Contributed By Advokatfirmaet GjessingReimers AS
On 27 March 2020, a new Act on the protection of trade secrets was enacted (TSPA). The TSPA implements Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (TSD). The TSPA is expected to enter into force later this year. Consequently, this chapter will focus on the TSPA.
However, first we will refer to the statutory provisions that currently govern the protection of trade secrets. These will be replaced by the TSPA, but with few exceptions the substantive law will not change, and the existing case law will continue to be relevant.
Currently, protection of trade secrets and undisclosed know-how (trade secrets) is governed by two statutes.
The first is the Marketing Control Act of 9 January 2009 (MCA). This act governs marketing and consumer protection. However, its Chapter 6 includes provisions on (un)fair competition between businesses. MCA section 28 has provisions on trade secrets, and section 29 has provisions on the misuse of technical aids, which include technical drawings, descriptions, models, etc.
The second statute that has provisions relating to trade secret protection is the Norwegian Criminal Code of 20 May 2005 No 28. Its section 207 deals with unlawful misuse or disclosure of trade secrets and the unlawful misuse of technical drawings, descriptions, models, etc. The above-mentioned provisions all concern the misuse or disclosure of trade secrets and technical aids in situations where the information or materials were acquired lawfully, and where the infringer violates a duty of fidelity.
Section 208 of the Criminal code covers the unlawful acquisition of trade secrets and technical drawings etc.
One example of a change in the substantive law that the reform will bring about is that in the TSPA there is no similar provision to Section 29 in the MCA, which provided protection of technical aids as such (including non-secret technical aids).
In addition to protection of trade secrets pursuant to current legislation, and upon the implementation of the TSPA, principles of duty of fidelity in contractual/employment relationships (non-statutory law) provide employers with certain supplemental protection against employees’ disclosure or misuse of their proprietary trade secrets/confidential information, or misappropriation of such information.
Neither the MCA nor the Criminal Code include legal definitions of the term “trade secret”, and the term “technical aids” is not defined but exemplified by a list of terms.
What is protectable under the relevant provisions of those statutes was determined in practice by referring to the preparatory works of those statutes, to case law, and to a certain extent also to legal literature.
Trade Secret Definition
Pursuant to the new TSPA Section 2 (1), “trade secrets” is defined as (non-official English translation):
“... information which: (a) is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible; (b) has commercial value because it is secret; and (c) the holder has taken reasonable steps to keep secret. General knowledge and skills that an employee has attained under an employment, does not constitute trade secrets [..].”
The definition mirrors Article 2 of the TSD. It is also assumed that the definition is in line with current case law. The relevant case law includes court decisions that go all the way back to the 1960’s, as the unfair competition legislation that preceded the current MCA of 2009 (the previous Marketing Control Act of 1972 and the Unfair Competition Act of 1922) had provisions similar to Section 28 and 29.
Essentially, the term “trade secrets” has traditionally been interpreted as covering all types of information, either technical or commercial (see, inter alia, the Norwegian Supreme Court in Rt. 2003 s. 825 Kvaerner). However, only such information as may be characterised as specific and important for the business may qualify as a trade secret. In addition, it is a requirement that the holder must have demonstrated that it has taken reasonable measures in order to keep the information secret; see 1.4 Elements of Trade Secret Protection.
Consequently, one could say that trade secrets must be distinguished from the lower threshold of common technical and commercial knowledge in order to qualify as a trade secret.
Under the circumstances, both specific and more composite information ("know-how") may be protected as trade secrets in Norway. However, “know-how” is not considered trade secrets as such (see, inter alia, the Supreme Court in Rt. 1964 s. 238 Notflottør), and its protection as trade secrets is subject to the requirements above.
Information protectable as trade secrets includes technical information relating to machinery, equipment, tools, production methods, chemical recipes, use of raw materials, etc, and commercial secrets such as financial results, information on production costs, pricing policies, customer lists, strategy documents, statistics, marketing plans, franchising manuals and business methods.
In the case law, examples of information protected as trade secrets include an airline’s booking information (Supreme Court in Rt. 2007 s. 1841 SAS), information related to a multi-phase flow meter, inter alia multi-phase testing, multi-phase modelling (Gulating Court of Appeal in LG-2003-8617 Roxar I/FLowSys), as well as the compilation of extensive customer information, insurance policies and insurance requirements (Council dealing with unfair marketing practices’ (NKU) opinion in case 9/2015).
