Trade secrets are always a sensitive issue. That is why it is best to make proper arrangements between freelancer and client at the start of an assignment. This avoids ambiguity afterwards.
What is a trade secret?
Not all information qualifies as a trade secret. In order to qualify as a trade secret, the information must meet three conditions:
- it must be secret: i.e. the information is not generally known or easily accessible;
- it must have commercial value; and
- reasonable measures have been taken to keep the business secret confidential.
What is considered a reasonable measure is always assessed on a case-by-case basis. Some examples of reasonable measures:
- Organisational security measures to ensure that only key personnel within the company have access to certain trade secrets;
- Legal security measures such as the inclusion of a confidentiality clause in the contract;
- Digital security measures such as encryption of the information;
How are trade secret protected by law?
On 30 July 2018, the law on the protection of trade secrets entered into force. This law protects the illegal disclosure of undisclosed know-how and trade secrets.
The trade secrets saw is innovative in terms of enforceability. If a party violates the law and thus proceeds with the illegal disclosure of a trade secret, the other party can request the court to take the following measures:
- Cease the act (use of the trade secret);
- Prohibit the disclosure of the trade secret;
- Have the production of infringing goods stopped;
- Recall or destroy infringing products;
- Seize the infringing party;
- Claiming damages;
These remedies are particularly effective for protecting trade secrets.
Should I have an NDA for freelance assignments?
An NDA has various advantages for both parties.
By concluding an NDA, the parties demonstrate that they have taken reasonable steps to protect the trade secret. In addition, it is easier for the parties to demonstrate the illegal use or disclosure of the information, as its use constitutes a breach of the concluded NDA.
Moreover, concluding an NDA allows for a number of clear agreements to be made. For example, the duration of the confidentiality can be established. This is not determined by the trade secrets law. A term of three to five years is usual.
An NDA can be a separate contract or part of another agreement (for example, a consultancy agreement).
What to include in an NDA?
An NDA may include the following:
- The purpose for which released information may (not) be used;
- The manner in which information will be made available;
- Persons who may/will have access to disclosed information;
- The conditions under which information may be shared with third parties;
- The obligation to return/destroy documents upon termination of the relationship or purpose for which the NDA was entered into;
- The duration of confidentiality;
- Penalties for breach (including lump sum compensation).
This article was written by Justine Heureux from Forum Advocaten, a Linkus partner.
Do you have questions about trade secrets and confidentiality agreements? Then be sure to contact our corporate law specialists so that we can provide you with tailored advice. You can also contact us for all your other questions relating to company law.