TALKING TAX: Regulation and means of protection of business secrets in Estonia

  • 2007-03-14
  • By Indrek Teder, Helmeri Indela [Teder Glikman & Partnerid]
In practice, every business activity includes secret information, the publication of which may cause damages to an enterprise. The Estonian Commercial Code provides an obligation to keep business secrets to members of management and supervisory boards of public limited companies as well as private limited companies. Employees are also obliged to keep the employer's business secrets if so agreed by the employment contract. Publishing business secrets is also punishable according to the Penal Code.

The definition of what constitutes a business secret is provided in the Estonian Competition Act. Information concerning the business activities of an enterprise, the communication of which to other persons is likely to harm the interests of such undertaking 's above all, technical and financial information relating to know-how, information concerning the methodology of validation of expenditure, production secrets and processes, sources of supply, volumes of purchase and sales, market shares, clients and distributors, marketing plans, expenditure and price structures and sales strategy 's are deemed to be business secrets.

First, information deemed to be a business secret must concern business activities of an enterprise since, as a rule, only the publication of such information to competitors, which concerns business activities, may harm the interests of an enterprise and create unreasoned competitive advantages to other enterprises.

Business secrets have economic value for an enterprise, which also includes the very aspect that the business secrets are unknown to the competitors. Business secrets are information securing business progress of an enterprise into a creation or collection of which the enterprise has made investments, and which therefore need justified protection.
Second, the character of a business secret is the fact that any publication of information related to business activities must jeopardize the interests of an enterprise. Above all, an enterprise's interests are economic interests. Publishing such information harms the market position of the enterprise or takes away its competitive advantage. At the same time it is not excluded that publishing information may also harm non-economic interests.

Information subject to disclosure or disclosed to the public is not deemed to be a business secret. Any know-how of some business sphere, which is generally known to persons operating in this sphere, is not deemed to be secret. In order to decide whether any information is secret or not, it must be analyzed in each single case 's how many employees of an enterprise possess the information, the value of this information to the enterprise, costs of the enterprise for obtaining such information, means taken by the enterprise to keep the information secret and extension of such means, how easily competitors could obtain the same information, and other aspects.

How to protect commercial secrets? For protection of information as a business secret we suggest:
- to estimate within the enterprise which information is deemed to be a business secret,
- to limit and estimate the persons who shall have access to business secrets and to sign with them strict confidentiality and non-competing agreements. An enterprise should also sign confidentiality agreements with its contractual partners. The confidentiality clause should be as clear as possible and should include a notice that any publication of business secrets is punishable pursuant to the Penal Code.

Indrek Teder is attorney at law at Helmeri Indela a lawyers at the law firm Teder Glikman & Partnerid, , a member of Baltic Legal Solutions, a pan-Baltic integrated legal network of law firms which includes Kronbergs & Cukste in Estonia and Jurevicius, Balciunas & Bartkus in Lithuania, dedicated to providing a quality 'one-stop shop' approach to clients' needs in the Baltics.