Spanish companies are more and more aware of the importance of their ‘know-how’. Especially medium-sized companies. It contributes to their way of working, of producing, of selling their products to the market, which is characteristic of them. It has been developed through years of effort and makes them different to the competitors. Intellectual Capital adds value to the company.

This ‘know-how’ occurs in very different sectors. Design, software companies, laboratories, medical clinics and libraries are just a few of the sectors which are accumulating a lot of Intellectual Capital here in Spain. Much of this knowledge cannot be patented nor registered as intellectual property.

There are alternatives in Spain for defending companies’ ‘know-how’ through securing and protecting it as an industrial or commercial secret.  Another day we will talk about how to do it.

Today we are going to talk about ‘late defense’ in Spain. The aim is avoiding:

i)             An employee taking with him secrets, to which he has had indiscriminate access;

ii)            A competitor ‘damaging’ your company by unfairly taking your employees.

On one hand, Spanish Unfair Competition Law prohibits employees taking or exploiting company secrets. But they have to be protected secrets.

A customary route for the loss of ‘know-how’ is the departure of qualified employees who go working for a competitor taking with them secret information. This unfair transfer of secret knowledge is prohibited by Law.

Another common way is a competitor’s inducement to employees so that they go to work for the competitor. This inducement can also be unfair and illegal if it makes them infringe contractual duties or produces a ‘mass exodus’ so as to eliminate a competitor.

To whom do inventions belong if created during the period of a contract?

Inventions developed within a company can be retained by it.

In this way, Art. 15 of the Spanish Patent Law establishes that a worker’s invention, created during the period of his contract or service relationship with the company, belongs to the employer if it is the fruit of his investigation activity and part of his contract.

1.- UNFAIR USE OF SECRETS

Art. 13 of the Unfair Competition Law prohibits disclosure or exploitation of commercial, industrial or trade secrets, both those known legitimately (with a duty of confidentiality) and illegitimately.

1.1.- What is an non-transferable / useable industrial or trade secret?

It is the ‘know-how’, the knowledge which the company accumulates and protects. It is the information or techniques, which are not exclusive (unregistered) but which the company has the right to keep confidential due to their competitive value. An industrial or commercial secret is the collection of this knowledge, information and business contacts.

According to Spanish Courts, a trade secret is information which is:

i)             Secret (not known generally nor accessible to the general public);

ii)            With commercial value;

iii)           And protected by the company as a secret.

1.2.- Not all acquired knowledge belongs to the company

Spanish Law recognizes that an employee can use knowledge or contacts, which belong to him, whenever that use is justifiable in his work.

It is considered that the use of new knowledge, acquired within the company, does not always assume breach of confidentiality. Therefore, the use of that knowledge is not unfair if it is indispensable for the professional future of the employee and it is wrong to deprive them of this work tool for their development.

Spanish Courts consider that the client list is not secret; nor the supplier relationship. The coincidence in clients does not necessarily imply disloyalty either, for example, if it can be explained by market limits or because the employees know the people to contact.

2.- THE BRAIN DRAIN

As said, a frequent way of losing know-how is when a qualified employee leaves and goes to a competitor. These ‘flights’ can be avoided in two ways: through the work contract or (in some cases) through unfair competition.

2.1.- Work Contract: Non-competition clauses

Spanish Workers Statute allows the company to come to a non-competitive agreement with the employee to apply after the work contract expires. It can last maximum two years (managers or technicians) or six months (workers). Furthermore, the employer must have a practical interest and must pay a specific compensation to the employee for this limitation.

2.2.- Unfair inducement of contractual infringement and termination of contracts

Although prohibition of competition had not been agreed in the contract, certain behavior is prohibited anyway: it is whatever practice which lead to a breach of contract.

(i)           Spanish Unfair Competition Law forbids inducement of contractual infringement. It considers it unfair to induce workers (or suppliers, clients or other obligated people), to infringe basic contractual obligations.

That means, that certain ‘mass exoduses’ to a competitor are illicit although the work contract does not have a non-competitive clause.

Spanish Courts limit this restriction. For example, a mere offer is not inducement. On the other hand, companies cannot recruit massively clientele or workers from their competitors. Furthermore, this induction can be the cause of termination of contract.

(ii)               Spanish Law forbids as well the procurement to obtain that employees or clients of a competitor terminate their contracts. A contract cannot be induced to be broken, in certain cases. Spanish Unfair Competition Law prohibits taking advantage of contractual termination, if it is an attempt to disclose or exploit a trade or industrial secret, or it is accompanied by deliberate cheating: an intention to eliminate a competitor.

These ‘circumstances’ have been clarified by Spanish Courts. For example, offering better conditions is not unfair competition. But, the use of reprehensible acts (cheating) or having a disruptive objective (disclosure / exploiting secrets or driving out a competitor) is unfair. For example, ex-employees contacting clients from an old firm, without saying that they are now working for someone else, or offering assistance and paying compensation for whoever terminates the contract with a competitor.

In general, acting with the intention of eliminating competitors is unfair.

Santiago Nadal