Under the TSPA, a trade secret is information that:
This is in line with the requirements under current law outlined in 1.2 What Is Protectable as a Trade Secret, namely that the information must be specific and important for the business, as well as subject to reasonable measures by the holder in order keep it secret.
Business Specific Information
Information that is specific for the business, must be distinguished from the general knowledge and the employee’s general knowledge and experience. This is also explicitly stated in the TSPA Section 2 (2), see 1.2 What Is Protectable as a Trade Secret. Where the line should be drawn is determined on a case by case basis. However, case law has provided some guidance.
First of all, so-called subjective knowledge of the employee is not considered trade secrets (inter alia the Supreme Court in Rt. 1997 s. 199 Cirrus and Borgarting Court of Appeal in LB-2013-20398 Vensafe). Traditionally, subjective knowledge is defined as knowledge that is inextricably linked to the holder (the employee) in a way that is easily recognised.
For information to be considered as specific to the business, it must pertain to, or have been developed for, a specific business. The information must be subject to a certain concretisation, and general claims that something is specific to a business are, generally, not accepted (Stavanger District Court in TSTAV-2006-56178-2 Roxar II and Borgarting Court of Appeal in LB-2013-20938 Vensafe).
However, in a 2005 judgment relating to multiphase flow meters for the measurement of liquids and gas in the wellstream during production of oil and gas, LG-2003-8617 Roxar-Flowsys, the Gulating Court of Appeal found that if complex and composite information had been obtained by trial and error in a company’s resource-demanding development process over several years, the resulting ”body of knowledge” could be sufficiently specific to the company to qualify as a trade secret. There followed two other judgments (Agder Court of Appeal in 2006 in LA-2004-60570 Scanmar, a case about catch control systems for use in the fisheries, and the above-mentioned Borgarting judgment in 2014 in the in LB-2013-20938 Vensafe case, relating to vending machines), which clarified this: only complex and composite information relating to distinctive products or methods will qualify as a trade secret under the “body of knowledge” approach, and only if the information has been obtained through long lasting and resource-demanding (technical) testing and research.
Furthermore, it is a requirement that the information should be capable of being transferred, including in the mind of a person. Thus, it is not a requirement that the information should be stored on a physical storage medium or unit such as a hard drive, a server or a USB.
The information must not be part of the general knowledge. In case law, this has been defined as information that the “man skilled in the art may read out of available sources” (Stavanger District Court in TSTAV-2006-56178-2 Roxar II). However, this rule may not be applied unconditionally. In the light of the other requirements below, it could be that even such available information could qualify as a trade secret if it has been sufficiently important for the business, and subject to reasonable measures of protection.
Qualifying as a Trade Secret
In order to qualify as a trade secret, the information must also be important for the business. There is a presumption that information which provides a competitive advantage, or results in efficiencies or cost savings for the business, fulfils this requirement (Rt. 2007 s. 1841 SAS). The information does not have to be novel in order to qualify as a trade secret.
The company must have taken reasonable measures in order to keep the information secret, see 1.5 Reasonable Measures.
As indicated in 1.2 What Is Protectable as a Trade Secret, and in accordance with TSPA Section 2 (1) letter c) (see TSD Article 2 (1)), in order that the information should be protected as a trade secret the holder is required to demonstrate that reasonable measures have been taken in order to keep it secret (“information which … the holder has taken reasonable steps to keep secret”). Even if its wording differs slightly from the TSD text, it is assumed that the Norwegian provision is materially in line with this provision.
Reasonable measures to protect information as trade secrets may be taken either explicit by marking the information as “secret”, “confidential” etc., but may also follow from the circumstances. Naturally, this must be assessed on a case by case basis although some general principles have been established in case law.
Internal use of the information in the business, or even licensing or other transfers of the information, does not deprive information of its confidentiality as such. Normally, it is only when the information has been disclosed to unintended recipients the “chain” of confidentiality is broken.
Examples of measures that have been deemed sufficient in case law include the stamping of documents as “secret”, “confidential”, etc (Supreme Court Rt. 1997 s. 199 Cirrus). However, also physical protection of information and password protection or encryption of data systems or archives will be relevant. Warnings or reminders of confidentiality obligations on billboards in the workplace, contractual confidentiality obligations (eg, in contracts of employment and consultancy agreements) may also qualify as “reasonable measures”. A business was not required to encrypt its e-mails in order to maintain protection of information as trade secrets (Supreme Court in Rt. 2003 s. 825 Kvaerner).
