Tales from the National Appeal Chamber: Trade secrets must be proven
Public procurement is subject to the general principle of openness. Sometimes, this conflicts with the interests of contractors, who can protect their companies’ valuable information and knowhow by designating it as a trade secret. But this is not an automatic process, as it requires contractors to make a credible showing of the rationale for protecting the information. In a recent ruling, the National Appeal Chamber clarified the conditions for correctly reserving trade secrets.
Under Polish law, an undertaking is regarded as a collection of tangible and intangible assets devoted to conducting business activity. Undertakings have a number of legal instruments at their disposal for protecting their physical assets, but protection of intangible assets is equally important.
Trade secrets are an institution enjoying special protection under competition law. Art. 11 of Unfair Competition Act defines it a trade secret as “technical, technological or organisational information of an undertaking or other information having economic value which, as a whole or in a particular combination and set of elements, is not generally known to people usually dealing with that type of information or is not easily accessible to such people, provided that the person authorised to use or dispose of the information has undertaken, with due diligence, measures to keep it confidential.”
Thus, for information to become a trade secret, both a material condition (economic value) as and a formal condition (measures by the undertaking to protect the information, for example, entering into confidentiality agreements with counterparties or internal procedures to protect trade secrets) must be met.
Under the Unfair Competition Act, using or acquiring someone else’s information constituting a trade secret is an act of unfair competition. The Public Procurement Law also allows for protection of trade secrets, but a contractor deciding to participate in the public procurement market must take into consideration that openness is an overriding principle of the process. Bids, contracts—all such documents are subject to disclosure. Protecting information from disclosure in public procurement is a deviation from the general rule and should be subject to rigorous control by contracting authorities. The recent case law from the National Appeal Chamber supports this position, outlining the principles for correctly protecting an undertaking’s trade secrets.
Burden of proof
In its ruling of 15 May 2023 (case no. KIO 1195/23), the chamber pointed out that the burden of proof in demonstrating the validity of a reservation of trade secrecy lies solely with the contractor seeking to protect the information. Art. 18(3) of the Public Procurement Law obliges the contractor to demonstrate that the information constitutes a trade secret. The chamber equated the obligation of “demonstration” with the obligation of “proof” within the meaning of the Civil Procedure Code. Therefore, it is not enough to make a prima facie showing substantiating fulfilment of the grounds for protection of confidential information. The contractor must provide evidence that the contracting authority can verify. It is unacceptable to rely solely on the contractor’s own statements. Additionally, the contracting authority should evaluate the contractor’s actions through the prism of the professional nature of its business, as an undertaking is considered a professional within the meaning of Civil Code Art. 355 §2.
Can unit prices constitute a trade secret?
This ruling was issued in connection with a contracting authority’s refusal to allow protection from disclosure of an asserted trade secret in the form of a list of unit prices for services offered by a media house. The contractor argued that “insight into this information will allow competitors to determine the company’s market position, learn about prices and discounts, and thereby reveal its negotiation capabilities,” and also that “the prices obtained by the appellant are unattainable for other market participants and result from many years of cooperation with the media, thanks to the media house’s individual negotiations with suppliers.”
The National Appeal Chamber did not uphold the contractor’s argumentation. The economic value of a trade secret lies in maintaining a market advantage over other entities thanks to the information. Therefore, the value must be objective, as viewed from the perspective of its usefulness for other contractors operating in the industry. The chamber reasoned that price information itself cannot constitute a trade secret, as it does not represent an objective value to other businesses—especially as the appellant argued that its prices were unattainable for other market participants. Thus, the contractor’s advantage lay in longstanding business relationships, discounts it could obtain, and other factors allowing it to pay advantageous prices. Those factors could be declared confidential, but not the price information itself, as “learning the amount of the price will not immediately allow competitors to obtain the same or a lower price, as it is based on unique factors available to the appellant.”
Late evidence
In this ruling, the chamber also noted the need to enclose all evidence justifying protection of the information. After protection was denied, the appellant submitted additional documents (a security policy and a sample nondisclosure agreement) as further evidence of the measures taken by the contractor to protect its trade secrets. In the chamber’s opinion, such late evidence could not be considered, as Art. 18(3) of the Public Procurement Law specifies when documents must be submitted. The contractor should demonstrate that the reserved data constitutes a trade secret “upon delivery of the information to the contracting authority.”
The chamber took a similar tone in its ruling of 7 June 2023 (case nos. KIO 1463/23 and 1478/23), where it held that since the relevant evidence was not enclosed in the justification of the request to protect a trade secret, it was not permissible to call on the contractor for clarification in this regard. A summons for clarification is used to dispel doubts about documents already submitted. If the information was not provided to the contracting authority at all, then asking the contractor for the information in this way would not be a summons for clarification, but an opportunity for one contractor to supplement its bid, which could violate the principle of equal treatment of contractors under Art. 16 of the Public Procurement Law.
Conclusion
Contractors must recognise that protection of information from disclosure is an exception to the general principle of openness in public procurement. To protect their trade secrets, contractors must demonstrate that both the substantive premise (economic value) and the procedural premise (measures taken by the contractor to protect the information) are met. Then the justification of the contractor’s assertion of a trade secret will be subject to rigorous examination by the contracting authority, and in no case can it be based solely on the contractor’s own declaration. The burden of proof lies wholly on the contractor, who must provide evidence with the due diligence expected of a professional. Only fulfilment of these requirements will ensure the trade secrets are protected.
Martyna Skrobotowicz, Infrastructure, Transport, Public Procurement & PPP practice, Wardyński & Partners
