Trade secrets: protection and enforcement in Israel

Service page: Commercial contracts lawyer: drafting, review and enforcement.

An employee who left took the customer list. A programmer sent source code to their private Gmail inbox. A sales manager gathered all the pricing data before leaving for a competitor. These are not theoretical scenarios. They happen, and they are usually discovered too late.

What counts as a trade secret in Israel?

The Commercial Torts Law, 5759-1999 defines a trade secret as business information of any kind that is not public knowledge and cannot easily be discovered lawfully by others, whose secrecy gives its owner a business advantage over its competitors, provided that the owner takes reasonable measures to keep it secret (section 5). The three elements cannot be separated: information you did not protect will not be recognized as a secret.

Unlike patents, there is no registration and no fixed term. The protection lasts as long as the secret is kept. Once the information becomes public, the protection ends.

• Unique formulas and production processes
• Customer lists with valuable data
• Business plans and strategies before publication
• Source code and software architecture
• Cost prices and profit margins

What do you need to do for the secret to be protected?

Three conditions must be met together. First, reasonable protective measures: an NDA with employees and service providers, access limited to those who need it, and data security management. Second, economic value: the information must give a real advantage over competitors. Third, secrecy: information you disclosed in a public lecture or published by mistake is no longer a secret.

The Labor Court and the civil courts examine how “reasonable” the protective measures are. The more thorough the measures, the stronger the protection.

• Reasonable protective measures: NDA, limited access
• Real economic value
• Secrecy actually kept
• Confidentiality agreements before disclosure, not after it

How do you keep the secret in practice?

Five steps every business should take. Sign an NDA with every employee, supplier and contractor who is exposed to sensitive information. Define expressly what counts as confidential information: employees cannot “steal” without knowing what is protected. Limit access on a need-to-know basis. Run an orderly offboarding process with every employee who leaves, with a written reminder of the confidentiality duties. Keep a record of who accessed which information and when.

For information that 300 employees can access without any restriction, it is very hard to argue that it is “secret”.

• An NDA before disclosure, not after it
• A clear definition of what counts as confidential
• Limited access (need-to-know)
• An offboarding process for every departing employee
• Ongoing records of access to information

What do you do when a secret is stolen?

As soon as there is a suspicion, act immediately.

A practical checklist

1. Digital forensic analysis: file metadata, access logs and the employee’s cloud storage. This is hard evidence that is difficult to hide. It also matters because of the presumption of use in section 10 of the Law: if the secret came to the defendant’s knowledge or the defendant had access to it, and the information the defendant uses is substantially similar to the secret, the defendant is presumed to have used the secret.
2. A temporary injunction: it can be requested within days, and it stops the use of the secret until the hearing.
3. A civil claim: misappropriation of a trade secret is a tort (section 11), and the plaintiff can ask for an injunction, for compensation, including compensation of up to NIS 100,000 (the amount stated in the Law; the Minister of Justice may change it by order, section 13(c) of the Commercial Torts Law) without proof of damage (section 13), and for the appointment of a receiver to seize evidence (section 16). When there is a reasonable concern that delay will cause serious damage or the disappearance of the assets, the court may give such an order even ex parte and even before the claim is filed. In that case, the hearing in the presence of both parties is held within 7 days, and the order expires if the claim is not filed within 7 days, unless the court set a later date (section 17).

Misappropriating a trade secret may also be a criminal offense under the Computers Law, 5755-1995 (unlawful access to computer material, section 4), and in serious cases you can also go to the police and file a complaint.

• Immediate forensic analysis, before evidence is hidden
• A temporary injunction in court
• A civil claim: compensation and return of profits
• A criminal complaint in serious cases

The law that applies to departing employees

An employee who leaves may take with them general knowledge and skills they acquired, and is not liable for knowledge that has become part of their general professional skills (section 7(a)(1) of the Commercial Torts Law). They may not take specific information: specific customer lists, code, formulas, pricing. The distinction is not always simple, and the Labor Court also weighs the importance of the employee’s livelihood against the employer’s interest.

A non-compete clause is examined in light of freedom of occupation and public policy (section 30 of the Contracts (General Part) Law, 5733-1973), and as a rule it is enforced only when it protects a legitimate interest of the employer, such as a trade secret, and to a reasonable extent. The prohibition on misappropriating a trade secret rests on statutory protection (section 6 of the Commercial Torts Law), even without separate consideration.