One could say that, in order to qualify, the measures taken by the holder of the information should be such as to give him a reasonable expectation that it will be protected. What is a reasonable measure or step is decided taking the specific circumstances of the holder of the trade secret into account.
The disclosure of a trade secret to employees of the business does not as such affect the availability of protection for the trade secret.
If the disclosure is intentional and occurs in the course of the employee’s work, eg, in order to enable the employee to do their work, the employee would have gained access to the trade secret legally, so there could be no unlawful acquisition issue involved. However, if the employee were to disclose the trade secret to others, who are not bound by confidentiality obligations to the employer, or if they were to use the trade secret for their own purposes, eg, after having taken up a position with a different employer, or in a new business they have started, the protection of the trade secret against misuse or illegal disclosure would kick in, provided the disclosing employer has taken reasonable measures to protect the trade secrets.
The nature of the information in question, the characteristics of the business, the responsibilities, skills, experience and job description of the employee to whom the trade secret was disclosed, are all relevant when determining what measures on the part of the employer should be deemed reasonable and sufficient. In some cases, one may find that it was obvious that the information disclosed was a trade secret, and thus covered by the employee’s a duty of fidelity.
In other cases it may be found that the employer should reasonably have put in place company regulations or guidelines to protect the trade secrets, including regularly and consistently marking any documents and storage media appropriately, or they should have included relevant provisions in the terms of the contract of employment, or should have given specific instructions to the recipient employee before or upon disclosure of the information.
The list of lawful ways of acquiring trade secrets in Article 3 first paragraph of the TSD was not transcribed into the new Norwegian TSPA. However, the bill presented to the legislators by the government made clear that no activity that is required or lawful under EEA or national law is unlawful.
Hence, the acquisition by someone of a trade secret by his or her independent discovery or reverse engineering does not constitute infringement. Neither does the disclosure or use of a trade secret acquired by independent discovery or reverse engineering. If a trade secret has been independently discovered or reverse engineered by another party, the question of the existence of trade secret protection depends on whether the information has become generally known or easily accessible by a disclosure on the part of the independent discoverer or reverse engineer.
The criteria are set out in the definition of trade secret in Section 2 first paragraph a) of the TSPA, which mirrors Article. 2(1)(a) of the TSD.
There are no trade secrets protections that are unique to computer software and technology.
Trade secret protection may be maintained for as long as the basic conditions in Section 2 first paragraph of the TSPA continue to be fulfilled, ie, the information is secret, has commercial value because it is secret, and its lawful holder has taken reasonable steps to keep it secret.
The effect of disclosure depends on the circumstances. If disclosure leads to the information becoming “generally known among or readily accessible”, it will no longer be secret, and will be unprotected. The wording of the TSPA Section 2 first paragraph a) does not include the qualification “to persons within the circles that normally deal with the kind of information in question”, but the preparatory work of the Act make it clear that this is implicit.
If disclosure is intentional, it will generally be controlled, for example by contract, such as a Non-Disclosure Agreement, which will control and restrict what the recipient party can lawfully use the trade secret for and whether it may disclose it to third parties.
If disclosure is accidental, the acquisition by the recipient of the information will not be unlawful, but the use or further disclosure of it may be if it constitutes a breach of a duty not to disclose the trade secret. Under Section 3 second paragraph b) of the TSPA, that would apply to trade secrets that a party has obtained knowledge of or control over in connection with an employment, an office (eg, a directorship) or a business relationship. Its wording is near identical to the wording of Section 28 of the MCA that will be repealed.
On this point no change in the substantive law is being introduced by the reform. What employment and office mean in this context is clear. Employees and appointed officers, eg, the board members of a company, have a duty of fidelity to the employer/company, which would be breached if they were to disclose or use trade secrets accidentally disclosed to them.
As regards a “business relationship”, businesses dealing with each other have a duty of loyalty to one another. The standard set out in Section 25 of the MCA, which remains in full force and effect after the enactment of the TSPA, is but one expression of this concept: “No act shall be performed in the course of trade which conflicts with good business practice among traders”. It is settled law that a current or previous business relationship should be taken into account when determining the extent of the duty of loyalty that two parties have to each other. The case law is clear that engaging in contract negotiations also creates a duty of loyalty, even if the negotiations are unsuccessful.
