Knowledge
Unfair competition and acts of unfair competition
One of our recent meetings in the TechMine Coffee series concerned what unfair competition and an act of unfair competition are. An important topic, and sometimes a slightly complicated one. If we do not take into account the many external factors affecting our business, we may be very surprised when the competition, especially unfair competition, makes a move.
Our invited expert was Dr Przemyslaw Magaczewski, partner at the law firm KTW.Legal , who specializes in competition law and in particular in matters of acts of unfair competition. He pointed out that the company’s interests must be exceptionally well secured so that, in the course of dynamic growth, you do not step on the mine of neglecting formal issues and learn the hard way, on your own company, what unfair competition is.
During the discussion we considered whether an organization unprotected against the actions of competitors has a chance to survive. Is intellectual property really so poorly protected in many entities? Does awareness of what unfair competition is exist in the minds of entrepreneurs? We also learned how to protect our ideas, patents, carefully developed methods and secrets. How to protect yourself and responsibly build a team that will be aware of the consequences of disclosing a trade secret. Our expert advised us how to prepare documents (contracts, regulations, notes) which in the event of a court dispute will help us protect our resources and demonstrate what financial value of our company has been infringed. But let us start from the beginning.
Unfair competition is an issue that can be considered in two ways:
1. As the protection of the company’s assets, thanks to which we are able to build its value and increase its competitive advantage on the market.
2. As protection against typical competitive actions that come from outside (traditional market competition) and from inside our company (employees and associates).
What are a company’s assets and how to secure them?
Behind this general phrase lie such concepts as:
Copyright
You need to take care of proper contracts with contractors and subcontractors, and the transfer of economic copyright requires written form. The provisions of the contract must be clear and precise. A transfer of copyright cannot be presumed. The transfer of copyright must concern specific fields of exploitation (e.g. distribution, use, reproduction). And what about the situation when we employ an employee who creates certain works for us as part of their job? As a rule, the employer acquires the works created by employees as a result of performing duties under the employment relationship. It acquires them upon acceptance of the work, but within the limits resulting from the purpose of the employment contract and the concordant intention of the parties. That is why the employee’s tasks should be well defined, or the issues of the transfer of economic copyright additionally specified. This is particularly important in the IT, architecture and creative industries.
Trade secrets
For a given piece of information to be treated as a trade secret, the entrepreneur must take appropriate steps to protect it. Here, if only for later evidentiary purposes, it is necessary to introduce appropriate contracts, regulations, procedures, but also appropriate physical protection of the information.
Know-how
It may include a specific way of operating, procedures, special knowledge concerning a given industry. To be able to protect it easily, and then be able to prove that it really is some special information that was protected, it is worth writing down such procedures and rules of conduct and referring to them e.g. in non-disclosure agreements.
Name, trademark, utility model, industrial design
Properly securing these elements affects the company’s security, while allowing a competitive advantage to be developed. Applications for protection can be filed online.
How, in turn, to protect yourself against unfair actions of competitors (external and internal)?
We all know very well that we do not operate in a vacuum, and our actions are closely observed by the competition. In our opinion this is a very healthy relationship; however, just in case, it is worth protecting yourself against unfair practice by signing:
Non-compete agreements with employees
To draw possible consequences against an employee who, during the employment relationship, conducts activities competitive to us, we must first formulate this in writing by signing a non-compete agreement with them. In the event of a dispute, without this type of document it will be very hard for us to assert our rights by demonstrating that we were exposed to losses. It should be remembered that if the employee unintentionally caused damage as a result of breaching the non-compete, the amount of compensation cannot exceed three months’ salary of the employee, whereas if the damage was caused intentionally, the employee bears full liability for damages. Termination of the employment relationship causes it to expire.
A ban on competitive activity after the end of the employment relationship: this concerns employees with access to particularly important information, the disclosure of which could expose the employer to damage. The duration of the ban is important here (it is assumed to be a period of 3 years, which is related to the protection of secrets, although there are no restrictions in the regulations). This agreement must provide for compensation for the former employee refraining from competitive activity, and the compensation cannot be lower than 25% of the basis of the previous remuneration.
Non-compete agreements with non-employees (contractors, subcontractors)
A principal deciding to conclude a non-compete clause with a contractor does so for fear that after the cooperation ends, the contractor will use the knowledge and contacts gathered from the previous assignment. Usually the damage consists in the loss of benefits that the other party could have achieved if the contractor had not undertaken competitive activity.
Protection against illegal software and the consequences of using it
A report by the Business Software Alliance (BSA), an association of software producers, says that 46% of the software installed on computers in Poland does not have the required licenses. Art. 120 of the Polish Labour Code clearly states that if an employee, while performing their duties, causes damage to a third party, only the employer is obliged to repair the damage. And towards the employer who has repaired the damage caused to a third party, it is the employee who bears liability.
Let us remember, however, that unfavorable provisions cannot be used in work regulations and other additional agreements in which we would like to hold the employee liable for damage caused, because the principle applies that provisions of contracts that are less favorable to employees than the provisions of the Labour Code are invalid. Besides, this is statutory liability towards third parties. One can only make sure that employees are more aware and increase their scope of responsibility. It is worth using appropriate provisions in contracts with employees or regulating the use of software in the company (also physically limiting the possibility of installing software on company computers).
Protection in case we are affected by unfair competition
An act of unfair competition is an action contrary to the law or to good practice, if it threatens or infringes the interest of another entrepreneur or client. Unfair competition is in particular acts such as:
– a misleading designation of a company
– a false or fraudulent designation of the geographical origin of goods or services
– a misleading designation of goods or services
– infringement of a trade secret
– inducing to terminate or not perform a contract
– imitation of products
– defamation or unfair praise
– obstructing access to the market
In the case of each of these actions, the entrepreneur can take legal steps to protect their interests. For the proceedings to carry a greater chance of winning, it is worth properly taking care of protecting your interests before such acts occur (e.g. appropriate protection of trade secrets, proper protection of the company name, e.g. by registering a trademark, proper contracts and relationships with contractors and clients).
Unfair competition is therefore not only action contrary to good practice, but also action contrary to the law.
