law in Russia should be familiar to anyone dealing with trade secrets in other key jurisdictions, there are some rather unique aspects to consider when dealing with trade secrets in Russia.

Best practice for companies owning trade secrets is to adopt an internal company policy that regulates the treatment of trade secrets. The Russian courts consider this is key to the proper maintenance of a trade secret regime.

That said, that probably applies to all key jurisdictions nowadays.