Trade Secrets

Legal Basis

Membership in International Conventions

Protection

Criteria for enforcement: any knowledge or information may be considered a trade secret and protected as such as long as it complies with the following requirements: (1) be confidential: not generally known or easily accessible; (2) be in physical or electronic media: documents, electronic or magnetic media, optical discs, microfilms, films, or other similar instruments; (3) have an industrial or commercial application; (4) that represents a competitive or economic advantage over third parties: that it has real or potential commercial value because it is secret; (5) that sufficient means have been adopted to preserve confidentiality and restricted access to the information. In the event of a dispute over trade secrets, it will be necessary that the information constituting the trade secret and its treatment have some characteristics. For example, it is necessary that sufficient measures have been adopted to preserve the secrecy character, such as maintaining restricted access, meaning that it is not public information; also, that only certain authorized persons have access to it; that measures or physical barriers have been taken, such as passwords, padlocks, security software, fences, badges, locks, surveillance, etc., to prevent the free circulation of the information, as well as access to any person, and that legal measures or barriers have been adopted, such as employment contracts with confidentiality clauses informing employees that certain information constitutes a trade secret or is confidential, the signing of NDA´s, policies and training in the company on this subject, or, alternatively, the use of tools such as notarized facts with a deed before a notary public to certify that confidential information was delivered on a specific date by a certain person.

Assignment - licensing: possible. Authorization to exploit a trade secret is regulated in contracts such as the franchise contract, wherein it is common to find clauses relating to the use and confidentiality of the systems, operation, administrative and commercial manuals of the business considered as trade secrets.  It should be emphasized that the payment of the royalty in exchange for the use of the industrial secret does not authorize the licensee to disclose it, so precautionary measures indicated in the contract will have to be taken to protect the trade secret.

Remedies for misappropriation: the party affected by misappropriation may take certain legal actions, either through administrative means, or criminally speaking. In administrative matters: the affected owner may file an infringement action before the Mexican Institute of Industrial Property. The following conducts as an administrative infraction: (a) misappropriating information that is considered a trade secret, without the consent of the person exercising legal control over said information or its authorized user, in order to obtain a competitive market advantage, or performing acts contrary to good customs and practices in the industry, commerce, and services that imply unfair competition; and (b) produce, offer for sale, sell, import, export, or store products or services that use a trade secret, when the person carrying out such activities knew or had reasonable grounds to know that the trade secret was used without the consent of the person exercising its legal control or its authorized user and, in a manner contrary to good customs and practices in the industry, commerce, and services that imply unfair competition. The affected party may opt for temporary closure for ninety days or definitive closure, depending on the significance of the conduct incurred. In criminal matters: the affected owner may denounce the commission of any of the conducts that constitute crimes, such as use of the information contained in a trade secret, or disclose it to a third party, which information became known by the infringer because of his work, position, the performance of his profession, business relationship or by virtue of the granting of a license for its use, without the consent of the person exercising legal control or its authorized user, having been warned of its confidentiality, all the above with the purpose of obtaining an economic benefit for himself or for a third party or causing harm to the person who keeps the secret. Whoever commits any of the crimes related to trade secrets will be imposed from two to six years in prison and a fine of 1,000 to 3,000 times the Unit of Measurement and Updating (Unidad de Medida y Actualización "UMA") at the time the crime is committed. In labor matters: when the subordinate discloses confidential information by any means, the employer may terminate the employment relationship. In civil matters: the trade secret owner may demand compensation for the damage and harm caused. Under the FLPIP the compensation may be claimed before the Mexican Institute of Industrial Property once the administrative procedure is concluded, or directly before the civil courts without the need of a prior administrative declaration.

Comments: trade secrets have become one of the most valuable assets for companies in Mexico, since many businesses owe their success precisely to this restricted information and knowledge that gives them an advantage over their competitors. Becoming aware of the advantages of a trade secret, the information that can be classified as such, the characteristics it must have, as well as the treatment that must be given to it, is vitally important to implement an adequate protection strategy and achieve a real benefit. Likewise, unlike other intangible assets, a trade secret does not imply the expense of a registry or its maintenance, so it is not subject to a protection term, since the only requirement is that certain measures be maintained so that access to the information is restricted maintaining thereby its confidentiality so that in the event of controversy, action can be taken against its unauthorized use or disclosure. However, although the lack of a specific registration for the protection of trade secrets would seem to be a disadvantage, the reality is that this involves positive aspects such as the fact that they have immediate effect, that they are not subject to time limits and therefore enjoy indefinite protection, and do not involve registration costs, which, among others benefits, makes them an indispensable part of the intangible asset protection policy for the owner.