For many businesses, some of their most valuable assets are not registered with the Companies Registration Office or the Intellectual Property Office. A product formula, customer database, proprietary algorithm, pricing model, financial information, business strategy, manufacturing process, or a particular method of conducting business may constitute a significant source of competitive advantage.
Much of this information cannot, or should not, be publicly disclosed. This is where trade secret protection becomes particularly important.
Unlike patents, trademarks, and industrial designs, trade secret protection does not depend on registration. Instead, protection is based primarily on the confidential nature of the information and the adoption of reasonable measures to preserve that confidentiality.
In Iran, the Industrial Property Protection Law of 2024 introduced a more comprehensive legal framework for trade secrets. Articles 122 to 128 establish rules concerning the definition and protection of trade secrets, infringement, reverse engineering, transfer of confidential information, obligations of competent authorities, and confidentiality in judicial proceedings.
What Qualifies as a Trade Secret under Iranian Law?
Article 122 of the Industrial Property Protection Law defines a trade secret as any type of business information that:
- has actual or potential independent economic value or competitive value;
- is generally unknown;
- cannot be easily obtained or ascertained through lawful means; and
- is subject to reasonable measures taken by its lawful holder to maintain its confidentiality.
Therefore, the mere fact that information is treated as confidential does not automatically make it a legally protected trade secret. The statutory requirements must be satisfied.
For example, a company may maintain a customer list as confidential. However, simply labeling the list “confidential” does not, by itself, establish trade secret protection. The company should be able to demonstrate that the information has economic or competitive value, is not generally available to the public, cannot be readily obtained through lawful means, and is subject to reasonable confidentiality measures.
This last requirement is particularly important in practice. A company seeking to enforce its rights should be able to demonstrate the steps it has taken to protect the confidentiality of its information.
What Types of Information Can Be Protected as Trade Secrets?
The Iranian Industrial Property Protection Law does not establish an exhaustive list of trade secrets. Instead, Article 122 identifies various categories of information that may qualify for protection, including:
- engineering and technical information;
- economic and financial information;
- scientific and commercial information;
- patterns and drawings;
- compilations and programs;
- formulas;
- designs and methods;
- tools and techniques;
- manufacturing processes;
- software;
- identifiers;
- customer lists;
- business methods;
- manufacturing secrets;
- unregistered inventions; and
- unregistered industrial designs.
Accordingly, the scope of trade secret protection can extend across different areas of a business.
For instance, a pharmaceutical company may possess a proprietary formula or manufacturing process that it has chosen to keep confidential rather than disclose through a patent application. Likewise, a technology company may protect a proprietary algorithm, source code, or software architecture as confidential business information.
The key consideration is not the particular form of the information, but whether it satisfies the statutory requirements for trade secret protection.
Trade Secret or Patent: Which Is the Better Form of Protection?
One of the most important strategic questions for businesses is whether valuable technical information should be patented or maintained as a trade secret.
Under the patent system, the applicant generally obtains exclusive rights in exchange for disclosing the invention in accordance with the requirements of patent law. In Iran, patent registration forms the basis for exercising the exclusive rights arising from an invention under the Industrial Property Protection Law.
Trade secret protection operates differently. The underlying principle is that the information must remain confidential. Article 125 provides that protection continues for as long as the information remains undisclosed.
This distinction can be commercially significant. While patent protection is subject to a statutory term, trade secret protection may continue for an indefinite period, provided that the information remains confidential and the legal requirements for protection continue to be satisfied.
The choice between patent protection and trade secret protection should therefore be assessed on a case-by-case basis. Relevant considerations may include:
- the nature of the information;
- whether the information can be reverse-engineered;
- its economic and competitive value;
- the likelihood of unauthorized disclosure;
- the ability of the business to maintain confidentiality; and
- the company’s long-term commercial objectives.
Does a Trade Secret Need to Be Registered in Iran?
No. A fundamental characteristic of trade secrets is that protection is not dependent on registration with the intellectual property authorities.
