The departure of a key employee and the subsequent launch of a competing business is one of the most common scenarios in which a company is exposed to the risk of misuse of confidential information. Although every employee has the right to pursue their career freely on the labour market, this freedom is not unlimited. If an employee starts competing activities after leaving (e.g. through a company controlled or managed by them) or assists in the conduct of competing activities (e.g. through a related person), they must comply with the prohibition on using third party’s trade secrets in breach of fair commercial practice under Art. 37 of the Bulgarian Competition Protection Act (“CPA“). The practice of the Bulgarian Commission for Protection of Competition (“CPC“) outlines clear criteria when this protection may be invoked.
What Constitutes a Trade Secret under the Competition Protection Act?
The definition of “manufacturing and trade secrets” under the CPA is narrower than the commonly accepted understanding of confidential information. Pursuant to § 1, item 9 of the Supplementary Provisions of the CPA, manufacturing or trade secrets are those facts, information, decisions and data related to business activities, which the rights holders have interest to keep them in secret and have taken the necessary confidentiality measures.
The CPC decisions indicate that data recognised as trade secrets includes, for example, client databases with specific pricing terms and contract deadlines, price levels and offers for specific clients, as well as technological information such as patterns, 3D models and production technology.
At the same time, not all information related to the undertaking’s activity constitutes a trade secret. As the CPC has consistently held, “it cannot be accepted that, in principle, all information created, used, processed and provided within a given undertaking constitutes its trade secret” (CPC Decision No 1209/2023). For instance, an employee’s own knowledge, skills and experience, even if acquired during the employment relationship, do not constitute the employer’s trade secret.
How to Protect a Trade Secret?
Based on the CPC practice to date, the most common reason for dismissing claims under Art. 37 of the CPA is the lack of adequate protection measures ensured by the undertaking holding the information itself. In order to benefit from the protection afforded by Art. 37 CPA, the undertaking must have fulfilled the following requirements:
- Specification and individualisation of the information – the management bodies of the relevant company must, in advance and through dedicated acts, expressly identify the facts, data and circumstances constituting a trade secret, separating them from the rest of the company’s information;
- Establishment of a restricted access regime – determining the persons who are authorised to access the information and implementing technical and organisational protection measures (passwords, user credentials, restricted system access, etc.);
- Notification of the relevant persons – informing employees which information specifically constitutes a trade secret and what obligations arise from having access to it.
Including a general confidentiality clause in the employment contract that covers “all information that has become known to the employee” is not sufficient. The CPC has consistently held that “the general qualification as trade secrets or confidential information in the signed agreement of everything that has become known to the employee in connection with and on the occasion of performing the undertaken duties does not comply with the characteristics of a trade secret within the meaning of Art. 37 in conjunction with § 1, item 9 of the Supplementary Provisions of the CPA and does not benefit from the protection of the quoted provision” (CPC Decision No 1126/2021, CPC Decision No 283/2024, CPC Decision No 1300/2023).
Which Actions by a Former Employee May Constitute an Infringement?
Art. 37 of the CPA prohibits three forms of conduct, i.e. obtaining, using and disclosing third party’s trade secret. The infringement may be committed through any of these actions, provided that each action has been carried out in breach of fair commercial practice, or the secret has been obtained or communicated on the condition that it would not be used or disclosed.
Importantly, actual harm is not required. The mere risk of harm to the competitor’s interests is sufficient.
In the typical practical scenario in which a former employee leaves the company and starts working for a competitor or establishes their own business, and uses specific information that had been designated and protected as a trade secret, the CPC has established an infringement, for instance, in case of:
- Disclosure of offers made to specific clients of the former employer, specific prices persons to whom services are rendered;
- Offering price levels lower than those of the former employer, where the only manner in which the competing undertaking could learn those levels was through the former employee;
- Use of technological information – patterns, 3D models and production technology to launch a competing business;
- Use of client data – personal data of clients, contractual terms, expiry dates and contact information for targeted solicitation of competitor’s clients.
What are the sanctions for violations under Art. 37 of the CPA?
The administrative fine for the infringing undertaking may reach up to 10% of the turnover for the previous financial year. For individuals who have assisted in the violation, the fine is up to EUR 25,565.
Recommendations
In light of the CPC’s consistent and well-established practice, undertakings should ensure that their internal policies and procedures for protection of confidential information comply with the following requirements:
- trade secrets are specifically defined through a dedicated internal act, rather than through a general clause in the employment contract;
- access to trade secrets is restricted to the employees on a need-to-know basis;
- employees are expressly notified which specific data and information constitute a trade secret;
- technical and organisational measures are in place to prevent unauthorised access.
Implementing these steps is not only a prerequisite for effective protection before the CPC under Art. 37 of the CPA but also ensure alignment with best practices for managing the companies’ information assets.
For further information contact:
Iva Georgieva, Managing Associate
iva.georgieva@kdp-law.com
