Protection of Trade Secrets
To effectively protect information, it is necessary to clearly understand its legal nature under Ukrainian law. Trade secrets in Ukraine are governed by several key laws and regulations: the Civil Code of Ukraine (CCU), the Commercial Code of Ukraine (CCU), and the Law of Ukraine “On Protection Against Unfair Competition.”
According to Article 505 of the CCU, a trade secret is information that is secret in the sense that, as a whole or in a specific form and in the aggregate of its components, it is unknown and not readily accessible to persons who normally deal with the type of information to which it relates, and therefore possesses commercial value and has been the subject of measures adequate to the existing circumstances to preserve its secrecy, taken by the person lawfully controlling such information.
Trade secrets may include information of a technical, organizational, commercial, manufacturing, or other nature. These include:
- Technical information and protection of know-how: unique software codes, IT system architecture, drawings, formulas, manufacturing processes, and research and development results.
Commercial data: customer and supplier databases, market analysis reports, marketing strategies, sales structures, and the terms of individual contracts.
Financial information: product cost of goods sold, profit margins for individual business lines, company budgets, and management accounting data not reflected in public financial statements.
Organizational decisions: staff training methods, specific KPI systems, and merger and acquisition plans.
Production processes: formula sheets, process flow charts, etc.
Ukrainian law (specifically, Resolution No. 611 of the Cabinet of Ministers of Ukraine dated August 9, 1993) clearly limits the list of information that a business is not permitted to withhold. Confidential information of this nature cannot be classified. This includes:
- The company’s founding documents (articles of incorporation, resolutions of the founders).
Documents granting the right to conduct business activities (licenses, permits).
Information on the number and composition of employees, their wages, and the availability of job openings.
Reports on the payment of taxes and other mandatory payments.
Documents regarding the payment of land allocation fees and environmental fees.
Information regarding environmental pollution or violations of antitrust laws.
If you include these items in your internal list of confidential information, the confidentiality regime will be deemed invalid in this regard. An experienced attorney specializing in trade secrets always begins by auditing and filtering a company’s information flows.
How to Implement a Trade Secret Policy: 5 Steps
The process of establishing a security system requires collaboration between the legal department, the HR department, and cybersecurity specialists. Let’s take a look at the detailed procedure for implementing trade secret policies within a company:
What Is Included in the Document Package
To create a comprehensive protection system, the legal department or a retained attorney must prepare a customized document package that includes:
An executive order establishing the trade secret regime and approving the documents. This serves as the starting point for implementing the regime at the company.
Regulations on trade secrets and confidential information. The company’s general regulations.
A list of information constituting a trade secret. A clear, detailed list of data categories.
A log of employees’ acknowledgment of the Policy. A document containing employees’ “live” or qualified electronic signatures (QES).
A Non-Disclosure Agreement (NDA) regarding trade secrets with employees. A special version for full-time staff.
Trade Secret Agreement with Business Partners (B2B NDA). A strengthened version of the agreement for business partners, suppliers, and contractors, with high penalty clauses.
Amendments to job descriptions and internal labor regulations. Integration of trade secret protection obligations into the workplace.
Forms for logs recording the release of information and the granting of electronic access. Operational control tools.
Sample instructions for document classification. Rules for applying classification markings to paper and digital media.
FAQ
No, unlike patents for inventions or trademark registrations, a trade secret does not require any government registration or entry in any registry. The right to a trade secret arises from the moment the information acquires the characteristics of secrecy and you have taken internal measures to protect it. However, you must be able to prove in court the date the information was created and the date the trade secret regime was established, using written or digital orders.
Only if you have not resolved this issue in advance. The employment relationship itself ends, and the obligations under the Labor Code cease. However, if your internal regulations and the signed individual non-disclosure agreement (NDA) clearly state that the obligation to maintain confidentiality remains in effect for 3, 5, or 10 years after the termination of employment, the former employee bears full financial and legal liability for any data breach.
Liability depends on the offender’s status and the consequences. For employees, this includes a reprimand, dismissal “for cause,” and compensation for damages (up to the amount of one average monthly salary, except in cases of full financial liability or a criminal offense). For individual entrepreneurs and partner companies, penalties include contractual fines (often amounting to hundreds of thousands of hryvnias) and compensation for losses. In serious cases (such as the intentional theft of technology for sale to competitors), criminal liability applies (Articles 231 and 232 of the Criminal Code of Ukraine).
The cost consists of two parts: legal (audit, drafting of regulations, a set of orders, non-disclosure agreements (NDAs), and instructions) and technical (configuring access rights, purchasing and implementing DLP systems and authenticators). The cost of the legal component is calculated on a case-by-case basis depending on the size of the business, the number of employees, and the specifics of the industry (for example, for a large IT company with an R&D center and hundreds of developers, the set of documents will be significantly more complex than for a local company). This is an investment that pays for itself as soon as the first attempt at sabotage by former top managers occurs.
Intellectual property protection is territorial in nature. However, the concept of a trade secret is standardized by international agreements (in particular, the TRIPS Agreement). If you sign a contract with a foreign partner, the international non-disclosure agreement (NDA) should include a reference to the laws of the country where any dispute will be adjudicated (for example, the laws of the State of Delaware in the U.S. or EU regulations on the protection of trade secrets in accordance with Directive 2016/943). For international protection, your internal Ukrainian record-keeping and labeling processes will also be crucial as evidence that you actually treated the information as a trade secret.
Do you need reliable protection for your business?
Don’t wait until valuable information falls into the hands of your competitors. Order a professional information security audit and the development of a customized know-how protection plan from qualified experts.Analysis of current data breach risks
Development of a “turnkey” Privacy Policy and non-disclosure agreements (NDAs)
Legal support for the implementation of technical restrictions for staff
