The regular readers of this blog certainly remember the usual suspects of trade secret misappropriation are employees, former employees, and self-employed consultants. In our series of blog posts about international trade secret misappropriation and trade secret enforcement under the Belgian Trade Secrets Act, we also explained that actions based on trade secrets misappropriation are in principle heard by the Enterprise Court. However, if the defendant is an employee or an ex-employee suspected of trade secret misappropriation during the course of employment, then the labor court has jurisdiction.
In a recent decision handed down by the Belgian Supreme Court (“Cour de cassation”)[1], an important point of civil procedure has been clarified in relation to actions for trade secret misappropriation brought against former employees.
Actions that are brought against employees or former employees on the basis of their employment contract are subject to a statute of limitations of either five years from the event giving rise to the claim or one year from termination of the employment contract, whichever occurs first. This can cause problems for employers, as the vast majority of actions against former employees will relate to something that occurred during the course of employment. This means that such actions are effectively time-barred one year after the end of the employment contract. This is especially relevant in the context of a breach of a non-compete clause or misappropriation of trade secrets by former employees. Indeed, as we already explained, in a case of misappropriation of trade secrets by a former employee, regardless of when the misappropriation took place, the former employer will typically only become aware of the issue only at a later stage, and often several months after the employee has left the company. The employer may then need a substantial amount of time to investigate the apparent trade secret violation before deciding on the most appropriate course of action. There is therefore an increased risk that the employer’s action will already be time-barred by the time it becomes clear that procedural steps should be taken against the former employee.
In its recent decision, the Belgian Supreme Court held that actions brought on the ground of unfair competition (including the misappropriation of trade secrets) by employers against former employees, who were not bound by non-compete obligations on the basis of their employment agreement, are to be considered to be actions based on tort liability.[2] This means that such actions are subject to a five-year statute of limitations running from when the employer becomes aware of the damage incurred and the identity of the responsible person. This Belgian Supreme Court decision does not really come as a surprise, but is rather a confirmation of a sensible interpretation of the law. Indeed, while a confidentiality clause in the employment agreement is generally helpful to show that a company has put legal measures in place to protect its trade secrets, employers do not need a specific clause in order to protect their trade secrets from misappropriation by former employees. Trade secrets are protected by law against any party that misuses and can give rise to enforcement actions on the basis of tort liability. As a consequence, an employer’s action against a former employee who misappropriated their trade secrets would generally be based on tort and subject to the five-year statute of limitations.
This comes as good news for companies that rely heavily on secrecy to create and protect their competitive advantage, as it allows them the necessary time to thoroughly investigate a potential trade secret violation and build their court case against the former employee responsible for the violation.
[1] Belgium’s highest court dealing with appeals on points of law from appellate courts.
[2] If instead a valid non-compete clause was included in the employment agreement, the applicable statute of limitations would be one year from the end of employment.