What is a business secret and why is it important for your company? These are some of the key questions we will address in our article today. If you want to find out how a business secret can serve as a significant guarantee for preserving valuable information related to your company’s operations, we will present basic considerations regarding the protection of business secrets in Serbia.
Business secret – what is that?
In Serbia, the protection of business secrets is regulated at the legal level. In 2021, the Law on the Protection of Business Secrets was enacted, primarily regulating issues of legal protection of business secrets from unlawful acquisition, use, and disclosure.
A business secret is essentially data or a set of data. These data are secret and enjoy protection because they are not generally known or easily accessible. Furthermore, data that constitute a business secret have commercial value precisely because they are secret, and their holder lawfully controls them by taking reasonable measures to preserve their secrecy. Therefore, there are three basic conditions that information must meet to be considered a business secret. For example, commercial information (information about suppliers and customers, prices, financial studies, market research, and financial plans) can be covered by a business secret, as well as technical information (e.g., production processes).
The importance of protecting business secrets in modern business is immeasurable. First and foremost, establishing a system of adequate protection of business secrets ensures a high level of protection against unfair competition and contributes to the competitiveness of the company. Furthermore, certain intellectual creations do not enjoy protection until the registration process before the competent authority is completed. This leaves significant room for misuse and “leakage” of essential information about the company’s operations and new products, which can easily reach the competition if not adequately protected.
The recipe for Coca-Cola, Nutella, the formulation of Chanel No. 5 perfume, as well as the design of “Apple” products, are examples of the best-kept business secrets in the world.
How to protect a business secret?
If you want to ensure the highest level of protection for business information relevant to your business, it is necessary to take measures that correspond to the nature and purpose of the information being protected. These measures can be physical (e.g., locking rooms where confidential information is stored, restricting access of employees to those rooms, securing computers, clearly labeling documents with a secrecy classification, etc.), as well as legal. We will further discuss legal measures for protecting business secrets below.
Regulation on the Protection of Business Secrets
In addition to the legal framework for protecting business secrets, it is desirable for employers to adopt a Regulation on the Protection of Business Secrets to further strengthen the protection of their confidential information. This Regulation defines in detail the procedures for identifying, classifying, and processing business secrets, as well as measures to prevent unauthorized access and disclosure. It also includes provisions on employee training on the importance of information confidentiality, as well as disciplinary measures for violating rules on protecting business secrets. The Regulation may also regulate the procedure for protecting business secrets in various business changes (e.g., change of employer, termination of employment contracts, etc.), as well as procedures for resolving disputes related to business secrets.
Confidentiality Agreement between Employer and Employee
Additionally, employers may require the signing of a Confidentiality Agreement with employees to further ensure the protection of business secrets. This agreement specifies the employee’s obligations regarding the preservation of confidential information during the employment relationship and after its termination. It includes provisions prohibiting the disclosure or use of business secrets without the employer’s permission, as well as the procedure for protecting confidential information in the event of termination of the employment relationship by the employer or employee, or mutual termination of the employment relationship. Signing such an agreement further strengthens the legal basis for protecting business secrets and helps preserve the integrity of the company’s operations, as the agreement may also include a clause containing contractual penalties in case of agreement violation, which is an important factor in preventing the disclosure of business secrets.
Challenges in Protecting Business Secrets
Today, companies face numerous challenges in preserving data confidentiality essential for conducting business activities and launching products and services in the market. One significant challenge is the increasing sophistication of cyber threats, including hacking and data breaches, which can jeopardize sensitive information. Furthermore, the rise of remote work and data storage “in the cloud” has made it difficult to control access to confidential information, increasing the risk of insider threats. Moreover, the global nature of business operations introduces complexities regarding legal jurisdiction and cross-border enforcement of intellectual property rights.
To address these challenges, companies need to implement robust security measures and establish clear policies for identifying and categorizing sensitive information. This includes regular risk assessments, data encryption, and implementation of access controls to limit unauthorized access. Furthermore, employee training and awareness programs are essential to educate staff about the importance of confidentiality and their role in protecting business secrets.
Predictions and Emerging Trends
Technological advancements, such as artificial intelligence and machine learning, are expected to enhance the protection of business secrets. While these technologies can improve data security through advanced encryption and threat detection, they also introduce new vulnerabilities, such as potential cyber attacks initiated by artificial intelligence. Additionally, the proliferation of digital platforms and connected devices in the era of the Internet of Things (IoT) expands the surface for potential threats, requiring companies to adopt proactive measures to mitigate risks.
New trends related to business secrecy include the growing significance of data protection regulations, such as the General Data Protection Regulation (GDPR) of the European Union, which sets strict requirements for handling personal and sensitive information. Companies also need to address the rise in industrial espionage and corporate espionage, especially in sectors with high-value intellectual property, such as technology, pharmaceuticals, and defense.
Conclusion
Protecting business secrets is crucial for maintaining competitiveness and preserving innovation in today’s dynamic business environment. By implementing a comprehensive approach to safeguarding sensitive information, including technical and organizational measures, companies can reduce the risk of data breaches and intellectual property theft. Prioritizing the protection of business secrets not only safeguards valuable resources but also builds trust with customers, partners, and investors.