An overview of Trade Secret Law in Bahrain

Nawra Abdulla ([email protected]) – Associate

Trade secrets play a vital role in the competitive landscape of modern business. They provide companies with the strategic advantage needed to thrive. In Bahrain, the protection and governance of trade secrets are primarily outlined in Law No. 7/2003 on Trade Secrets (Trade Secret Law) establishing a framework to safeguard confidential information from unauthorized disclosure. This article explores the key mechanisms and legal provisions in place to ensure that businesses can effectively protect their proprietary knowledge, thereby fostering innovation and maintaining a competitive edge in the market.

Definition of Trade secrets

While Bahraini law does not provide a precise definition of trade secrets, the concept is understood through general principles of confidentiality and economic value. According to Article 1 of Trade Secret Law, individuals and corporations are prohibited from disclosing information in their possession if it meets the following criteria:

1. Confidential information: Trade secrets consist of confidential business/trade information that is not publicly known and shall be kept confidential, providing a competitive edge that derives economic value. This confidentiality is essential for maintaining the competitive advantage of the information. Trade secrets typically include formulas, practices, processes, designs, instruments, patterns, or compilations of information that have economic value and are kept confidential.
2. Economic Value: The information must have value due to its confidentiality, offering economic benefits to its owner by remaining undisclosed.
3. Reasonable Efforts to Maintain Secrecy: The owner of the information must take reasonable steps to keep it confidential such as implementing security measures and confidentiality agreements to prevent unauthorized access or disclosure.

Exemption: The competent administrative authority is exempt from the abovementioned restrictions when the disclosure was undertaken for the purpose of public protection and/or prevention of unfair commercial use of trade secrets.

Legal Framework

The protection of trade secrets in Bahrain is primarily covered under international agreements and national legislation, ensuring a robust framework to safeguard confidential business information.

1. International Considerations: Bahrain is a member of various international agreements and treaties that impact trade secrets protection. This can influence how trade secrets are treated in a broader international context. Bahrain’s ratification of the Paris Convention through Decree No.31/1996 and its membership in the World Intellectual Property Organization (WIPO) via Decree No. 1/1995, aligns its legal framework with international intellectual property standards. These conventions promote fair competition and intellectual property rights, supporting Bahrain’s domestic laws, including the Commercial Companies Law and Trade Secret Law.
2. National Law: Alongside multiple intellectual property laws, Trade Secret Law explicitly outlines the protection and enforcement of trade secrets, reinforcing general principles of business confidentiality and fair commercial practices. Article 3 of the Law grants the owner of trade secrets the right to prevent unauthorized disclosure and violations of trade confidentiality that contradict with lawful commercial practices. Additionally, it grants the owner to transfer trade secrets freely with or without the exchange of compensation.

Violations

Article 4 of the Trade Secret Law explains the specific actions that constitute violations of fair trade and commercial practices. These include:

1. Breach of Contract: Occurs when a natural person or a corporate person discloses confidential information obtained through a contractual agreement, thereby violating the terms of confidentiality.
2. Inducing Disclosure: Persuading and encouraging others to disclose confidential information without authorization is also deemed a violation.
3. Illegal Acquisition: Obtaining information from protected sources through unlawful means, such as fraud, theft or bribery constitutes a serious breach of Trade Secret Law.
4. Acquisition of Trade Secrets: Gaining trade secrets from another party while knowing, or having reasonable grounds to suspect, that the information was obtained through the above-mentioned unlawful acts. However, it is important to note that acquiring trade secrets through independent efforts or capabilities does not violate fair trade practices.

Remedies for violations

The unauthorized acquisition, use, or disclosure of trade secrets can result in legal action. Remedies include:

1. Injunctions: Courts may issue orders to prevent further use or disclosure of trade secret to safeguard the information from additional harm.
2. Financial compensation: claimants may seek compensation for losses suffered due to violations.

Article 6 of Trade Secret Law stipulates the procedural steps for addressing violations, the claimant is entitled to file a claim and request precautionary measures to protect trade secrets supported by sufficient evidence to issue a court order in this regard, with the court’s ability to act without the opposing party’s presence if urgent harm is anticipated. Affected parties have the right to challenge such order within 10 days and must initiate further legal actions regarding the main dispute within 15 days.

Enforcement

The enforcement of Trade Secret Law in Bahrain has been significantly shaped by key rulings of the Bahraini Court of Cassation. In Challenge No. 897 J.Y 2014 wherein the court held an employee liable for disclosing trade secrets of the organization they work for, emphasizing that maintaining confidentiality is a fundamental obligation of good faith within the employment contract. The court affirmed that the breach of this obligation by the employee not only constitutes a violation but also warrants compensation for damages incurred. The court recognizes that requiring employees to keep business secrets confidential is a legal obligation. This requirement, specified in the Bahraini Labor Law and the Bahraini Civil Code, mandates that employees must not disclose confidential information. If an employee breaches this obligation, they may be liable for damages. However, the court must determine if the employee actually disclosed any business secrets based on the evidence provided, including witness testimony, and the court’s independent evaluation of these facts. Further reinforcing this obligation, the court addressed a similar case in Challenge No. 897 J.Y 2017 wherein the court held “Breaching the confidentiality agreement can result in compensation for damages suffered due to the disclosure of trade secrets.” These rulings collectively underscore the serious legal consequences and remedies available for the unauthorized disclosure of trade secrets by employees, thereby supporting the integrity of trade secrets protection in Bahrain.

Protection measures of Trade Secrets

In practice, businesses in Bahrain employ several strategies to effectively protect their trade secrets, key measures include:

1. Confidentiality Agreements (NDAs): Non-Disclosure Agreements are commonly used to protect trade secrets when sharing information with employees, business partners and third parties. These agreements outline the obligations of the parties to maintain confidentiality and detail the consequences of unauthorized disclosure. Additionally, including a confidentiality clause within the contract clauses to maintain confidentiality and prohibit disclosure.
2. Internal Security Measures: Companies implement various security measures to safeguard trade secrets, such as restricted access to sensitive information, secure storage solutions, and robust cybersecurity protocols to defend against unauthorized access and breaches.
3. Employee Training: Regular training programs educate employees on the importance of protecting confidential information and the legal and ethical responsibilities associated with trade secrets to foster a culture of compliance.
4. Document Control: Companies use controlled access systems for documents and data that contain trade secrets, ensuring that only authorized individuals have access to sensitive information.

Concluding remarks

In conclusion, trade secrets are not just valuable assets but essential components of a business’s competitive strategy in Bahrain’s dynamic market. The robust legal framework provided by the Trade Secrets Law, supported by both international and national regulations, offers vital protections that encourage innovation and uphold fair competition. By proactively implementing measures such as confidentiality agreements, stringent internal security protocols, and comprehensive employee training, businesses can effectively safeguard their proprietary information against unauthorized disclosure. These efforts not only comply with legal obligations but also foster a culture of trust and accountability within the organization. As companies continue to face increasing competition and rapid technological advancements, prioritizing the protection of trade secrets will be crucial for long-term success and sustainability. Ultimately, a strong commitment to safeguarding confidential information enhances not only individual business interests but also contributes to the overall integrity and resilience of the marketplace in Bahrain.

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