Introduction

Trade secret protection is an often-overlooked but extremely valuable form of intellectual property. Unlike patents or trade marks, they do not require registration and they can potentially last forever. Their usefulness, however, depends entirely on a business’s ability to keep them confidential. Cyprus, in line with European Union law, offers a modern legal framework that protects trade secrets against unlawful acquisition, use, and disclosure.

This article explains what trade secrets are, how they are protected in Cyprus, and what businesses should understand about the legal and practical aspects of maintaining secrecy.

What Is a Trade Secret?

A trade secret can be almost any type of information, provided that it is secret, commercially valuable, and subject to reasonable efforts to keep it confidential. This broad definition means that a wide range of business information may qualify, including formulas, algorithms, customer data, strategies, and internal methodologies.

There are several well-known examples. Recipes for KFC’s coating and the Coca-Cola formula are famously guarded through restricted access and confidentiality agreements. Some of these secrets have been preserved for decades, illustrating the potential longevity of trade secret protection compared to patents, which expire after a fixed term.

These examples show that information can become a long-term competitive advantage when it remains confidential.

The Challenges of Protecting Trade Secrets

Protecting trade secrets is not straightforward. Unlike other intellectual property rights, trade secrets do not have clear boundaries or registration certificates. Their “nebulous” nature makes them harder to define and defend.

Businesses therefore rely on a combination of contractual, organisational, and technical measures. These may include confidentiality clauses in employment contracts, non-disclosure agreements with partners, restricted access to sensitive information, secure storage, and internal reporting procedures. If these measures are not in place, a business may struggle to prove that information was genuinely secret or that reasonable steps were taken to protect it.

Despite these challenges, trade secrets offer several advantages. They can be cheaper than patents, last indefinitely, and protect types of information that fall outside the scope of other intellectual property rights.

The EU framework: Directive 2016/943

As part of the European Union, Cyprus has harmonised its trade secret laws with the Trade Secrets Directive (EU) 2016/943. The purpose of the Directive is to ensure comparable levels of protection across the EU and to discourage the unlawful acquisition, use, and disclosure of confidential business information.

The Directive was implemented in Cyprus through the Law on the Protection of Undisclosed Know-How and Business Information (Trade Secrets) from Unlawful Acquisition, Use and Disclosure of 2020 (Law 164(I)/2020) (as amended from time to time). This law provides the core legal framework that businesses can rely on for trade secrets.

Definition of a trade secret under Cyprus law

Section 2 of the 2020 Law provides the statutory definition of a trade secret. Information will qualify as a trade secret if all three of the following conditions are met:

  1. The information is secret. This means that it is not generally known or readily accessible to individuals who normally deal with such information.
  2. It has commercial value because it is secret. If the information were publicly known, it would no longer give the holder an economic advantage.
  3. Reasonable steps have been taken to keep it secret. What is reasonable depends on the circumstances, but courts will expect evidence of deliberate efforts to maintain confidentiality.

These criteria reflect the core principle that trade secret protection exists only as long as secrecy exists.

Unlawful Acquisition, Use, and Disclosure

Section 5 of the Law sets out when the acquisition, use, or disclosure of a trade secret is considered unlawful. Several scenarios fall under this definition.

Unlawful Acquisition

Acquiring a trade secret without the holder’s consent is unlawful when it involves:

  • unauthorised access, appropriation, or copying of documents or materials, or
  • any conduct that is contrary to honest commercial practices.

These provisions cover actions such as hacking, industrial espionage, bribing employees, theft of documents, or copying information that should not be accessed.

Unlawful use or disclosure

Using or disclosing a trade secret is unlawful when the person doing so:

  • acquired the trade secret unlawfully,
  • breached a confidentiality agreement or another obligation of secrecy, or
  • violated a contractual duty to limit the use of the trade secret.

The law also extends liability to individuals or entities that knew or ought to have known that the information was obtained through unlawful means. This means that even indirect recipients can be held responsible if the circumstances suggest awareness of misconduct.

Dealing in goods based on unlawfully obtained trade secrets

Section 5(5) extends the unlawful use category to goods manufactured or marketed using unlawfully obtained trade secrets.
Importing, exporting, storing, or offering such goods is treated as unlawful use.
This provision is important for businesses whose competitive advantage relies on industrial processes or technical know-how.

Lawful Acquisition and Reverse Engineering

The 2020 Law does not prohibit all forms of obtaining information. Section 4 clarifies several situations in which the acquisition, use, or disclosure of information is considered lawful.

Lawful acquisition includes:

  • independent discovery or creation,
  • observing, studying, disassembling, or testing a publicly available or lawfully possessed product (commonly known as reverse engineering), unless contractual obligations prohibit this,
  • employee information rights under EU and Cypriot law, and
  • any conduct consistent with honest commercial practices.

Reverse engineering is a particularly noteworthy point. If a product is publicly available, a competitor may legally analyse it to discover how it works unless they are contractually restricted from doing so.

The law also states that when use or disclosure is required or permitted by EU or domestic legislation, it is considered lawful.

Exceptions based on the public interest

Section 6 of the Law recognises important exceptions that limit trade secret enforcement. Courts must reject a claim if the alleged acquisition, use, or disclosure falls within certain protected categories.

These exceptions include:

  • exercising the right to freedom of expression and information, including media freedom,
  • revealing misconduct or illegal activities in the public interest (whistleblowing),
  • disclosures made by employees to their representatives when necessary to fulfil lawful duties, and
  • actions taken to protect a recognised legitimate interest under EU or Cypriot law.

These limitations balance the rights of businesses with broader societal values, ensuring that trade secret laws cannot be used to suppress legitimate reporting or public interest disclosures.

Practical steps for businesses in Cyprus

The legal framework protects trade secrets, but the responsibility for maintaining secrecy lies primarily with the business. Without adequate internal measures, even strong legislation cannot prevent loss of confidential information.

Some practical steps include:

Internal policies and access controls

Clear policies on confidentiality, document handling, and data storage help ensure that employees understand their obligations. Access controls, both digital and physical, reduce unnecessary exposure.

Contractual Safeguards

Confidentiality clauses in employment contracts and NDAs with third parties are essential. These agreements should clearly define what constitutes confidential information and the obligations surrounding its use.

Monitoring and response procedures

Businesses should have procedures in place to detect potential breaches and to respond promptly. This may involve IT monitoring, audits, and reporting mechanisms for employees.

Training and awareness

Regular training can reinforce the importance of trade secret protection and teach employees how to recognise risks, such as phishing attempts or inappropriate data requests.

Why trade secrets matter

Trade secrets can offer businesses a flexible and cost-effective way to protect valuable information. They can last indefinitely, apply to a wide range of subject matter, and avoid the disclosure requirements associated with patents. For many companies, especially those relying on internal processes or data, trade secrets are core strategic assets.

However, they are only as strong as the measures used to protect them. A lapse in confidentiality can permanently destroy trade secret status, leaving a business without recourse.

Conclusion

Cyprus has a comprehensive legal framework for trade secret protection, aligned with EU standards. The Law of 2020 provides clear definitions, identifies unlawful conduct, outlines exceptions, and supports businesses seeking to protect valuable information. But the practical burden lies with businesses themselves.

Maintaining secrecy requires deliberate planning, ongoing vigilance, and an understanding of both the legal and operational dimensions of trade secret protection. When managed properly, trade secrets can safeguard innovation and provide long-lasting competitive advantage.

* The content of this blog post is intended for general informational purposes only and does not constitute legal advice. Reading this blog does not create a lawyer-client relationship.