The Protection of Trade Secrets in Domestic and Cross-Border Proceedings, Investigations and Employee Relationships in Switzerland

The protection of trade secrets plays an important role in the success of individual business enterprises and for a functioning economy as a whole. Swiss law recognises the importance of protecting confidential business information and provides robust legal remedies for the misappropriation of trade secrets.

In Switzerland, there is no legal act or framework that specifically governs the protection of trade secrets and the duties and liabilities of the parties involved. Pertinent provisions are found in:

• the Code of Obligations (CO);
• the Criminal Code (SCC);
• the Unfair Competition Act (UCA); and
• the Civil Procedure Code (CPC).

The SCC and the UCA stipulate certain misconduct regarding trade secrets as criminal offences and as unfair competition, respectively.

The CO protects trade secrets particularly in the context of employment relationships.

The CPC grants the owner of trade secrets access to interim measures, while providing civil courts with the authority to take appropriate measures to ensure that evidentiary proceedings do not violate the legitimate confidentiality interests of the parties or third persons.

As Switzerland is not a member of the European Union (EU), the EU Trade Secrets Directive (Directive (EU) 2016/943) neither applies directly nor has Switzerland implemented its contents into Swiss national law.

The following overview focuses on two areas of application of trade secrets protection that have become increasingly important in Switzerland in recent years. The first part highlights practical considerations and recent legal trends in connection with the protection of trade secrets in domestic and cross-border proceedings and investigations. The second part looks at the options available to companies to protect their trade secrets against unlawful disclosure and exploitation by current or former employees. Finally, an update is provided on the introduction (by 2025) in the CPC of a new in-house counsel privilege, and on its potential use for the protection of trade secrets.

Protecting Trade Secrets in Domestic and Cross-Border Proceedings and Investigations

Handling trade secret protections in court proceedings means treading a fine line between the trade secret owner’s protection against unauthorised use or misappropriation on the one hand, and safeguarding the right to a fair trial on the other. In Switzerland, as a general rule, all evidence must be disclosed to the opposing party without restriction and in the same manner as it is presented to the court. If, however, the interest of the trade secret owner so requires, civil courts must take appropriate measures to safeguard trade secrets (Article 156 CPC).

In a recent decision, the Swiss Federal Supreme Court (FSC) had the opportunity to revisit the practice of anonymising published court judgments (BGer 1C_642/2020). The case concerned a ruling of the Federal Administrative Court on the inclusion of medicinal products on the Federal Office of Public Health’s specialties list. While the FSC recognised that the general interest in public justice and the individual interest in confidentiality must be weighed against each other, it held that the Federal Administrative Court’s anonymisation of its judgment limits the comprehensibility of – and may restrict access to – justice. In particular, where the anonymised information was publicly available elsewhere, the FSC held that its re-publication could not represent a competitive disadvantage.

The FSC has also held that, as a procedural protective measure under Article 156 CPC – provided this proves to be the mildest means – it is also possible to order a duty of confidentiality subject to criminal sanctions, whereby such a duty can only be ordered for the duration of the proceedings (BGE 148 III 84). In addition to the evidence and the motions for evidence, procedural protective measures can only extend to information in the legal documents in exceptional cases.

In another decision, the Federal Patent Court laid out the general definition of a trade secret as knowledge that is not readily available, has a commercial value and is intended to be kept secret by its owner (O2020_014). While it is not required that the information cannot be obtained legally, it should at least require a significant effort to do so. The prevailing view is that relative obscurity of information and subjective desire for confidentiality alone are not enough to establish a secret; a legitimate interest in confidentiality is also required. Thereby, financial harm alone does not establish a worthy interest in confidentiality; the protection of confidentiality must be necessary for the proper functioning of the competition in the market. The Federal Patent Court then went on to state that whether an interest is worthy of protection ultimately depends on the result of a balance-of-interest test between individual confidentiality interests (and the constitutional right to a fair hearing) and the procedural interest in discovering the truth.

In cross-border proceedings and investigations, any disclosure of a trade secret to a foreign counterparty, court or authority may constitute a criminal offence under Article 162 and/or Article 273 SCC.