It follows that if the trade secret holder acts swiftly upon an accidental disclosure that occurred in spite of reasonable steps to keep the information secret having been taken, he may be able to prevent the other party from further disclosing the secret, and thereby maintain it. If that is not achieved, and the further disclosure is in breach of a duty of loyalty or fidelity, the available remedies will be compensation or damages.
Licensing is one of the ways in which the owner can commercially exploit his trade secrets. Furthermore, trade secrets are sometimes disclosed to a licensee, even if they are not the rights licensed, eg, where commercial information is shared with the licensee of a secret manufacturing method.
As such, the disclosure of a trade secret in connection with the grant of a licence to use it, or to facilitate the use of other rights that are licensed, eg, a patent, does not damage or destroy the trade secret. Here again it is a question of whether the trade secret owner, when disclosing the trade secret, takes reasonable measures to ensure that it will be kept secret. Whether the trade secret is the licensed right, or is disclosed to the licensee as background or reference information, the inclusion in the licence agreement of provisions that make clear which information constitutes trade secrets and set out the licensee’s obligation to keep and protect their secrecy, and, if appropriate, how the licensee should achieve this, is important.
Trade secret protection differs from the protection applying to IP rights in that it does not relate to or create an exclusive right to specific information. The protection of trade secrets is a protection against unlawful acquisition, disclosure or use of the information. More than one party may be the owners of the same trade secret, for example if they have independently discovered the secret.
The protection of trade secrets differs from that which applies to industrial property rights in that the protection does not require any form of application, filing, prosecution or registration.
Sometimes the owner of trade secrets also holds other intellectual property rights, such as patents, design rights or copyright that concern inventions, creations or works that are related to the trade secret.
Whilst it is debatable whether other intellectual property rights actually overlap trade secret rights, it is often the case that the owner of a trade secret who wishes to assert their rights against a third party, has also had other of his intellectual property rights infringed against by the same third party.
Under Norwegian law it is possible to assert trade secret rights in combination with other types of intellectual property rights.
The Oslo District Court has exclusive jurisdiction in all patent, trade mark, copyright and registered design cases, whereas unfair competition cases (and trade secret infringement cases) will normally be brought before the district court for the place where the defendant is headquartered. Actions that include both types of claims have to be brought in the Oslo District Court.
The exclusive jurisdiction of the Oslo Court does not apply to preliminary injunction actions, which can be brought either before the district court for the place where the defendant has its registered place of business, or before the court for the place where acts of infringement have occurred or where infringing goods are expected to be or arrive in the near future.
It is possible to bring claims that relate to trade secrets and which are based on the contractual relationship between the parties. That is the case of claims for breach of an implied duty of loyalty between the parties to a contract or an agreement, such as employer and employee, licensor and licensee, supplier and distributor. See 1.9 Duration of Protection for Trade Secrets for effects of accidental disclosure.
It is worth mentioning that the new Act on good trading practice in the grocery chain (enacted, not yet in force), includes provisions in its Section 3 that prohibits acts that are contrary to good trade practice in relationships between businesspeople in the grocery business, and require that good trade practice should be based on honesty, predictability and loyalty.
Under Section 3 first paragraph of the TSPA it constitutes a trade secret infringement to obtain knowledge about or control over a trade secret by unlawfully gaining access to or removing or copying documents or objects or by other acts that are contrary to good business practice. In practice, this means that permission, even implicit, from the rightful owner or holder is required.
It is not a requirement that the defendant appropriated the trade secret by unlawful means, such as break in, wiretapping, hacking, etc.
One example from case law illustrates this. A party that opened an attachment to an email that was received in error was found to have unlawfully acquired the information in the attachment.
It is not a requirement that the trade secret was used, but the disclosure or use of a trade secret constitute infringement if knowledge about it or control over it was obtained in by an unlawful acquisition or in connection with an employment, office or business relationship.
The elements of a trade secret misappropriation claim are the same where an employee of the owner is involved. However, employees have a duty of fidelity to their employers, which will be relevant when assessing what the owner can expect in terms of diligence and care in the handling of information, and when determining if reasonable steps have been taken to keep the information secret.
