Recent court decisions in the technology, media, and telecommunications sector are expected to influence the way in which businesses manage, protect, and enforce their intellectual property rights and trade secrets in Bulgaria.
Clearer Framework for Damages for Licensing Infringements
Nowadays, it is almost impossible to find a business that does not use or rely on various software solutions and tools for its operations. This, of course, increases not only the demand for useful, user-friendly, and problem-solving software solutions but also the risk of unauthorized use of such solutions and intellectual property infringements. In cross-border contractual relationships and allegations of infringements, the situation is even more complicated.
One of the major questions in cross-border copyright infringement cases is how to calculate the damages. A recent interpretive decision established a structured approach to calculating the damages in the form of lost royalties in cross-border cases of unauthorized use of a copyrighted work where no relevant licensing agreement has been entered into. The Supreme Court determined that the amount of damages should be calculated based on the licensing fees that would have been paid by the infringer had they obtained a legitimate license for the use in the country where the infringement occurred. Consequently, in the event of an infringement within the territory of Bulgaria, the rightsholders will calculate the unreceived fees in accordance with the standard licensing fee for their product in Bulgaria.
It is also notable that the decision encompasses not only the recovery of legal fees incurred during litigation but also the reimbursement of reasonable and proportionate lawyer’s fees associated with reaching an out-of-court settlement, such as the work on a cease-and-desist letter to the alleged infringer.
Consequently, rightsholders would likely feel more secure in taking legal action against infringers, knowing they can generally recover both the lost licensing fees and the legal costs associated with the infringement. For potential infringers, on the other hand, the risk of facing higher financial penalties, including legal costs, may encourage more cautious behavior and motivate quicker settlements to avoid lengthy and costly litigation.
As an interpretative decision, it is binding on courts in future disputes, thereby ensuring consistent application of its principles.
The Relationship Between Trade Secrets and Public Disclosure
Another recent decision sheds light on the importance of maintaining confidentiality in trade secrets, particularly in the context of public disclosures. Nowadays, more and more companies in the Bulgarian market are increasingly relying on trade secrets to protect valuable information that cannot be protected in any other way (e.g., that cannot be copyrighted or patented). For example, some companies rely mainly on their trade secret protection arrangements to mitigate the risks of ex-employees extracting, disclosing, and/or using such highly valuable information. However, this is not an easy task and one of the reasons for this is that it is not crystal clear what type of information falls within the scope of trade secrets. For example, in many cases, trade secrets and confidential information are generally considered by companies to be interchangeable. However, the truth is that while any trade secret can be considered confidential information, not all confidential information can be considered a trade secret.
The court decision provides two important clarifications in this regard. On the one hand, the court confirms that, in principle, a client list can be protected as a trade secret. On the other hand, however, the court clarifies that this would not be the case if the list had been publicly disclosed to an unrestricted audience – for example, it has been made available on the company’s website. It seems that this understanding could be applied more broadly also to information other than the client list.
In view of this ruling, companies must exercise greater caution in disseminating proprietary information through marketing materials or online/public platforms. As illustrated above, such actions may result in the loss of exclusivity and, consequently, the inability to protect the information as a trade secret under Bulgarian laws.
The above rulings provide significant clarification mainly for the Bulgarian technology, media, and telecommunications sector but not only, as trade secrets may be relevant to other sectors as well. Collectively, these decisions contribute to the creation of a more secure and predictable legal environment, encouraging rightsholders to protect their intellectual property and optimize their strategies in order to keep their competitive advantage.
By Georgi Kanev, Head of IP&T, and Maya Demirova, Trainee Lawyer, Kinstellar
This article was originally published in Issue 11.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