Any person who betrays a manufacturing or trade secret that they are under a statutory or contractual duty to not reveal, and any person who exploits for themselves or another such a betrayal, is criminally liable on complaint to a custodial sentence not exceeding three years or to a monetary penalty (Article 162 SCC). Thereby, it must be determined in each individual case whether a piece of information constitutes a trade secret. Generally, a fact or piece of information is qualified as a trade secret if it is neither generally known nor generally accessible. The owner of the fact or information must further have an objective, legitimate secrecy interest as well as the subjective will to maintain secrecy. It is noteworthy that Article 162 SCC does not require any specific result of the secrecy violation, such as damages, to establish criminal liability. In recent years, there have been around six convictions under Article 162 SCC per year.

If there is a sufficient connection to Switzerland, the disclosure of a trade secret may equally constitute the criminal offence of industrial espionage (Article 273 SCC). Thereby, any person who seeks to obtain a manufacturing or trade secret in order to make it available to an external official agency, a foreign organisation, a private enterprise or the agents of any of these, or any person who makes a manufacturing or trade secret so available, shall be liable to a custodial sentence not exceeding three years or to a monetary penalty, or in serious cases to a custodial sentence of not less than one year. Notably, this provision covers violations of a trade secret in Switzerland as well as abroad (Article 4 paragraph 1 SCC; BGE 141 IV 155). In the recent past, on average there has been around one conviction under Article 273 SCC per year.

In any case, the criminal liability under Articles 162 and 273 SCC does not go further than the scope of the trade secret under civil law. Accordingly, there is no violation if:

• there is a contractual arrangement with the owner of the trade secret that permits disclosure to foreign parties;
• the owner of the trade secret has granted a waiver in the individual case; or
• the foreign parties already had prior full knowledge of the disclosed information.

There is also no criminal liability if the trade secrets are completely redacted before the disclosure of respective documents or information.

Regardless of the criminal liability, it is to be noted that the violation of a trade secret usually also constitutes a violation of the confidentiality obligations that are normally contained in commercial contracts. This may also lead to a violation of the personality and data protection rights of the owner of the trade secret.

Protecting Trade Secrets in Employee Relationships

For companies’ trade secrets, employees play a major role as they often have insight into confidential information and practices of their employer. From the perspective of companies and employers, the question thus arises as to how to deal with the unlawful disclosure and exploitation of trade secrets by current or former employees.

Measures under civil law

The main possibility an employer has under civil law is to file an employment action against an employee. Under Swiss employment law, as part of their duty of loyalty and care, employees are prohibited from disclosing facts that are meant to be kept secret and that were obtained while in the employer’s service, such as manufacturing and business secrets (Article 321a CO). A secret may be violated not only by communicating it to unauthorised third parties but also by exploiting it – ie, by using it for one’s own advantage. To the extent necessary to safeguard the employer’s interests, this protection my extend beyond the end of an employment relationship.

In the case of an existing employment relationship, the employer can terminate the employment relationship and may do so with immediate effect if a serious violation occurs (Article 337 CO). The employer may also claim damages incurred as a result of the violation of the trade secret (Article 321e paragraph 1 CO). It should be noted, however, that such claims must be made without delay in order to minimise the risk of the court considering the damages as waived by the employer. The FSC assumes that any known, unclaimed damages at the end of an employment relationship are waived. Unknown damages can be claimed at a later point in time if and when they come to light.

In two leading decisions, the FSC decided on the disclosure of trade secrets by a current employee (BGer 6B_364/2021; BGer 6B_438/2021). In its legal assessment, the FSC held that information constitutes a trade secret if:

• it is neither generally known nor generally accessible;
• it is intended by the owner of the information to be known only to a limited group of people; and
• there is a legitimate interest in keeping it secret.

Furthermore, the FSC ruled that employees act intentionally if they are able to foresee the risk for the employer and are nevertheless willing to consciously take such risk, irrespective of whether they intended to harm their employer and whether they act in a refined, planned or calculated manner.