There are no obligations applying specifically between joint venturers with respect to trade secret. As other types of contractual relationships, the contractual relationship between joint venturers creates a reciprocal duty of loyalty between them, which is relevant, similarly to what is the case for employee relationships, see 2.2 Employee Relationships.
Industrial espionage is generally covered by the provisions on trade secrets infringements in Section 3 of the TSPA although the term is not used.
Under the previous law, it was covered both by Section 28 of the MCA and by Sections 207 and 208 of the Criminal Code. There are no claims or penalties that are unique to industrial espionage.
Under Section 201 of the Criminal Code, anyone who, with the intent of committing a punishable act, unlawfully prepares, acquires, possesses or makes available to another a password or other information that may give access to electronic information or data systems or to computer software or other means suitable to commit punishable acts directed to database is punished by fines or imprisonment of up to one year.
Under Section 204 of the Criminal code procuring for oneself access to a “data system” by breaching a protection or by other unlawful means is punishable by fines or imprisonment up to two years.
There are no recognised “best practices” in Norway for safeguarding trade secrets. However, most advisers and industry organisations would agree that businesses should consider at least the following measures:
The type of business, its size, number of employees, number and characteristics of its suppliers, partners, customers and competitors should be taken into account when deciding which measures to put in place. Naturally, the larger the business and its operations, the more measures would normally be required.
To the extent exit interviews deal with confidentiality or trade secrets, it would depend on the employment agreement whether it is necessary to obtain written assurances from departing employees. Normally, confidentiality and trade secrets, including ownership and right of use, would be regulated by the employment contract. The employer may also rely on non-statutory principles of fidelity in contracts/employment relationships.
Normally, towards the end of employment employees should be requested to go through their e-mail accounts and file archives in order to transfer information that is necessary and/or critical for the employer, including secret information. The employees should also be requested to “sign of” that their e-mail and/or file archives do not contain such necessary/critical information, and that all private and/or personal documents have been removed from the accounts. The latter may also be done in order to comply with Norwegian data protection requirements.
Departing employees are normally not required to provide written assurances with respect to confidentiality or trade secrets, other than the above-mentioned sign off relating to emails and file archives.
Employers may enquire as to the nature or the new position of the departing employee.
As mentioned above in 1.4 Elements of Trade Secret Protection, a distinction is drawn between an employee’s general knowledge and skills and business-specific protectable trade secrets.
The courts have accepted that an employer cannot rely on trade secret protection to prevent (former) employees from using the general knowledge and skills of a person in their particular trade, even if the employee has, at least in part, acquired such knowledge and learnt such skills while working for the employer. If the employer is to be able to impose such a restriction on an employee, a non-compete obligation has to be agreed, either in the contract of employment or when the employment comes to an end. There are statutory limits to the extent of such non-compete clauses.
The non-compete has to be agreed in writing, it cannot exceed one year, and the employer must fully compensate the employee. If the contract of employment has a non-compete clause, it is still up to the employer to decide whether it wishes to rely on the clause, and if so, for how long. That decision will often depend on the specific circumstances, such as the nature of the new position the departing employee is taking up with the competitor.
There is no doctrine of “inevitable disclosure” under Norwegian law.
To minimise the risk that new employees will be subject to a trade secret misappropriation claim, some employers will raise the topic with the employee during the hiring process, encouraging the employee to think this through, and trying to develop a mutual understanding of any of the problem, and to what extent the hire can work. Taking the issue into account when defining the responsibilities of the individual in the new position, so as to avoid “overlap” may be an option in some cases. All this should of course be done without any disclosure of confidential information by the employee.
After the individual is hired, the onboarding process provides an opportunity for both the employee and the employer to remind themselves of the care they must take avoid situation in which a trade secret may be accidentally or unintentionally disclosed.
Before bringing an action, the party shall give notice in writing to the defendant about the claim and the grounds for the claim, invite it to respond.
The defendant should respond to the claim and the grounds for the claim within a reasonable time. If the claim is contested in whole or in part, the grounds relied upon should be stated. Any counterclaims should be declared in the response and the grounds for them given.
The first party should be asked to respond stating its position to the counterclaims.
The general limitation period for compensatory damages based on tort is three years. The period starts on the day when the creditor had, or ought to have had, knowledge about the loss, and of who the liable party is.
The steps that an owner must take to initiate a trade secret lawsuit are no different from those applying to other civil lawsuits.
