Does civil procedure protect business know-how?

In commercial disputes, businesses increasingly face a dilemma: in order to effectively pursue their claims, companies must disclose information constituting their trade secrets. This applies in particular to commercial terms agreed with counterparties, settlement mechanisms in contracts based on indices, or strategic plans used to calculate lost profits. The problem is that failure to disclose such information may make it impossible to prove the claim, while disclosure may result in the loss of a competitive advantage. The currently applicable provisions of the Polish Code of Civil Procedure do not always make it possible to reconcile the effective pursuit of claims with the real protection of such data.

What tools does civil procedure currently offer?

• First, reference may be made to Article 479³³ of the Polish Code of Civil Procedure; however, it applies to separate proceedings in cases concerning competition and consumer protection, and therefore does not apply to standard commercial disputes.
• Another solution is the possibility of holding a hearing in camera, i.e. with the public excluded (Article 153 § 1 of the Polish Code of Civil Procedure). In practice, however, this instrument is of limited significance. First, members of the public rarely attend hearings. Second, the key issue is usually to restrict access to information by the opposing party, rather than by third parties. Importantly, restricting the public nature of a hearing does not affect the contents of the case file: all information concerning trade secrets included in pleadings remains available in the file to the parties and, under certain conditions, also to third parties.

This raises the question: is it possible to provide real protection for trade secrets in the course of proceedings?

The most commonly used method is anonymisation of documents, whereby a party removes data identifying the parties to an agreement or key elements of the business relationship. In practice, parties also partially disclose the contents of materials, for example by redacting certain passages, or submit excerpts from documents — sometimes even certified by a notary — covering selected provisions.

The problem arises, however, where information covered by trade secrets is of key importance for the merits or the amount of the claim. In such a case, the opposing party — in order to effectively defend itself — should be able to verify the method of calculating the damage or the sources of the assumptions adopted. This gives rise to a conflict between two values: the protection of trade secrets and the right of defence, including internal transparency of the proceedings.

Together with Jordan Zafirow, attorney-at-law and partner at Hoogells, and Natalia Żurawska, junior associate at #Hoogells, we are currently facing precisely this challenge in one of our cases. It is a classic commercial dispute examined under ordinary procedure, which means that the provisions of the Polish Code of Civil Procedure provide virtually no protection for those parts of the client’s arguments that are linked to trade secrets. Ultimately, we developed a solution that reconciles the party’s evidentiary obligations with the current wording of Article 9 of the Polish Code of Civil Procedure, which grants both parties unrestricted access to the case file.

We encounter this issue quite often in commercial disputes. It is worth considering the introduction, into ordinary proceedings, of mechanisms analogous to those provided for in cases concerning competition and consumer protection. For example, special grounds could be established for restricting access to evidentiary material, such as the critical importance of the data for the business activity of an undertaking, their obvious usefulness to a competitor who is a party to the dispute, or the potential conflict between disclosure and the public interest, for example in the case of critical infrastructure entities.

Practice shows that the protection of trade secrets in civil proceedings remains insufficient and is largely reduced to improvised procedural solutions. The risk of disclosing sensitive information increasingly affects not only litigation strategy, but also the decision whether to initiate proceedings at all. This is a strong argument in favour of systematically supplementing civil procedure with mechanisms that would allow for a better balance between the transparency of proceedings and the business interests of the parties.