Legal Protection of Business Know-How: Trade Secrets, Unfair Competition, and Liability

This article analyzes the legal protection of know-how in the business context, focusing on its nature as an unregistered intangible asset and its vulnerability to unfair competition practices. Based on the Brazilian legal framework—especially the Industrial Property Law, the Civil Code, and contractual principles—the discussion addresses the feasibility of protection against the misuse of technical knowledge, methods, processes, and business strategies. It also examines violations committed by former partners, employees, or competitors, and the legal mechanisms available for preventive and compensatory protection.

The digital economy and technological innovation have placed intangible assets—such as trademarks, reputation, customer base, and know-how—at the core of business strategy. Unlike trademarks and patents, know-how, which encompasses undisclosed technical, operational, and commercial information, does not require registration for its protection, but demands heightened attention regarding its management and legal safeguarding.

The misappropriation of know-how can cause serious and often irreversible damage, particularly when committed by former employees, partners, consultants, or commercial associates, highlighting the need to understand the legal grounds available to protect this intangible asset and to penalize its misuse.

2. Concept and Legal Nature of Know-How

Know-how is defined as a set of practical and confidential knowledge applicable to business activities, which provides a competitive advantage to its holder. It may include:

• Technical formulas and processes

• Production methods

• Marketing and pricing strategies

• Client and supplier databases

• Market data and logistical structures

It is a non-registrable asset protected by confidentiality and the prohibition of unfair competition, unlike patents, which require public registration with the Brazilian Patent and Trademark Office (INPI).

3. Legal Grounds for Know-How Protection

The legal protection of know-how stems from multiple normative sources, including:

3.1 Industrial Property Law (Law No. 9.279/96)

Art. 195, XI – Engaging in unfair competition includes: “disclosing, exploiting, or using, without authorization, the content of confidential information used in industry, commerce, or service provision, [...] to which one had access by virtue of a contract or employment relationship.”

3.2 Civil Code – Civil Liability

Art. 927 – Anyone who, by unlawful act, causes harm to another shall be obliged to repair it.

Art. 187 – An abuse of rights also constitutes an unlawful act when the exercise of a right clearly exceeds the limits imposed by good faith, good customs, or the economic and social purpose of the right.

3.3 Contracts with Specific Confidentiality Clauses

Clauses imposing duties of secrecy, non-misuse, and prohibition of disclosure to third parties, even after the termination of the contractual relationship.

3.4 General Data Protection Law (Law No. 13.709/2018)

When know-how involves customer databases, consumer behavior, or algorithms, it may also fall under the scope of data protection legislation.

4. Common Forms of Know-How Misappropriation

Know-how is typically misused in the following scenarios:

• Former employees or partners starting a competing business using previously acquired knowledge

• Service providers disclosing internal strategies to third parties

• Consultants, suppliers, or distributors improperly using data obtained under confidentiality agréments

• Unauthorized disclosure of information in tenders, technical proposals, or public presentations

Such conduct may be deemed unlawful even in the absence of manifest bad faith if it results in the misuse of information protected by legal or contractual confidentiality.

5. Legal Measures Available in Case of Violation

5.1 Preventive Measures

• Injunctive relief or urgent measures to cease disclosure or unauthorized use

• Search and seizure of documents or digital media containing confidential information

• Extrajudicial notifications reinforcing the confidentiality duty

5.2 Compensatory Measures

• Damages for actual loss and lost profits

• Liquidated damages if provided in the NDA or primary contract

• Public retraction or prohibition of using derived technology

Documentary and technical evidence is essential and may include digital forensic reports, emails, signed contracts, access logs to systems, among others.

6. Relevant Case Law

“The unauthorized use of know-how transferred under a confidentiality clause constitutes unfair competition and gives rise to compensation, regardless of formal industrial property registration.” (STJ, REsp 1.839.078/SP, Justice Ricardo Villas Bôas Cueva, judgment dated 11/10/2020)

“Unfair competition does not require proof of literal copying of documents; it is sufficient to show the use of non-public strategic information obtained through contractual or employment ties.” (TJSP, Civil Appeal 1009821-33.2022.8.26.0100, judgment dated 06/12/2023)

“Even if unregistered, a company’s business methodology and operational model constitute trade secrets and are protected under the Industrial Property Law and the principle of objective good faith.” (TRF3, Civil Appeal 5008374-39.2021.4.03.6100, judgment dated 08/18/2023)

7. Best Practices for Know-How Protection

• Execute customized NDAs with specific clauses and penalties

• Include confidentiality and non-compete clauses in employment and service agréments

• Implement internal access controls to sensitive information

• Formally identify what constitutes “confidential information”

• Document routines, training, and policies that reinforce internal confidentiality practices

• Conduct periodic audits and monitor potential information leakage channels

8. Final Considerations

Know-how is one of the most strategic assets of modern businesses and, despite lacking formal registration, enjoys solid legal protection under Brazilian law. Its effective protection relies on a combination of contractual instruments, internal best practices, and legal mechanisms for both preventive and remedial measures.

A proactive legal approach—focused on information compliance and contractual shielding—is essential to preserve a company’s competitive advantage and ensure that internally developed knowledge does not become an unfair benefit to competitors or former members of the business structure.