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Global employment briefing: Sweden, October 2017

  • Sweden
  • Employment law


New 2018 legislation on trade secrets: extending criminal liability

There is a proposal to implement a new act on trade secrets at the latest on 8 June 2018. The proposed new act will replace the current Swedish Trade Secrets Act. Changes in the Swedish legislation are necessary to implement the EU Directive 2016/943 on the protection of undisclosed know-how and business information against their unlawful acquisition, use and disclosure. Although the essence of the current Trade Secret Act remains unchanged, the principal suggested change is a new provision on criminal liability for individuals who infringe a trade secret to which they have had lawful access during employment. The current Trade Secret Act provides for criminal liability where individuals have unlawfully gained access to the trade secret.

Damages under the Trade Secrets Act

The Swedish Labor Court recently ruled on the calculation of damages under the Trade Secrets Act and found three individuals and their company liable to damages of four million Swedish kronor (approx. 415,000 Euros) in total. The remedy available for breaches of the current Trade Secrets Act is damages related to the economic loss incurred by the unlawful action (financial damages) and damages related to circumstances other than those of a purely financial character (general damages).

Calculation of financial damages can be complicated, but the starting point for the calculation is loss of profit for the employer. If such loss is difficult to estimate, the calculation can be based on the profit for the breaching party or the cost savings the breaching party made by the trade secret infringement. In the recent ruling, the Labor Court found that calculation of damages based on loss of profit contained too many uncertainties to serve as a basis for calculation. The damages should instead be calculated as the cost incurred by the employer to obtain the trade secrets to the extent that the infringing party were able to save the corresponding sum by committing the infringements. The employer could substantiate the cost for obtaining the trade secrets and the Labor Court thus addressed the question of what amount the former employees were able to save by the infringements. The Labor Court ruled that it was impossible to come to an exact conclusion about the saved amount and awarded a reasonable sum.

The damages the Labor Court awarded in this case were higher than district courts generally have awarded. However, the case showed that even if the actual costs for obtaining the trade secrets can be fully demonstrated, an employer will always risk not being able to prove the amount that the employees were able to save by the infringements and thereby subject to a court’s discretion to award a reasonable amount. The above mention proposal for a new Swedish Trade Secret Act however suggests a provision to the effect that regard shall be taken to the unlawful profit gained by the wrongdoer when calculating the financial damages.

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