HOW TO PROTECT YOUR BUSINESS SECRETS EFFICENTLY IN HUNGARY

24 September 2018

If business secrets are mentioned, most people think of big companies and tenders worth millions. Nevertheless, not only big companies are affected by leaks of confidential information, causing serious disturbance and financial loss. If you think this problem cannot affect your business, this article is for you. In our article, we will show you what can be considered as a a business secret, how you can protect this information, and what are your options when the breach has already occurred.

What can be a business secret?

The starting point for effective protection is to know what to protect. Many people, however, are not aware of this basic question. The range of information that can be classified as business secret is extremely broad, can be a phone number, a recipe, a sales method, or an idea of what market your business should enter.

In order for an information to be classified as a business secret, generally two requirements must be met:

a) Financial value

This is often difficult to distinguish. For example, who would think that the partners’ phone numbers should be kept secret, until a dismissed colleague takes the full list of partners with him and starts taking your partners to the competition.

You can see that a phone number can have a financial value, if the previous associate's activity results in multiple partners being lost and the company cannot complete the contracts, on the top of all that you will have to find new partners.

b) Difficult to access, kept secret

This condition is also more complex than you would think, because secrecy is a double requirement. Information primarily must objectively be secret, meaning it is not known or easily accessible. You do not commit an infringement, if you tell your friend that companies have to comply with the GDPR, even if you have heard it at your workplace.

The other side of secrecy is that your business needs to take appropriate measures to keep the confidential information secret. So ,if you discuss the next year’s business plan with your colleagues in your favorite restaurant and the strategy also catches the ears of a CEO sitting at the next table, it is unlikely that you will win a lawsuit against him for a breach of business secrecy.

Now that we have measured what information is to be protected, let's look at how this can be achieved in practice.

From who you have to protect your secrets?

If you install the fourth firewall on company workstations to avoid data theft, do not be surprised if the attack is coming from elsewhere.

In most cases, infringers will not be found in China, but unfortunately in the next office room or on previous company photos.

Although trust is a good thing, our experience shows that business secrets are often leaked or used by employees and business partners, suppliers and subcontractors.

Therefore, to avoid unpleasant situations in the future, it is the easiest to make the first move and secure your company against infringements.

Make the first move!

In most contracts, secrecy is completely skipped or only mentioned up to 1-2 sentences.

Although the Labor Code, the new Act on Business Secrets and the Criminal Code have regulations regarding business secrecy, the protection provided by the law is often not enough in itself since the provisions can be interpreted in different ways.

In situations where the other party has the opportunity to become acquainted with the operation of your business (employment contracts, subcontractors, suppliers), it is indispensable to lay down the rules in the contract, since breach of confidentiality can be most effectively prevented at this point, not to mention that you can best secure yourself in case of a possible dispute.

For example, you can make it clear that employees cannot send corporate e-mails to private addresses or you can agree in penalties because of infringement.

If you are wondering why you have to make the contract with the length of a novel, we let you know: because in a possible procedure, the infringement can be established based on the contract, you will not have to demonstrate that your interpretation of the law is right hoping that the judge is on the same page with you.

In the case of penalties, you do not have to prove the damage incurred, you can claim the amount of the penalty based on the fact of the breach itself.

Also, consider that mentioning penalty in the contract has deterrent effect in itself and makes it clear that you are serious about secrecy.

What can you do if the trouble has happened?

If your business secrets have been infringed, you can file a civil lawsuit before the competent regional court. You do not have to wait for years for the court to terminate the infringement, within two weeks, the court can order the infringer to stop the unlawful activity and, if it is foreseeable that you will be entitled to compensation, the court may seal his property by applying provisional measures.

As the result of the civil procedure a number of sanctions can be applied against the infringer such as the publication of the fact of the infringement in a national newspaper, the seizure and destruction of the goods produced with unauthorized use of the business secrets and the reimbursement of the financial advantage.

In the event of a breach, you may also file a police report. You must prove that the unlawful act of the infringer – which could be the acquisition, use or transmission of the secret – was intended to gain an unlawful advantage or resulted in a financial loss to your business. If the offense is established, the infringer may face up to three years imprisonment.

Based on the above, first, you must measure what information you need to protect. The next step is to properly regulate confidentiality in appropriate, detailed contracts and company codes. If, despite the applied protection measures, the breach has occurred, there are several options available to remedy the breach within a short period of time, or to stop the infringer from making even more serious disadvantages.