Navigating The Pitfalls Of Trade Secret Protection Under Swiss Law

 
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In today's economy, trade secrets are among the most valuable assets of companies, and so preventing trade secret theft is an increasing priority for authorities worldwide. Both EU and US regulators are taking steps to strengthen the regulatory arsenal applicable to the protection of trade secrets.

For example, the US Department of Justice has announced the China Initiative, which aims to combat the theft of trade secrets perpetrated by Chinese actors. The European Commission estimated in 2018 based on a study by the European Centre for International Political Economy that cyber theft caused €60 billion loss in economic growth in the EU. In 2016, the EU has adopted a directive to strengthen and harmonise trade secret protection among its member states. Member states were required to implement the directive by June 2018. Many EU countries also took significant steps to implement trade secret laws in recent years.

Trade secret litigation has also increased in the US. The number of civil trade secrets cases filed in federal and state courts in the US has increased by 30% since 2016, according to a 2018 study by Lex Machina, a legal analytics firm. Large damage claims and verdicts worth hundreds of millions - like the $845 million awarded to a US branch of a Dutch semiconductor maker, ASML, for misappropriating trade secrets - show the importance of trade secrets and their protection.

This article sets out some strategic considerations for initiating trade secret proceedings under Swiss law. These considerations may be relevant when a company is suing a competitor after discovering the theft of trade secrets through an internal investigation, but also when a company is suing another party for damages while still trying to protect its trade secrets, for example in a fraud case.

Protecting trade secrets v higher chances of success in litigation

Before initiating litigation, a company should think carefully about the issue of confidentiality. There are some trade-offs between the protection of confidentiality and the chances to successfully sue another party. Judicial proceedings generally bear a risk of exposing trade secrets. This may be particularly delicate in litigation regarding trade secret theft where the claimant has to elaborate on the trade secret that it wants to protect. There are different ways to protect confidentiality in criminal, civil, or even extrajudicial proceedings. Thus, an important strategic question is whether to take the civil or the criminal route. As will be shown below, if a party has been harmed by a criminal offence (eg, by a fraud or a trade secret theft), civil proceedings in Switzerland offer weaker means concerning discovery of evidence compared to civil proceedings in the US. This being said, while criminal proceedings have many advantages in this respect under Swiss law, the company loses control over the proceedings to the criminal authorities, which makes it more difficult to protect the company's trade secrets.

Criminal proceedings

If a company has become victim of a criminal offence, it may file a complaint to initiate criminal proceedings. An attractive feature of...

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