Every company wants the "keys to success" of its operation not to be known to competitors. It turns out that keeping such information secret is nothing new. For example, the techniques of glass production were originally a closely guarded secret - in the 13th century Venetian glassmakers were even isolated on the island of Murano and forbidden to leave it. What are the equally effective, but contemporary, means for a company to protect its know-how? Even in the 21st century, companies make large investments in the development of know-how and its protection in order to achieve competitive advantages. Such investments only justify themselves if they are properly protected. Unfortunately, practice shows that the understanding of the protection of such knowledge is not entirely clear.
WHAT IS SCIENCE?
The explanation of the term "knowledge" in Latvian can be found in several explanatory dictionaries, giving a general idea of its meaning. Namely, know-how is:
- high technological skill based on knowledge and expertise, special knowledge in combination with practical skills and their use, with natural inventiveness, with scientifically proficient invention (explanatory dictionary of terms and foreign words);
- scientific, technical, commercial, organizational knowledge or information. It may contain trade secrets, descriptions of non-proprietary technological processes or other information not yet available to the general public. In the companies of the tourism industry, know-how is necessary for the implementation and use of new technological processes, for example, when introducing new computerized seat reservation systems (explanatory dictionary of tourism and hospitality terms);
- scientific, technical, commercial, organizational, etc. knowledge, information that provides its owner with certain advantages in business, which manifests itself as trade secrets, non-patented technological processes, various production or trade information unavailable to the general public and is the object of international business transactions, a commodity that can be bought and sold (Explanatory Dictionary of Economics).
On the other hand, on the website maintained by the Cultural Information Systems Center, Termini.gov.lv, you can find the definition of the concept of know-how together with the explanation of the most frequently used term know-how, which is borrowed from the English language and whose literal translation is "know how to do". On this website, know-how is explained as technical secret, special professional information, skill, technological competence.
Analyzing these definitions, it can be concluded that know-how is special skills and knowledge acquired by a person or a company in order to perform or successfully develop a certain task or project.
Science is formed from several elements through accumulated experience through experimentation, error and development, resulting in the formation of specific knowledge that allows a person or company to differentiate itself from competitors. This knowledge is the key to the success of a person or company, which makes it commercially attractive.
SCIENCE = TRADE SECRET?
The identifying elements of science are most often associated with various technical knowledge, procedures, skills, formulas and technique. Some of the given explanations of the term already show that knowledge is usually kept secret. This could raise the question - is know-how a trade secret?
For the first time in Latvian regulatory legislation, the term "know-how" as a trade secret is used in the Cabinet of Ministers Regulation No. 122 "Regulations on the exemption of patent and know-how license agreements from the prohibition of agreements stipulated in the Competition Law", where know-how is defined as a set of technical information that is a trade secret that is essential and identified in a certain way.
So, those rules clearly defined what know-how was and intended it to be a trade secret if it was identified in a certain way. However, these provisions lost their force after the new Competition Law entered into force (i.e. on July 1, 2002), thus the precise explanation of this term disappeared from Latvian regulatory enactments.
Reference to know-how can also be found in the Law on the Protection of Trade Secrets (KAL), which was developed to implement Directive 2016/943 on the protection of know-how and business undisclosed information (trade secrets) against illegal acquisition, use and disclosure, but a full explanation of the term is not included in this law.
As stated in the annotation of the Law on Trade Secrets, Article 2 of the draft law provides an explanation that is understandable with the term "trade secret" used in the directive. Namely, the object of a trade secret can be both technical information such as sketches, designs, prototypes, production processes, inventions that may or may not be patentable, as well as know-how in the form of technical, commercial, organizational knowledge, such as formulas or recipes, as well as commercial information such as customer and supplier lists, business models and strategy, pricing policies, etc.
Therefore, when systematically translating the information indicated above, it can be concluded that the know-how must first be accurately identified and characterized, while in order to be recognized as a trade secret, it must meet the characteristics determined by KAL:
- it is secret because it is not generally known or available to persons who normally use this type of information;
- it has actual or potential commercial value because it is secret;
- the holder of the trade secret has taken appropriate and reasonable measures to preserve the secrecy of the trade secret in relation to it.
MEANS FOR THE PROTECTION OF SCIENCE
One of the easiest ways to identify know-how created in the company is to create a description of the know-how and take the necessary steps to give it the characteristics of a trade secret. More complicated mechanisms for the protection of know-how are to use the legal statuses of intellectual property rights, such as patents, designs or copyrights. Using these mechanisms, the protection of property rights acquires a significant level of protection.
Undoubtedly, in companies, employees also contribute to the creation of know-how, but it is not always established between the parties that in such a case the employee's contribution or the created product, i.e. know-how, is the property of the company (employer). For example, the Copyright Law clearly defines in which cases the "product" created on behalf of the employer belongs to the employer, and in which cases - to the employee:
- if the author, being in an employment relationship with the employer, has created a work while performing work duties, the personal and property rights to this work belong to the author, except for other cases specified by law. The author's property rights can be transferred to the employer according to the contract;
- if the computer program was developed by an employee while performing a work task, all property rights of the author of the computer program created in this way belong to the employer, unless the contract provides otherwise.
In order to avoid the obligation to prove intellectual property rights, it is particularly important for the employer to clearly define to the employees what its trade secret is, including the definition of know-how as a trade secret. This can be done by including relevant conditions in the employment contract (obligation of non-disclosure of information, non-competition) or in internal rules of procedure. It is no less important to train employees on the following issues:
- internal and external processes of creating and maintaining trade secrets (including know-how);
- principles of processing trade secrets;
- control of access to trade secrets.
At the same time, even when fulfilling all of the above, companies must take into account the threat of unfair commercial practices and the fact that employees or cooperation partners can disclose the know-how created by the company for selfish purposes. It should be noted that according to Directive 2016/943, the employer can take legal action against employees who are tempted to disclose or disclose trade secrets, even if they leave the country. Employers in Europe use this right very often, but the same cannot be said about Latvian entrepreneurs. Studying the European judicial practice on this matter, it can be concluded that a prerequisite for the protection of legal interests is a properly defined trade secret, including know-how, which must be protected in order not only to avoid potential legal proceedings, but also to ensure successful business.
Returning to the Venetian glassmakers on the island of Murano mentioned in the introduction, the conclusion is that even if the workers are isolated on the island, know-how can eventually escape from it, so a reasonable effort should be made to protect this information.
Source: iTiesibas