The criteria of the violation of the rights to a manufacturing secret

Each of the subject matters of intellectual property or the means of individualization enshrined in the Civil Code of the Russian Federation (hereinafter referred to as the C.C.R.F., the Code) has its own criteria, on the basis of which it is possible to conclude whether the actions are a violation of the intellectual property rights or not.

To determine these criteria, I suggest that we should refer to Part Four of the Code, which stipulates for each of the protected results of the intellectual activities and the means of individualization, depending on the peculiarities of these subject matters, a peculiar set of the methods of their use, which are referred to the exclusive right.

At the same time, the violation of the exclusive right, as a general rule, is the use of one of the methods stipulated for a particular subject matter committed without a permission of the right holder.

Thus, in order to determine whether the certain actions constitute the violation, it is necessary to compare these actions with the methods of the use determined for the disputed subject matter of intellectual property and to determine whether the alleged violator has obtained the permission of the right holder.

In the case, it the permission has not been given, such actions may be recognized as a violation of the exclusive right.

For example, it is stipulated for the subject matters of the copyright that the recording of a work on an electronic medium, including the recording in the memory of an electronic computing machine is considered to be a reproduction, which is one methods of the use of the work.

It is worth noting that a program for the electronic computing machine or, as the Ministry of Education and Science has suggested that it should be called, having prepared amendments to Part Four of the Code – “a computer program,” is also a subject matter of the copyright and it is protected as a literary work.

At the same time, we understand that the so-called “pirated” version of the computer program implies that it has been obtained by the user bypassing the defense established by the right holder and without his permission.

In this regard, if such unlicensed version of the computer program has been downloaded and is being stored in the memory of the computer, then such actions being a method of the use of the subject matter of intellectual property, which are committed without the permission of the right holder, may be recognized as a violation of the exclusive rights.

The utility models being the subject matters of the patent law have their own particular criteria. So, the use of the utility model shall be considered to be, in particular, the following: importing into the territory of the Russian Federation, manufacturing, applying, offering for sale, selling, otherwise introducing into the civil circulation or storing for such purposes the product, in which the invention is used (Subparagraph 1 of Paragraph 2 of Article 1358 of the C.C.R.F.).

Herewith, by virtue of Unnumbered Paragraph Two of Paragraph 3 of Article 1358 of the C.C.R.F., the utility model shall be considered to be used in the product, if the product contains each feature of the utility model given in the independent claim of the claims of the utility model contained in the patent.

Thus, in order to recognize the actions as violating the rights to the utility model, a set of conditions must be established, for example: importing into the territory of the Russian Federation of the products that contain each feature of the utility model given in the independent claim of the claims of the utility model contained in the patent.

I am not going to go into details in respect of the issue of the use of a trademark and the criteria of its illegal use, because everybody is more familiar with them quite well, and I shall just note that by virtue of Paragraph 3 of Article 1484 of the C.C.R.F., no one shall be entitled to use without the permission of the right holder the designations that are similar to his trademark in respect of the products for the individualization of which the trademark is registered, or of the homogeneous products, if as a result of such use a possibility of confusion appears.

Now I suggest that we should consider the situation with the criteria of the violations of the rights to a manufacturing secret, and I would better begin with a definition of what the manufacturing secret is, which is also used to be called know-how.

However, interestingly, the term “know-how” (from English “to know how”) has been first introduced by the English judicial practice and initially it has been the expression “to know how to do it.” This term in the form “know how,” which is familiar to us, was first used in the American judicial system (case “Dizend vs D. Brown,” 1916).

As follows from Paragraph 1 of Article 1465 of the C.C.R.F., the manufacturing secret (know-how) shall be deemed the information of any nature (manufacturing, technological, economic, organizational and others) on the results of the intellectual activities in the scientific and technological field and on the methods of carrying out the professional activities that has a real or potential commercial value due to the fact that it is unknown to the third parties, if such information is not freely accessible to the third parties on legal grounds, and the holder of such information undertakes the reasonable measures aimed at keeping it confidential, including by introducing a commercial secret regime.

We see that the definition of the manufacturing secret given in Article 1465 of the Code contains a fairly general concept that does not disclose the essence of what this subject matter is, since know-how is the information, and the information of any nature. Moreover, it is important that such information does not necessarily include only the results of the intellectual activities.

At the same time, the important criteria of the protectability of the manufacturing secret are:

• the actual or potential commercial value of the information;
• the fact that the information is unknown to the third parties;
• the fact that the right holder has undertaken the reasonable measures to keep this information confidential.

Now, according to the above examples concerning the methods of the use of the work, the utility model, the trademark, I suggest that we should analyze the Article of the Code, where the methods of the use of the manufacturing secret are set out.

It is indicated in Article 1466 of the C.C.R.F. that the holder of the manufacturing secret has the exclusive right to the use of it in accordance with Article 1229 of this Code in any method, which does not contradict to the law (the exclusive right to the manufacturing secret), including while manufacturing the products and implementing the economic and organizational solutions.

Is that all???

If we turn to Article 1270 of the C.C.R.F., which defines the methods of the use of the subject matters of the copyrights, it contains 11 subparagraphs devoted to this issue, which occupy more than a page of a printed text. While in the case of the manufacturing secret, only two and a half lines are devoted to this.

However, one should not be in despair, because, if we turn to Paragraph 1 of Article 1472 of the C.C.R.F., which enshrines the liability for the violation of the exclusive right to the manufacturing secret, we shall see that the violator of the exclusive right to the manufacturing secret may also be recognized to be the person, who has received unlawfully the information constituting the manufacturing secret, and who has disclosed or used that information, as well as the person liable for keeping the manufacturing secret confidential in accordance with Paragraph 2 of Article 1468, Paragraph 3 of Article 1469 or Paragraph 2 of Article 1470 of the this Code.

