Distribution contracts generally contain provisions protecting confidential business information, such as client lists, price lists, marketing and other business plans and strategies.
It used to be that a party affected by a breach of a confidentiality obligation had to sue in tort or breach of contract under the Civil Code with the burden to establish the existence of a trade secret under the rules of evidence and prove damages. Law 75 did not provide a claim for relief. In the distribution context, breach of confidentiality issues may arise when a key employee with access to confidential information leaves the firm to a competitor or to the other contracting party, or when the principal terminates the contract and the distributor uses confidential information obtained during the relationship for its financial benefit (or the other way around).
On June 3, 2011, the Legislature of Puerto Rico enacted a far-reaching law protecting trade secrets and providing substantial remedies for unauthorized violations. The law is patterned after the Uniform Trade Secrets Act.
The elements of a claim under Law 80 are: 1) proof of a “commercial secret” (a defined term meaning information which provides an actual or potential economic benefit, is not public, and whose confidentiality has been maintained by reasonable means); 2) the commercial secret has been misappropriated; and 3) it has caused damages to the owner.
The statute provides preliminary, permanent injunctive relief, and the payment of royalties in extraordinary circumstances. The measure of damages can be substantial; including actual damages and “additional damages” to the extent that the offending party has derived a benefit from the use of the confidential information, or in the alternative, the payment of royalties. The measure of damages includes lost profits, the value it would have cost to develop the information, depreciation, development costs, and market value of the information.
If the violation was intentional or in bad faith, the court has discretion to award three times the amount of actual damages and grant attorney’s fees. The Law supplements any remedies that the parties may have under the contract and other laws. Thus, regardless of any contractual provision, Law 80 provides relief to the owner for damages caused from the misappropriation of commercial secrets.
Law 80 claims will most certainly arise in the labor-employment context and in actions involving a breach of fiduciary duties. But, Law 80 will become relevant in commercial litigation as well. I would expect that a Law 80 trade secret claim will go hand in hand with trademark infringement claims and those under Law 75. Because of its recent enactment, there is no case law so far interpreting its provisions.
