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New EU Directive on the Protection of Trade Secrets to Come

New EU Directive on the Protection of Trade Secrets to Come

White & Case Technology Newsflash

Introduction

On December 15, 2015, the European Commission, the Council and the European Parliament (EP) reached a full compromise on a new EU directive on the protection of trade secrets ("Directive").[1] The text of the Directive in this version will be introduced henceforth. Even though the text of the Directive has essentiallybeen agreed upon, it has yet to be officially adopted by the EP. Once the Directive has been adopted, the Member States are obliged to implement their provisions into their respective national laws within two years.  

Aim of the Directive

The Directive is aimed at harmonizing the internal market and removing differing national levels of protection for trade secrets.

The differences in national law regarding definition, scope and remedies for protecting trade secrets are vast.[2] Moreover, there are currently different national rules in respect to the measures a trade secret holder may seek against unlawful conduct.[3] These trade obstacles need to be removed. Innovative activities can be protected by a number of means, such as patents, design right and copy rights, but also trade secrets, if the know-how or business information should remain undisclosed. Even though trade secrets are the most used form of protecting intellectual creation and innovative know-how in business, they are least protected on the EU level.

The Directive sets a minimum standard and it is possible for the Member States to enact stricter rules, as long as they are compliant with the requirements of the Directive (Art. 1 (1)). 

Main Provisions of the Directive

The main provisions of the Directive are as follows:

  • Art. 2: The Directive provides for a harmonized definition by which a trade secret is determined as information that:
    "(a) is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
    (b) has commercial value because it is secret;
    (c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret."[4]
  • Art. 2a and 3: The Directive differentiates between lawful and unlawful acquisition, use and disclosure. Independent discovery or creation of the same information, as well as reverse engineering, are accepted and remain lawful. Unfair competition law is not affected by the Directive but the Commission has to be aware of the problems in this area and consider legislating if necessary.
  • Art. 4 lit. a) and lit. b): Two mentionable exceptions to unlawful acts are the protection of the source for journalists, as well as whistleblowers who reveal misconduct or illegal activity to protect the public interest.
  • Art. 8: The main aspect of the Directive is the implementation of measures, procedures and remedies, as well as sanctions in national civil law for unlawful acquisition, use and disclosure of trade secrets. Hence, it must be possible for the legitimate trade secret holder to take civil actions against unlawful conduct. This entails that the proceeding must not jeopardize the trade secret. Litigation would otherwise be redundant if the trade secret were to become public. Thus, Member States shall, following Art. 8, implement measures to preserve the confidentiality of the trade secret in legal proceedings. This can include measures to restrict access to documents and hearings, as well as publishing the non-confidential parts of a decision only.
  • Art. 9 and 10: Other important aspects are provisional and precautionary measures which shall be available for the trade secret holder. These can be provisional cassation or prohibition of use or disclosure of the secret; prohibition to produce, offer, place on the market, use, import, export or store infringing goods; and the seizure or delivery of the suspected infringing goods to avoid the entry or circulation of the said goods within the market. When requesting such measures, the authority must, under national law, be able to require evidence from the applicant to ensure that the trade secret exists and that the measure can be revoked or ceased under certain circumstances.
  • Art. 11: Once a judicial decision on the basis of the merits of the case finds an unlawful acquisition, use or disclosure, effective measures against the infringer shall be in place. The judicial authority may order one or more of the enlisted measures, which are partly similar to the ones available for provisional measures, but partly go beyond; such as adoption of corrective measures in respect of the infringing good, as well as destruction of all or parts of the documents, objects, material, substance or electronic files dealing with the trade secret.
  • Art. 13: The competent authority may also order the infringer to pay damages to the trade secret holder taking the negative economic consequences and moral prejudice into account.

It remains to be seen how the Member States implement the Directive and in which areas they legislate beyond the minimum standards set out herein. Moreover, it is to be expected that the CJEU will have to interpret and substantiate certain terms, especially in respect to the generic wording of the definition for trade secrets. Over all, the Directive is a useful and important tool to foster and secure innovative efforts across borders of the Member States, and should ultimately benefit the internal market as a whole. 

 

[1] - See 2013/0402(COD), Brussels December 18, 2015 available at http://data.consilium.europa.eu/doc/document/ST-15382-2015-REV-1/en/pdf  (references to provisions relate to this version; henceforth "Final Compromise"); based on the Proposal for a Directive of the European Parliament and of the Council on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure, COM(2013)0813 final.
[2] - The provisions in TRIPS-Agreement on the protection of trade secrets set useful international standards but do not remove the different standards among the Member States which can only be achieved by a Union-wide solution.   
[3] - E.g., rules differ in respect of the availability of cease and desist orders, possibility to request destruction of goods, return or destruction of documents, files or other materials, as well as the calculation of damages see recital 5 f. Final Compromise.
[4] - This definition is identical to the wording in Art. 39(2) TRIPS Agreement and is also similar to the definition used in the US Uniform Trade Secrets Act.

 

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