An action starts with a request for mediation in the Conciliation council. If the case is not settled there, each party has one year’s time to file a complaint with the competent district court.
If both parties have legal representation and the dispute is worth more than NOK125.000, the case can start directly in the district court.
Before filing the action, the owner should set out to the alleged infringer its claims and the factual and legal basis for them in a “notice before legal action”, asking that the infringer state its position to the claims. Sending such a notice is not mandatory, but if it is not sent, the claimant may forfeit the possibility of a cost award.
Trade secret claims will be brought in the district court, normally the court having jurisdiction over the place where the defendant has its registered office or place of business. See 1.12 Overlapping IP Rights for joint trade secrets and patent cases.
In terms of pleading standards, the plaintiff should set out in the initial pleading, or “writ of summons” the factual and legal bases of the claim. Evidence should be submitted as early as possible. Witnesses should be named as early as possible, and when they are (in the initial pleading or in a subsequent pleading), it should be indicated to what topics they will speak. It is not a requirement to submit affidavits or written witness statements.
Such written witness statements will be disallowed if they are submitted without the party submitting them stating that the witness will appear before the court at the main trial hearing to be examined.
A party to litigation may allege facts before it has concrete evidence of misappropriation, in the sense that the case or the claim will not be outright dismissed or disallowed. There is no heightened particularity standard for trade secret claims.
It is the parties’ responsibility to identify and find the evidence they want to rely on. To this end they may seek the assistance of private investigators or other advisers. A party’s counsel will often make enquiries and interview potential witnesses. These fact-gathering activities should take place before the court action is started. They often are not completed before well into the pre-trial phase of the proceedings.
One mechanism that is very relevant to trade secret cases is the so-called pre-litigation securing of evidence. Under this procedure, a trade secret owner may apply to the court for an order that a judicial examination of potential opposite parties and of witnesses, or an inspection of real evidence (physical evidence, including documents, mirror copying for servers and hard disks) is to be held. To secure evidence in this way, the applicant must substantiate that it can be of importance in a dispute to which the applicant may become a party, and that there are reasons why it is important to obtain access to the evidence before proceedings are instituted, eg, a danger that the evidence may be lost or considerably weakened if it is not secured.
Orders for securing the evidence in this way can be obtained ex parte. The procedure to get access to the secured materials afterwards can be time consuming and challenging. It often develops into a fight about which parts of the evidence should be released to the applicant, and which parts should not, eg, on account of lack of relevance or because releasing it would be a disclosure of trade secrets.
Under Norwegian rules on civil procedure, a party or a witness may refuse to give access to evidence that cannot be done without revealing a trade secret. The court may nevertheless order that the access to the evidence shall be given, if it deems it necessary.
If the court issues such an order, it shall also impose on all those present a duty of secrecy and prohibit them the use of the trade secret that may be disclosed by the evidence. The court may decide that oral argument about the evidence is to be heard behind closed doors.
The obvious defences are a contention that the information appropriated was not a trade secret, because it was generally known in the relevant trade or industry, or was readily accessible, or because the owner had not taken reasonable steps to keep it secret. For an employee it may be possible to argue that the alleged trade secret was part of his general knowledge and skills. For a business partner who obtained information from the owner, the typical defence will be that the owner had failed to take reasonable measures to preserve the secrecy of the information, eg, by failing to mark the documents shared, and that neither the nature of the information or the circumstances in which it was acquired suggested that it may be secret.
The rules of civil procedure include a special and very seldom applied rule to that allows the court at the request of a party, to decide the case based on a simplified procedure if it is clear that a claim cannot succeed in any part, or that the defences invoked against a claim are clearly untenable in their entirety. The court only considers a request for a simplified procedure if it finds that there is reason to do so. There is no appeal against the court’s decisions to consider a request or to refuse or grant it once it has been considered.
The judgment that is issued can be appealed.
It is hard to provide a general estimate of the costs and fees for trade secret litigation, since they largely depend on the nature of the secret, whether it is commercial or technical, whether the technical experts are needed, the number of witnesses, the amount of evidence etc. The trial hearing in a trade secret case will easily go on for three to five full days in court, sometimes longer. For a case with a five days trial hearing, one can expect legal fees of the order of NOK1.5 million to NOK2.5 million for each side. In addition, costs for expert witnesses and other expenses will be incurred.