Measures under criminal law

In addition to triggering potential criminal liability under Article 162 and/or Article 273 SCC, the violation of a trade secret may also amount to the punishable offence of disloyal management of a business (Article 158 SCC). This provision generally provides for sanctions against any person who by law, an official order, a legal act or authorisation granted to them has been entrusted with the management of the property of another person or with the supervision of such management, and who in the course of and in breach of their duties causes or permits that other person to sustain a financial loss.

The exploitation of an entrusted work product, as well as the exploitation or disclosure of an unlawfully obtained manufacturing or trade secret, may further violate unfair competition law (Articles 5 and 6 UCA). Thereby, the term “work product” encompasses products of an intellectual and material effort and expenditure and, contrary to trade secrets, does not require a legitimate interest in maintaining secrecy. It therefore potentially has a broader scope of application than the term “trade secret”.

The general time limit for filing a criminal complaint is three months, beginning on the day on which the complainant discovers the identity of the suspect (Article 31 SCC). The prosecution of a criminal complaint by the authorities requires that the complaint be well founded and that the alleged events have actually taken place with a certain degree of probability. In particular, all coercive measures, such as a house search, require sufficient suspicion of a crime and level of urgency. Any supplementary civil measures (see below) will have to be co-ordinated with the criminal measures.

Interim measures

For trade secrets, interim measures such as a court injunction may be suitable – for instance, to prevent further dissemination or even the initial disclosure of a trade secret at an early stage.

Swiss civil procedure law provides for interim measures in situations in which applicants credibly demonstrate that their rights have been violated or that a violation of their rights is anticipated, and that the violation threatens to cause not easily reparable harm to the applicant (Article 261 CPC). Applicants must also credibly demonstrate the urgency of the requested measure. In particularly urgent cases, the court may even order ex parte interim measures immediately and without hearing the opposing party (Article 265 CPC). The civil courts enjoy broad discretion as to the type of interim measure they consider appropriate in an individual case. Interim measures are also available under unfair competition law (Article 9 UCA).

New In-House Counsel Privilege

Under current Swiss law, only Swiss and EU/EFTA attorneys (but not in-house counsels) are subject to professional secrecy and therefore have a special right to refuse to co-operate in legal proceedings by invoking an attorney-client privilege. This situation has been criticised in Switzerland for years as Swiss companies may suffer procedural disadvantages in foreign court proceedings due to the lack of in-house counsel privilege. In particular, Swiss companies may be required to disclose correspondence with their Swiss in-house counsel in US proceedings, while at the same time the correspondence of US companies and their in-house counsel is protected by the US attorney-client privilege.

Against this backdrop, a parliamentary initiative was submitted in 2015 to introduce a right of non-cooperation for in-house counsels, at least in civil proceedings. On 17 March 2023, the Swiss Parliament passed a new Article 167a CPC providing for a right of non-cooperation in civil proceedings as regards activities in an in-house legal department. The new law will enter into force on 1 January 2025.

Accordingly, to the extent that trade secrets can be qualified as information that is profession-specific for attorneys, and that in particular does not relate to accessory activities of attorneys such as asset management, board of directors’ activities or business consulting, there will be a right to refuse the disclosure of such information. Note, however, that the wording of Article 167a CPC limits such right to refuse disclosure to civil proceedings, and that many questions in connection with the application of the new law remain open to date.

Conclusion

Trade secret owners, such as litigants and employers, can rely on strong protections of their trade secrets under Swiss law. In practice, however, the effective protection of trade secrets is a demanding exercise that requires speed and practical expertise in navigating the complex legal landscape, and also requires strategic experience in choosing the appropriate tools to achieve the desired goal. In particular, it may be difficult in the individual instance to clearly distinguish between the trade secrets of a company on the one hand and the professional experience and knowledge of its employees on the other. Also, in order to prove that the disclosure or use of a trade secret is a criminal offence, it must be shown that an individual has acted intentionally.

Furthermore, the protection of trade secrets in domestic proceedings is within the broad discretion of the courts. This adds a degree of uncertainty to the fate of trade secrets in such proceedings. In cross-border contexts, special care must be taken to adequately protect trade secrets from prohibited disclosure to foreign counterparties, courts and authorities. Accordingly, the production of documents and information in cross-border proceedings and investigations regularly requires a careful strategic consideration of the available options, as well as tactical and operational legal advice in preparing the information for production.