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Millionare compensation for a Trade Secret violation

Barcelona’s Province Court sets EUR 4.2 million for damages in a trade secret case

Industrial and intellectual property is not always achieved through titles, registrations, or certificates. Thus, it is common for valuable elements such as databases or industrial processes to be protected through the well-known figure of trade secret.

It is a protection granted for decades in Spain through Law 3/1991 on Unfair Competition and more recently by Law 1/2019 on Trade Secrets (transposition of EU Directive 2016/943). More and more companies – aware of the tremendous value of multitude of aspects and inside key elements, which sometimes exceeds that of their own visible assets such as trademarks or patents – are adopting mechanisms, strategies or internal policies for the protection and active defense of their trade secrets.

This has been the recent case decided by the 15th chamber of the Provincial Court of Barcelona in its judgment of May 20, 2022 which, after revoking the acquittal in first instance, confirms that the defendant used a sister company as a proxy to evade its duty of confidentiality previously signed for knowing  the plaintiff’s trade secrets.

With the intention of subsequently acquiring and operating an apartment – hotel complex in Nerja, the applicant initially asked CBRE Real Estate for a viability analysis of the business, as well as the search for a manager for the operation of the hotel activity since it had no experience in the sector. After the purchase of the complex, CBRE contacted a candidate to whom it delivered both its business valuation reports and other internal documents (salaries and positions, etc.). The delivery and access were made in conditions of absolute confidentiality through a contract, with the express warning that the information could only be used for the preparation of an offer to manage the business.

Despite the offers submitted, the parties did not reach any agreement. Just one year after the NDA was signed, the family who was running the hotel sold its shares to a new managing company for a whopping amount of 5.7 million euros. The purchaser would turn out to be a sister company of the previously appointed candidate by CBRE Real Estate.

Despite the defendant’s allegations – described as “childish” by the Court itself – the decision confirms that it used that sister company as a proxy to – with the knowledge previously acquired – obtain the management of the hotel. Therefore, the plaintiff lost a commercial opportunity that the Court valued at 4.1 million euros, as well as damages exceeding 123,000 euros because of the expenses for the preparation of the various viability reports of the business.

This very recent judgment is a clear example of the usefulness of adopting a correct policy of protection of trade secrets. In this case, the requirement to sign a confidentiality agreement with a third party who will be provided with invaluable information for the company, was – as the Court says – a “key element” for the success of the subsequent complaint.  These classic methods (NDA) combined with more modern ones such as blockchain-backup of evidence, are vital to guarantee that any company – regardless of its size or relevance – can develop a useful and effective trade secret policy.

Jorge Oria