Business secret and documents given to the franchisee

A document containing advice to enable franchisees to improve the quality of their management and the profitability of their point of sale is protected under business secrecy.

A franchisee of the Speed Rabbit Pizza network has sued Domino’s Pizza on the basis of unfair competition due to Domino’s Pizza granting its franchisee excessive payment terms. As a counterclaim, Domino’s Pizza requested that this franchisee be ordered to pay damages due to the obtaining and production during the proceedings of documents covered by business secrecy.

The piece in question was a point of sale evaluation guide, containing many tips for franchisees in the Domino’s Pizza network to improve the quality of their management and the profitability of their point of sale. This guide had been addressed only to members of the network and it mentioned, at the bottom of each page, its strictly confidential nature and the prohibition of any communication outside the network.

The question arose as to:

• if this document was indeed covered by business secrecy,
• and whether it was possible to produce it in the case at hand.

Article L330-1 of the Commercial Code provides:

“Any information meeting the following criteria is protected under trade secrecy :

1. It is not, in itself or in the precise configuration and arrangement of its components, generally known or readily accessible to persons familiar with this type of information by virtue of their field of activity;
2. It has commercial value, actual or potential, due to its secret nature;
3. It is subject to reasonable protective measures by its legitimate holder, taking into account the circumstances, to keep it secret. ”

The Court of Cassation approved the Court of Appeal, which had considered that the document in question was a vehicle for transmitting the franchisor’s distinctive know-how: the information it contained had actual or potential commercial value. This information was not generally known or easily accessible in the pizza manufacturing and takeaway industry.

The part in question was therefore well protected by the Business secrets, and plaintiffs knew, or should have known, that this document had been given to them without the consent of Domino’s Pizza and in breach of an obligation of confidentiality to which the companies belonging to its network were bound.

Regarding the possibility of producing said document in the context of the trial, the Court of Cassation recalls the provisions of Articles L. 151-8, 3°, of the Commercial Code and Article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms:

• L. 151-8, 3°, of the Commercial Code provides that in proceedings relating to an infringement of business secrecy, secrecy is not enforceable when its acquisition, use or disclosure has occurred for the protection of a legitimate interest recognised by European Union law or national law.
• Article 6§1 of the ECHR provides that the right to evidence may justify the production of elements covered by business secrecy, provided that such production is indispensable for its exercise and that the infringement is strictly proportionate to the aim pursued.

In the present case, the Court of Appeal had considered that it had not been demonstrated that the production of this document was justified by the protection of a legitimate interest recognised by European Union law or national law.

The Court of Cassation criticizes the Court of Appeal for not having investigated itself whether the document produced was essential to prove the alleged facts of Unfair competition and if the infringement caused by obtaining or producing it in the Business secrets of Domino’s Pizza was not strictly proportionate to the objective pursued.

Court of Cassation, Commercial, Financial and Economic Chamber, 5 June 2024, No. 23-10.954