Overview of Trade Secrets
The World Intellectual Property Office (WIPO) provides the following elements for information to qualify as a trade secret. The information must be:
- commercially valuable because it is secret;
- known only to a limited group of persons; and
- subject to reasonable steps taken by the rightful holder of the information to keep it secret, including the use of confidentiality agreements for business partners and employees.
According to WIPO, "the unauthorized acquisition, use or disclosure of such secret information in a manner contrary to honest commercial practices by others is regarded as an unfair practice and a violation of the trade secret protection".
Famous examples of well-known trade secrets include: KFC's original recipe; The Coca-Cola Company's secret formula for COKE; the chemical formula for WD-40 and LISTERINE; and Google's search algorithm.
Trade Secrets in the UAE
The UAE does not have a standalone federal trade secrets law. Instead, a piecemeal array of protections and remedies for trade secrets can be found under the following federal laws:
- Commercial Companies Law (Federal Law No. 2 of 2015), as amended;
- Civil Code (Federal Law No. 5 of 1985), as amended;
- Penal Code (Federal Law No. 3 of 1987), as amended; and
- Industrial Regulation and Protection of Patents, Industrial Drawings and Designs Law (Federal Law No. 31 of 2006).
As a result, there is no unified legal definition of what constitutes a trade secret onshore in the UAE, and the laws do not define what type of information can be protected as a trade secret and what conditions must be met for the trade secret to qualify for protection. Each law does, however, set out its own penalties for the misappropriation of a trade secret.
Non-Disclosure Agreements (NDA)
While the federal laws set out below do provide some protection for trade secrets in certain circumstances in the UAE, the absence of a specific trade secrets law means that there will always be some uncertainty as to the type of information that is capable of protection as a trade secret, what conditions must be present for that information to qualify for protection, and what amounts to unlawful disclosure.
Consequently, parties in possession of trade secrets should consider putting in place a non-disclosure agreement with any third parties to whom it wishes to disclose any confidential information. NDAs are typically enforceable before the UAE courts.
UAE Laws under which trade secrets may be protected
The following federal laws contain protections and remedies for trade secrets in the UAE:
UAE Companies Law – Article 369
The Companies Law provides sanctions against any person who utilises or discloses a trade secret of a company. The penalties are imprisonment for no longer than 6 months and/or a fine of at least AED50,000 (equivalent to around USD 13,617) but no greater than AED500,000 (equivalent to around USD 136,170).
Civil Code – Article 905(5)
The Civil Code provides that employees, are under an obligation to keep the industrial and trade secrets of their employer, failing which, the employee could be exposed to claims for damages or compensation.
Penal Code – Article 379
The Penal code provides for sanction over the unauthorised disclosure of trade secrets, for a person's own interest/benefit, or the interest/benefit of another, and the person became entrusted with the secret by virtue of their profession, craft, position, or art. A convicted person shall be sentenced to imprisonment for a minimum period of 1 year and/or to a minimum fine of AED20,000 (equivalent to around USD 5,447).
Somewhat unusually, the UAE Patent Law also contains provisions that protects confidential "know-how". However, these provisions appear to be focused more towards protecting know-how which contains patentable subject matter from disclosure before it can be filed as a patent application.
Patent Law – Article 39 to 42
The UAE Patent Law prohibits the disclosure, use or publication of know-how, where:
a) the owner of the know-how must show that necessary measures had been adopted for maintaining the secrecy of the elements of the know-how;
b) a written agreement had been in place, validly regulating the know-how acquired and disclosed between them (the agreement must include a definition of the elements of, the purpose of using, and conditions for transferring, the know-how. The latter is defined to include information, data, or knowledge of a technological nature, acquired through a profession, which is capable of practical application);
c) the know-how must not have been published or put at the disposal of the public; and
d) the disclosure must have been unauthorised, with the disclosing party knowing that the know-how was confidential, or if it can be proven that another person in his position, would not have been unaware of the confidentiality of the know-how (the disclosure would then be deemed to have been unlawful).
Under the Patent Law, imprisonment for a period not less than 3 months, and not more than 2 years and/or a fine of no less than AED5,000, and not more than AED100,000 (equivalent to around USD 1,362 to USD 27,233).
Originally Published 19 August 2021
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.