As in any other civil proceedings in Norway, trade secret trials are bench trials. However, in the district court, at the request of either party or if the court deems it desirable, two persons will be appointed to serve as lay judges with the judge. If it is found to be required for the proper conduct of the case, the lay judges should be experts in the fields to which the case relates. The latter decision made by the judge seized with the case in the preparatory stages.
In the court of appeal the same applies, except that there are three “robed” judges, and not one as in the district court.
A vast majority of trade secret cases, especially those in which patent infringement issues are also involved, are heard by a court that includes lay expert judges.
In Norway, the trial process comprises a preparatory phase and the main hearing. One should expect that the trial hearing is between five and nine months after the writ was filed.
Serving a Writ
The writ is served on the defendant within days, who should respond within three weeks. The deadline may be extended. Once the reply has been filed, a case management conference (CMC) will be called.
Disclosure of Evidence
Requests for disclosure of evidence are made in the CMC, and the names of witnesses and expert witnesses are exchanged, although witness and expert witness evidence may be offered later also. Dates for further submissions are set, especially the submission of any expert reports.
In Norway there is no discovery, but a form of disclosure process. The parties have a duty to ensure that the case is correctly and completely informed. Each party also has a duty give information about important evidence that it does not possess or control, unless it has reason to believe that the other party is aware of it. That applies even if the evidence is damaging to the party itself.
Cases are decided on the evidence presented to the court during the hearing. Witnesses and expert witnesses appear before the court and give evidence. There is examination in chief and cross examination.
The court is not permitted to rely on written witness statements or affidavits, unless the witness comes to the trial so that cross examination is possible, unless the parties agree otherwise.
Expert witness testimony is almost invariably the rule in trade secret cases. Their evidence must be presented at trial, although one or more reports on their findings and assessment of the questions asked of them (by the party that hired them) are usually filed pre-trial.
Expert witness testimony is in principle only allowed on issues of fact and science, and not law, except where expert witness evidence is required on a matter of foreign law. A party that is involved in a trade secrets dispute and who is considering the use of expert witness testimony should carefully assess and identify specifically what it wishes to achieve by the expert testimony. Sometimes specialist expertise is needed in more than one field. Candidates that seem suitable should be checked for potential bias.
A preliminary vetting can be done by talking to people that work in the relevant field, and Google is of course very useful. When candidates are approached, they should be asked to consider if there are reasons why they should not be appointed. Counsel should be strongly involved in the process to select expert witnesses.
As regards preparations, it is generally useful to draft a set of questions that should be answered. If time permits, the expert should be asked to produce their answers in a first draft, which is then discussed with them. Follow up questions will have to be asked and may result in amendments being made in any expert opinion or report that is to be submitted If possible, expert witness reports should not be drafted by the lawyers, but it is fine to have counsel summarise the expert’s opinions as expressed in an interview.
Preliminary injunctive relief is available in trade secret infringement cases. To obtain a preliminary injunction the plaintiff must substantiate, on the balance of probabilities that it is the owner/holder of a trade secret entitled to protection (the “claim”), and that:
A preliminary injunction will not be granted if the loss or inconvenience to the defendant is clearly disproportionate to the interests of the plaintiff in obtaining the injunction.
Posting a Bond
The court may make the injunction or its effectiveness contingent upon the claimant posting a bond. The magnitude of the bond is fixed by the court, usually after it has heard the parties. In principle the bond should ensure that there are means available to compensate the defendant for any economic loss or damage caused by the injunction if it is eventually found to have been unjustified.
Deciding Preliminary Injunctions
Preliminary injunctions are usually decided after a hearing at which the court has heard witnesses and argument, but ex parte preliminary injunctions are available, if summoning the parties to a hearing would risk making the injunction vain.
The court will normally set a deadline by which the claimant must institute proceedings on the merits before a competent court, on penalty of the injunction lapsing if it fails to do so. A preliminary injunction will remain in effect until it is revoked by in an action on the merits, replaced by a final injunction, or if the parties settle the dispute and the settlement provides for a its revocation.
With the advent of the TSPA, the successful claimant can choose between:
Punitive damages are not available.
Permanent injunctive relief is available. If the court finds it reasonable, the successful claimant can also obtain an order that requires that the infringing product be recalled. It is not possible to obtain an order that limits an employee’s subsequent employment in order to protect the claimant’s trade secrets.
The court may decide that the injunction is to have a time limitation.
