Trade Secret Litigation Defense — from Proof to Judgment
A trade-secret dispute in court is resolved by a chain of four norms: first it must be established whether a protected secret exists at all (Article 1105); then the unlawfulness of the breach (Article 992); then the measure of damages (Article 414); and finally the penalty as the pre-agreed price of breach (Article 418). This page explains the chain from the perspective of both sides of the dispute.
Qualifying the Secret — Article 1105
An entrepreneur who possesses a manufacturing or commercial secret — know-how, constituting technological, organizational or commercial information of particular importance, evidenced by the necessary and sufficient measures taken for keeping it secret — has an exclusive right to this information. The first question of the litigation is precisely this qualification: the claimant must prove both the particular importance of the information and the necessity and sufficiency of the secrecy measures — access regimes, restriction of availability, the obligations of employees, and evidence of who had access to the information and when. Without either component the secret does not exist, and the claim loses its foundation.
The Tort Claim — Article 992
A person who, by unlawful, intentional or negligent action, causes damage to another person is obliged to compensate it. In a secret dispute this norm is the basis of the claim: the unlawfulness — the unlawful acquisition or use of the information — must be established by the claimant, and the form of fault added to it: intention or negligence. Liability is built on these two elements, and it is here that the main battle of evidence is fought — the source, the access and the fact of use.
The range of fault also matters: damage caused by intentional and by negligent action is equally compensable, so a denial of intent alone does not defeat the claim — what is decisive is the unlawfulness of the action and its causal link to the disclosure.
The Measure of Damages — Article 414
In determining the amount of damage, the interest of the creditor against due performance is to be taken into account; the time and place of performance of the contract must be considered in establishing the amount. In a secret dispute this calculation is written with two supports: what the information would have yielded under lawful use, and in what time and space that interest was valued. The precision of the measure decides the amount of the judgment, which is why the computation must rest on documentary foundations from the very start of the dispute.
The Penalty — the Pre-Agreed Price, Article 418
The parties may freely determine a penalty which may even exceed the possible damage, save for the cases provided by law; an agreement on a penalty requires written form. In the trade-secret context this instrument makes the protection of a valuable asset tangible: each case of disclosure will have its price fixed in advance, and instead of the complex computation of damages the claimant will often be satisfied by the demand of the penalty.
In a secret dispute both sides meet at the threshold of qualification: the claimant uses it to cross — confirming importance and measures documentarily, and building the trail of the source through the chronology of the information's movement; the respondent uses the same threshold for defence — proving either that the information lacked importance, or that the secrecy measures were insufficient and the information was in itself accessible. At the damages stage the battle moves to the computation: specific transactions, lost opportunities and the parameters of time and place — all of this decides the amount of the judgment. Where a penalty exists, the claimant's task is sharply simplified: the written form and the fact of breach suffice to demand the price.
A special rule concerns set-off: the net balance of a party computed through set-off or close-out netting under the corresponding law is not a penalty or a similar punitive sanction and must not be deemed one — a distinction that matters where the parties use a financial-collateral scheme.
Frequently Asked Questions
Below we answer the questions most frequently raised about trade-secret protection.
What must I prove on the existence of a secret?
Both components: the particular importance of the information and the necessary and sufficient measures of keeping it secret — without either, the right does not arise.
On what basis is the damage claimed?
On the tort norm: unlawful, intentional or negligent action creates the obligation to compensate the damage.
How is the amount computed?
Through the creditor's interest in due performance, with account of the time and place of performance.
May the penalty exceed the damage?
Yes — the parties determine it freely, save for statutory exceptions; only the written form is required.
What form does a penalty agreement require?
Written — an agreement on a penalty requires the written form.
How We Help on Legal.ge
A secret dispute is won on the file: evidence of qualification, the trail of the source, the computation of damage. The specialists at Legal.ge will explain Articles 1105, 992, 414 and 418 of the Civil Code, assess your position, and prepare the claim or the defence. Contact us through the Legal.ge form.