Brazil: Secrecy As A Business Tool - Protection Of Business Secrets In Brazil

Last Updated: 31 May 2011
Article by Cláudio Mattos

Conditions imposing obligations of secrecy and confidentiality upon contracting parties, especially in transactions or contracts, are common. Clauses limiting such obligations to a given period after which the parties will be released from the obligation and may disclose the other party's information and secrets are yet more common.

The importance of commercial confidential information or trade secrets, the latter the most commonly used term, and which will be used in this article, is a key element regarding the competitiveness among companies.

Is it necessary to fix a period for the secrecy and confidentiality obligations? And further, how can a non-patentable formula, method, or technology be protected in Brazil?

It is essential to rightly understand the legal definition of trade secret, its concept, extension and applicability, in order to protect it properly, obtain advantages which in most instances the companies fail to see, and gain advantages in the business scenario.

A trade secret may be a formula, scheme, method, process or a part of them, an information compilation, technical data, a business plan, procedures, an information contained in a given product or process. A trade secret may be the formula of a chemical compound, a manufacturing process, a treatment or preservation of a material or even the list of the clients of a company.

That is the reason for the difficulty of providing an exact definition of trade secret, which is unnecessary as the presence of the elements essential for its characterization is what really matters .

In fact, it is essential that the subject of the trade secret (i) be able to be used by somebody in his/her business, and bring advantages over competitors; (ii) be unknown to the public in general (iii) be effectively subject to adequate measures seeking the preservation of its secrecy and confidentiality in regard to third parties.

Its fundamental element is the secrecy, despite the fact that the trade secret must have an economic value. In reality, it is this last characteristic that distinguishes it from information that are merely secret or confidential.

Resuming the secrecy issue, it is necessary that the subject of a trade secret be unknown to the public in general. Some even confuse "known to the public in general" with "be in public domain", two completely different issues, as the latter is a prerequisite to characterize lack of exclusivity and proprietary rights over a certain asset.

What is important is that the secret will not be publicly disseminated or easily accessed by third parties that usually handle the same type of information or matter that is the subject of the trade secret. But those two characteristics only, the economic value and the secrecy nature respectively, are not enough to secure legal protection to the trade secret.

It is of utmost importance that the secrecy of the trade secret is kept through the interested party's adoption of adequate and uninterrupted precautions. This is so because those who do not treat a trade secret as a secret cannot intend to hold rights over it.

Measures, such as entering into confidentiality agreements with employees, suppliers, contractors and/or partners, limiting the access to the information, as well as introducing internal policies on the access, handling and destruction of documents of such nature, are some of the prerogatives of the companies to safeguard their rights over their trade secrets.

The lack of adequate instruments, also concerning the local legislation, and the non-existence of internal practices in the companies designed to effectively keep the confidentiality of the information related to trade secrets, are likely to generate disputes and, consequently, loss of the exclusive property right over them.

The trade secret must be better examined as it is an alternative tool for the companies to protect their intellectual property rights.

Unlike a patent that confers on its holder the right to commercially exploit a certain invention for a certain period, the trade secret has no time limitation in Brazil. Its effectiveness will depend on the maintenance of its confidentiality and on the fact it will not be made known to third parties.

Should it not be necessary to fix in contract a defined period to release a party from the confidentiality obligation imposed on it, it is legitimate for the owner of the secret to require that the other party keep the secrecy and confidentiality of the business secrets at any time, except in exceptional situations, which must be clearly provided for in a contract.

There are countless cases in which the trade secrets persist for many years or even for over a century and it is obvious that the companies should take this into consideration as it may be an interesting and convenient option when analyzing and formulating their strategies .

Claudio Mattos, partner in Demarest e Almeida law firm.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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