This distinguishes trade secrets from registered intellectual property rights such as patents, trademarks, and industrial designs.
However, the absence of a registration requirement does not mean that businesses can simply designate any information as a trade secret without taking protective measures.
Article 122 expressly requires the lawful holder to have adopted reasonable measures to maintain confidentiality. Consequently, a company’s internal confidentiality policies and security measures may become highly relevant when establishing the existence of a trade secret or proving its unlawful acquisition or disclosure.
How Can Companies Protect Trade Secrets in Iran?
From a legal and risk-management perspective, businesses should establish a structured system for identifying, protecting, and managing confidential information.
1. Identify and Classify Confidential Information
The first step is to identify information that has economic or competitive value.
Depending on the nature of the business, this may include:
- customer lists and databases;
- pricing information;
- commercial contracts;
- financial information;
- formulas and specifications;
- manufacturing processes;
- research and development information;
- proprietary software, source code, and algorithms;
- supplier information; and
- business plans and commercial strategies.
Once identified, confidential information should be classified according to its level of sensitivity and the potential consequences of unauthorized disclosure.
2. Use Non-Disclosure Agreements
Non-Disclosure Agreements (NDAs) are among the principal contractual mechanisms for protecting confidential business information.
Confidentiality obligations may be incorporated into:
- employment agreements;
- consultancy agreements;
- contracting agreements;
- joint venture agreements;
- technology transfer agreements;
- licensing agreements; and
- other commercial contracts.
An effective confidentiality provision should clearly define the confidential information, establish permitted uses, identify authorized recipients, regulate onward disclosure, and specify the duration and scope of the confidentiality obligation.
An NDA should therefore be part of a broader confidentiality framework rather than treated as a standalone formality.
3. Apply the Need-to-Know Principle
Access to confidential information should generally be restricted to employees, managers, consultants, and other persons who require such information for legitimate business purposes.
The need-to-know principle can reduce the risk of unauthorized disclosure and help demonstrate that the company has taken reasonable measures to preserve confidentiality.
Businesses may also consider maintaining access logs, implementing role-based access controls, restricting electronic access, and controlling the transfer and copying of sensitive files.
4. Mark Confidential Information
Sensitive documents and electronic files may be marked with designations such as:
- “Confidential”;
- “Commercially Confidential”; or
- “For Internal Use Only.”
Such markings can help demonstrate that the company identified the information as confidential and took steps to protect it.
However, labeling information as confidential is not, by itself, sufficient to establish trade secret protection. It should form part of a broader set of reasonable confidentiality measures.
What Constitutes Trade Secret Infringement under Iranian Law?
Article 123 of the Industrial Property Protection Law provides that obtaining or disclosing trade secrets without the authorization of the owner constitutes an infringement of trade secrets.
Trade secret infringement may therefore take different forms.
For example, if an employee provides a company’s confidential customer database to a competitor without authorization, or if a person unlawfully obtains confidential business information and subsequently uses or discloses it, the conduct may fall within the statutory provisions governing trade secret infringement, depending on the circumstances.
Importantly, the Iranian legislation does not address disclosure alone. Unauthorized acquisition of confidential information may itself constitute an infringement.
Is Reverse Engineering a Trade Secret Infringement in Iran?
Not necessarily. Article 124 expressly excludes certain forms of information acquisition from the scope of trade secret infringement, including:
- obtaining information independently and without infringing another person’s trade secret; and
- obtaining information through reverse engineering.
The legislation therefore distinguishes between the unauthorized acquisition of confidential information and the independent discovery or lawful acquisition of information.
This distinction is commercially important. Trade secret protection does not create an absolute monopoly over the underlying information.
Where a competitor independently develops or lawfully obtains the same information without accessing the protected trade secret, trade secret protection will not, in principle, prevent the competitor from using that independently obtained information.
Can Trade Secrets Be Transferred to Another Party?
Yes. A trade secret can constitute a commercially transferable intangible asset.