Thus, we can clarify that in order to recognize the actions as violating the exclusive right to the manufacturing secret, the set of conditions is necessary, namely: unlawful obtaining the information constituting the manufacturing secret, and disclosing it or using it without the permission of the right holder, including while manufacturing the products and implementing the economic and organizational solutions.

In this case, it is indicated in Paragraph 2 of Article 1472 of the C.C.R.F. that the person, who has used the manufacturing secret and who has not known and should not have known that using it was illegal, including due to the fact that he has gained access to the manufacturing secret accidentally or by mistake, shall not be liable in accordance with Paragraph 1 of this Article.

Moreover, by virtue of Paragraph 2 of Article 1466 of the C.C.R.F., the person, who has become a holder of the information constituting the protected manufacturing secret in good faith and independently from other holders of the manufacturing secret shall acquire an autonomous exclusive right to this manufacturing secret and therefore cannot be recognized as a violator of the rights to know-how.

However, the issue is still open: what are the criteria of the violation of the rights to the manufacturing secret? Let us try to find out in it using an example.

Let us imagine that company A holds the manufacturing information concerning the manufacture of a tonic beverage, in particular, a recipe and technology of its manufacture, and it uses them in the manufacture.

The commercial secret regime ensuring that the third parties do not have access to this information has been introduced at the company.

Moreover, this information has been obtained by company A in the course of its own independent developments, what may indicate to the fact that this information is unknown to the third parties.

The similar beverage, which manufacturer is company B, appears at the market of tonic beverages. According to the assurances of company B, their beverage is as good as the products of the competitors regarding all indicators, and it is even superior regarding some aspects.

Company A, having carried out a chemical analysis and the tests of the beverage of company B, comes to a conclusion that the beverages has the similar composition and results of drinking, therefore it is suspected that the confidential information leakage from company A has taken place, and as a result this information is in the hands of the competitors.

The right holder of the manufacturing secret starts an active campaign to struggle the violation; it files a statement of claim to the court against company B.

Then, in the course of the court proceedings, the court appoints an expert examination in the case, within the framework of which it puts a question to the expert: “Has the manufacturing secret of company A been used in the manufacture of the products of company B?”

The expert starts examining the technical documentation of both companies, he is present during the process of the manufacture at the enterprises, records the instrument reading and the proportions of the ingredients, measures the temperature, time and density, measures the length of hoses with a tape ruler, and raps the tanks for the presence of the hidden cavities.

In the end, the expert concludes that a part of the information constituting the manufacturing secret has been used in the manufacture of the beverage of company B, the beverages have different tastes, one beverage has a taste of melon, and another one has a taste of strawberry, in addition, the toning effect of the beverage of company B lasts 30 minutes longer than that of the beverage of company A, and also, the freckles disappear after drinking it.

From what we can conclude that it is quite possible that some part of the commercially valuable information, knowledge and skills, expressed in the form of the technical documentation, the equipment, which are necessary to launch the manufacturing process could have been used by company B, but it is not clear how significant this part is. It is also not clear whether this part is an independent protected subject matter of the intellectual rights to the manufacturing secret, and whether it is possible to speak on the violation of the right to the manufacturing secret in general, if the part is used.

Moreover, I believe that when considering the disputes of such kind, it is necessary to evaluate not only the comparison of the manufacturing secret and the disputed products or the manufacturing technology of these products, but also the information that is in the public domain, which could have been used by both parties, in this connection, the popular wisdom is recalled: “All that glitters is not gold,” in other words, not all the information that lies in the safe is really a secret. Although, of course, it will be a secret, but a Polichinelo’s secret.

In addition, in the situation described by me, the actions of company B could have been recognized as a violation only in the case, if, among other things, the direct proofs had been submitted to the court confirming the fact of the so-called commercial espionage, during which that information being really a secret, would have been stolen from company A.

At the same time, it is characteristic that the cases of such category, when the manufacturing secret is being defended, are very few, and the reason for that can only be guessed. Maybe it is because this subject matter is insufficiently studied, or maybe the violations involving the use of the manufacturing secret are few, due to the fact that the right holders keep their secrets artfully.

Summing up this article, I would like to say that, unfortunately, in the legislation and indeed, truth be told, in the judicial practice, there is still a large gap concerning the criteria of the evaluation of the fact of the violation / non-violation of the rights to the manufacturing secret.

For me, as a practicing lawyer, it is not clear what criteria or terms should be applied in this regard: equivalent features, reprocessing, confusing similarity, and identity, maybe something else?

At the same time, I must admit I have held out a hope that the Supreme Court of the Russian Federation would somehow touch upon this issue and give its clarifications regarding this issue in Resolution of the Plenum of 23.04.2019 No. 10 “On the Application of Part Four of the Civil Code of the Russian Federation.” But, unfortunately, this has not happened.

In this context, the issue of the criteria of the violation of the rights to the manufacturing secret remains open and unclear for me.

However, all those who are interested in the topic of the disputes on the defense of the intellectual rights, and in particular, the rights to know-how, I would recommend to read case A40-180850/2017, I suggest that special attention should be paid to the Resolution of the Intellectual Property Court of 10.10.2020, especially to the part of the judicial act, in which the Court gives or rather does not give its evaluation of the arguments of the appealer, as well as to the special opinion of judge T.V. Vasileva of 15.10.2020.

It seems to me that the special opinion reveals the secret literary talents of the judges, which are hidden behind the iron-clad templates of the court decisions and resolutions, and the special opinion of dear Tatyana Vladimirovna is a vivid example of this.

P.S. I shall be happy to read the opinions of the colleagues regarding the issue of the criteria of the violation of the rights to the manufacturing secret.