The Weakening of Business Secrecy Before French Judges: The Negative Counterpart of the Right to Evidence in a Fair Trial

The French High Court has just handed down a ruling confirming the weakening of the force of business secrecy in the name of the right to evidence principle, based on the right to a fair trial found in article 6 of the European Convention on Human Rights (ECHR).

In this case, [1] a company “A” accused a competitor, a company “B,” and its franchisor, a company “C,” of unfair competition. To prove its allegations, company A produced a confidential guide made by company C for its franchisees containing distinctive know-how, obtained without the latter’s consent. [2] In response, company C claimed damages for its moral damage caused by the violation of business secrecy.

While the Court of Appeal did indeed order the original plaintiff (company A) to pay compensation for the infringement of business secrecy, the French High Court (Cour de cassation) overturned the ruling and made the right to evidence principle prevail.

While this solution weakens business secrecy and may seem worrying for companies, it is consistent with the position of French judges.

To explain such a position, we must look to the French notion of business secrecy and the legal principles governing evidence as well as the practical consequences for companies.

LEGAL AND JURISPRUDENTIAL RULES OF EVIDENCE

The principle in French law is the freedom of proof, pursuant to article 1358 of the French Civil Code. Proof of a legal fact (as opposed to a legal act), such as an act of unfair competition, can therefore be proven by any means.

However, as an exception, case law limits this freedom in the name of the principle of fairness and lawfulness of evidence provided that (1) evidence is considered disloyal when it has been obtained without the knowledge of the person against whom it is used and (2) it is unlawful when it has been obtained in violation of a fundamental right (notably the right to privacy, professional secrecy, or the confidentiality of correspondence).

Business secrecy can be understood as numerical or technical information of commercial or strategic value, which must remain confidential in the interests of the company in possession of such information. As business secrecy is not a fundamental right, the submission of evidence in violation of this secrecy is considered disloyal, and the judge is to sanction the person who produces it in court and consider the evidence inadmissible.

However, as an exception to the exception, French courts have developed case law on the right to evidence to neutralize the disloyalty.

On the basis of article 6 paragraph 1 of the ECHR, which enshrines the right to a fair trial, French judges have dimmed the principle of inadmissibility of disloyal evidence with two cumulative conditions:

1. The infringement of the rights of the person against whom the evidence is used must not be disproportionate to the aim pursued, and
2. It is indispensable to the exercise of the right to evidence.

As such, if a judge finds that (1) there was absolutely no other way of proving the alleged fact and (2) the violation of the protected right is not disproportionate to the plaintiff’s interest in producing the evidence, the judge may admit the production in court of evidence obtained disloyally.

Consequently, in order to prove disloyal behavior, the High Court tolerates another form of disloyal behavior.

In this case, the High Court relied on both Article 6 of the ECHR and Article L. 151 8, 3° of the French Commercial Code, which allows business secrecy to be overridden if done in the name of the “protection of a legitimate interest recognized by European Union or national law,” as is the right to a fair trial.

THE SCOPE OF BUSINESS SECRECY VIOLATIONS IN PRACTICE

The admission of disloyal evidence by the judges purges the disloyalty. This is why the High Court refused to award damages in the above-mentioned case.

However, this does not mean that once a secret has been revealed in the course of a dispute that the secret is lifted and becomes public knowledge. Indeed, while a secret may be revealed to a judge in the course of a trial, it still cannot be disclosed to the general public with impunity.

Therefore, if the disloyally obtained document is revealed outside of a trial, it is not protected by article 6 of the ECHR, and the company victim of this breach of business secrecy may bring criminal claims (notably for theft and breach of trust) and tortious claims against the person who revealed the secret on the basis of Articles L. 152 1 et seq. of the French Commercial Code.

In any case, disloyalty did not pay off for the original plaintiff in this case, since the lower courts considered that the document, which had been obtained disloyally, was insufficient to prove acts of unfair competition: company A’s claims in this respect were therefore dismissed.