Under Article 126 of the Industrial Property Protection Law, the right to exploit a trade secret is vested exclusively in its owner. The owner, or a person authorized by the owner, may transfer the trade secret to another party and enter into an agreement with the transferee containing an undertaking not to disclose the information.
This provision may be particularly relevant to:
- technology transfer transactions;
- franchising arrangements;
- joint ventures;
- contract manufacturing;
- licensing transactions; and
- other commercial collaborations.
When confidential information is transferred, the recipient should be clearly informed of its confidential and commercial nature. Appropriate contractual restrictions should also be established to regulate the recipient’s use, disclosure, and onward transfer of the information.
How Are Trade Secrets Protected When Disclosed to Government Authorities?
In certain circumstances, businesses may be required to submit confidential technical, commercial, or manufacturing information to competent authorities in connection with regulatory approvals, testing, or other statutory procedures.
Article 127 requires competent authorities to protect trade secrets obtained from individuals or entities for purposes such as testing or granting regulatory approvals.
Where such information is unlawfully disclosed, liability for damages and, where applicable, criminal sanctions may arise against the person responsible for the disclosure.
This protection is particularly relevant to companies that must submit commercially sensitive information as part of regulatory or licensing procedures in Iran.
Are Trade Secrets Protected During Court Proceedings?
One of the principal concerns for trade secret owners is the possibility that enforcing their rights may require them to disclose the very information they are seeking to protect.
Article 127 addresses this concern by providing for confidential treatment of judicial proceedings involving trade secrets.
Where the subject matter of the proceedings is a trade secret, or where a party must disclose a trade secret to establish or defend a claim, the proceedings are conducted in camera.
This mechanism is significant because effective enforcement of trade secret rights should not result in the unnecessary public disclosure of the protected information.
What Are the Legal Remedies for Trade Secret Infringement in Iran?
The Industrial Property Protection Law of 2024 (1403) provides not only civil and contractual protection but also criminal sanctions for certain forms of trade secret infringement.
Under Paragraph 3 of Article 131, obtaining or disclosing another person’s trade secrets without their consent, or in violation of Articles 123 and 126 of the Law, constitutes a criminal offense.
In addition to compensation for damages and the confiscation of property and proceeds derived from the offense, the offender may be subject to:
- a fifth-degree fine; or
- a fine equivalent to twice the damages incurred,
whichever is greater.
Accordingly, depending on the circumstances, unlawful acquisition or disclosure of trade secrets may give rise to both civil and criminal consequences under Iranian law.
How Long Does Trade Secret Protection Last in Iran?
Trade secret protection differs from many other intellectual property rights because it is not subject to a fixed statutory protection period in the same manner as patents or certain other registered rights.
Article 125 provides that the protection of trade secrets continues for as long as the relevant information remains undisclosed.
Accordingly, a trade secret may retain its legal and economic value for an extended period, potentially indefinitely, without registration, provided that the information continues to satisfy the statutory requirements for protection and the confidentiality of the information is maintained.
Key Takeaways for Businesses Operating in Iran
Trade secrets can represent a significant component of a company’s intangible asset portfolio and competitive advantage. Under Iranian law, their protection is fundamentally based on confidentiality rather than registration.
Businesses seeking to protect confidential information should therefore focus on four principal areas:
- Identify information that has economic or competitive value.
- Classify and restrict access to sensitive information.
- Contractually protect confidential information through appropriate NDAs and confidentiality clauses.
- Implement reasonable and ongoing security measures to preserve confidentiality.
A company should be able to demonstrate not only that particular information was commercially valuable and not publicly available, but also that reasonable measures were actually taken to preserve its confidentiality.
For businesses operating in or entering the Iranian market, trade secret protection should therefore form part of a broader intellectual property and information-management strategy. Proper identification of confidential assets, carefully drafted contractual protections, internal confidentiality policies, access-control mechanisms, and appropriate procedures for dealing with employees, contractors, business partners, and government authorities can all contribute to preserving the legal protection available under Iranian law.
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