Hungary: new law concerning the protection of know-how – implementation of the know-how directive

Introduction
The EU Directive on the regulation of confidential know-how and business information (know-how directive) was implemented in Hungary in July 2018. The corresponding law no. LIV. 2018 on the protection of business secrecy came into effect on 31/07/2018.

Background
The decision of the EU Directive was necessary due to the growing risk of unlawful acquisition of foreign know-how. This can be done, for example, by: unauthorised copying or industrial espionage. The EU Member States had previously established various protection levels, which led to a splitting of the internal market with regard to know-how and trade secrets. It was feared that the innovation companies within the EU are less economically active on a cross-border level as long as there is no uniform protection provided by the Member States. The goal of the directive is thus to ensure the smooth functioning of the internal market by creating sufficient and comparable legal protection in cases of illegal acquisition or illegal use or disclosure of a business secret and know-how.

Background of the hungarian regulation
Prior to the entry into force of the law implementing the directive, know-how and business secrets were regulated in the "Personal law" section of the Civil Code, and know-how was accordingly protected as a personality right. According to Hungarian law, this cannot be transferred, but the know-how for legal transactions was treated as a transferable asset; In addition, permission to use the know-how could be granted. Due to the contradiction between the law and practice, know-how could not continue to be regulated as a personality right in the Civil Code. Therefore, the Directive was implemented in Hungary by issuing a new law.

The new regulations
The new law contains the definition of know-how and business secrets established by the EU Directive, as well as the non-protected cases and the new sanctions system. This resolves the aforementioned contradiction between the protection of know-how and personality rights. Know-how and business secrets are now transferable. In addition, legislators have established new regulations regarding the procedures to be followed for civil legal disputes regarding know-how and business secrets. In a potential procedure, the disclosure of know-how or business secrets cannot be avoided by legal provisions, but the disclosure of know-how and business secrets can also not be ruled out in a judicial or administrative procedure.

Author: Laura Simon