Ex parte civil seizures of accused products are available. They are also available before final judgment in the case.
In a final judgment, the court may impose corrective or preventative measures to limit the effects of an infringement of to prevent new or continued infringements of a trade secret. One of the measures mentioned in TSPA Section 6 is the delivery of the infringing product to the trade secrets owner. Any measure taken must be proportional in the circumstances.
In an action for a preliminary injunction, the court may order that infringing product are to be taken seized from the infringer and stored securely pending a final decision of the case. The requirements are those generally applying in preliminary injunctions cases, see 7.1 Preliminary Injunctive Relief.
In civil litigation a party that essentially wins the case is entitled to an awarded of all necessary fees and costs incurred to litigate the case. In principle, this means the full attorneys’ fees and other costs incurred in the dispute. See 7.6 Costs for further detail on cost and fees awards.
A successful party in the litigation, be it the claimant or the respondent, is entitled to an award of the necessary costs incurred. This will include the following categories of costs:
The process for seeking an award of costs includes submission of a cost and fee specification to the court and to the opposite party at the end of the trial. Counsel are permitted to comment on the other side’s cost note.
The cost award is made in the judgement, and the court will usually give its reasons for that decision over a page or two.
Judgments and most types of orders and decisions can be appealed. Appeals are available to both claimants and defendants. Appeals have to be filed no later than one month after service, with some exceptions. One exception applies to appeals against decision relating to the admission of or duty to give access to evidence, where the court may set a deadline of one week to appeal.
The appeal procedure for judgments takes 12 to 15 months, sometimes longer. Appeals against orders and decisions are decided within weeks.
The appeal process is the same in all local jurisdictions.
Depending on the appeal, the appeals courts review both factual, legal and/or procedural issues. Appeals against judgments are de novo proceedings, and the appeals court hears live argument, hear witnesses and experts in a full appeal trial hearing. Appeals against orders are normally decided only on the papers.
An issue may be waived prior to appeal. There is nothing particular that a party has to do to preserve an issue for appeal.
Criminal penalties are imposed for unlawful trade secret acquisition, disclosure and use, if the violations were intentional.
Under the TSPA, trade secrets infringements, which include the unlawful acquisition, disclosure and use of a trade secret, and the manufacture, marketing and placing on the market of products that infringe a trade secret, are punished by fines or imprisonment of up to one year. If the infringement is serious, eg, on account of the magnitude of the loss and damage caused to the owner or others, or of the profits reaped by the infringer, the punishment is fines or up to three years’ imprisonment.
When it has received a report that a punishable trade secret infringement has been committed, the police will investigate. If the police finds that the evidence of trade secret infringement is sufficient to convict, it will charge the infringer. If the police decides that it will not charge the alleged infringer, the offended party may bring criminal charges. The obvious defence would be that the infringer was in good faith when they acquired the trade secret, because the subsequent use or disclosure of it would then only be punishable if it could be considered a serious infringement.
For former employees and officers of the owner of a trade secret, a possible defence may be available if the trade secret was obtained or unlawfully acquired in the course of an employment or of holding an office with the owner. If the employment or office ended more than two years earlier the infringement is not punishable.
Alternative dispute resolution in the form or arbitration or mediation is available for resolving trade secret disputes.
The parties may agree to arbitrate their dispute. The Norwegian Arbitration Act provides a useful framework for ad hoc arbitration. The parties may also apply to an arbitration institute, which will provide a set of rules for the arbitration and assistance with arranging it.
The advantages to using arbitration are that it takes less time to get a final, enforceable decision, and that the parties may agree to keep the whole arbitration confidential, including also the final award. Under Norwegian law, an arbitral tribunal can not issue interim measures, but on the other hand the fact that the dispute is being arbitrated does not prevent a party from seeking to obtain an interim measure order from the courts.
Mediation is another ADR mechanism. The parties may agree to try mediation with the assistance of a mediator. Mediation may be attempted before the proceedings before a court are initiated, or after. Norwegian courts will as a matter of course offer judicial mediation to the litigants.
Judicial mediation involves a mediator appointed by the court, normally a judge (who will not hear the case if the mediation fails). The mediation proceedings are confidential. However, if the settlement is entered into as a judicial settlement, the settlement itself will be publicly available.
However, the parties may decide to settle out of court, so as to keep the settlement confidential.