31 Aug 2017
Trade secrets in the light of the right to evidence under French law
The legal issue:
To improve their chances of success, litigants must be able to provide evidence of the facts alleged in support of their claims.
This rule derives from Articles 6 and 9 of the French Code of civil procedure, which provide that:
"In support of their claims, the parties put forward the relevant facts supporting their claims." (Art. 6)
"Each party must prove, according to the law, the facts necessary for the success of his claim." (Art. 9)
Yet many litigants lack sufficient evidence to support the facts they allege.
To address this situation, Title VI of the Code of civil procedure sets rules regarding the judicial treatment of evidence.
Article 143 provides that "the factual circumstances upon which the resolution of the dispute depends may, at the request of the parties or sua sponte, be subjected to any legal permissible preparatory inquiry".
Pursuant to Article 145, a party may request the court to order such inquiry as a first step before any trial on the merits of the case, as long as there is a legitimate ground to do so:
"If there is a legitimate reason to preserve or to establish, before any legal process, the evidence of the facts upon which the resolution of the dispute depends, legally permissible preparatory inquiries may be ordered at the request of any interested party, by way of a petition or by way of a summary procedure." (Art. 145)
Legally permissible preparatory inquiries may include the following:
- a personal review by the judge;
- parties' appearance before the court;
- third-party statements, with a possibility for the judge to request investigations;
- court-ordered expert assessments.
How can trade secrets be affected by the right to evidence?
The overarching principle is that trade secrets per se don't exclude application of the above-mentioned provisions of the Code of civil procedure regarding the judicial treatment of evidence.
For many years, the French Supreme Court has considered that trade secrets in themselves may not be enforced to prevent the court to order a preliminary inquiry as per Art. 145, if the need for such measure can be established.
As an example, in its decision dated 7 January 1999, the second civil chamber of the Supreme Court stated that:
But, whereas trade secrets per se don't hinder application of the provisions of Art. 145 of the new Code of civil procedure to the extent that the judge has determined that the measures he orders are based on a reasonable ground and are necessary to protect the rights of the party which requested them..."
Applicable restrictions: the proportionality rule
In its decision of 22 June 2017, the French Supreme Court accepted for the first time that any disclosure likely to violate trade secrets must be proportionate to the underlying purpose.
In the above case, an insurance agent acting as a representative for two different insurance companies (A and B) on a non-exclusive basis decided to end its contract with Company A.
Suspecting that the agent engaged in illegal and even unfair competition, company A started a legal action against him and relied upon Art. 145 of the Code of civil procedure to request disclosure of any evidence which might help assess his new insurance agent and broker activity.
The judge in chambers granted this request.
But Company B joined the agent in the appeal proceedings and claimed that such forced disclosure violated trade secrets in that it allowed Company A to obtain confidential information regarding its customer base and pricing policy.
In lieu of such disclosure, Company B requested the court to order an expert assessment - i.e. a third party bound by a professional secrecy obligation would conduct a comparative assessment of the two rival insurance companies' customer portfolios in order to identify any common customers.
The Court of appeal rejected this claim on the ground that neither trade secrets nor the fact that Company B owned the customer database compiled by the agent was a sufficient ground to object to disclosure of evidence before the court, given that the claimant (Company A) was not able to obtain such evidence through its own means and that such evidence was needed to assess the possible existence and scope of passing off by Company B, which would establish unfair competition.
Nevertheless, considering that the Court of appeal failed to provide any legal justification for its decision, the Supreme Court quashed the appeal decision.
The Supreme Court deemed that the Court of appeal should have determined whether ordering an expert assessment (as requested by Company B), to be conducted by a third-party bound by an obligation of professional secrecy, was proportionate to both i) the right to evidence regarding suspected illegal or unfair competition on behalf of the insurance agent and ii) protection of Company B's trade secrets.
From now on, this proportionality rule must be complied with by any claimant requesting preliminary inquiry measures when instituting the proceedings.
Nasser MERABET
Avocat
avocat@nmerabet.fr