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EU Trade Secrets Directive: compromise text agreed
The agreed text of the Trade Secrets Directive brings minimum standards for trade secrets protection in all Member States one step closer. It remains to be seen how much national law will change in its implementation.
On 15 December 2015, the EU Presidency announced that a full compromise text had been achieved of the draft 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 (the “draft Directive”). The draft Directive is likely to take effect in 2016, with Member States then given two years to implement it into national law.
The intended purpose of the draft Directive is to harmonise protection of trade secrets throughout the EU. The protection of trade secrets is required by the Trade-Related Aspects of Intellectual Property Rights Agreement agreed by World Trade Organisation members in 1994 (“TRIPS”). However, at present, there is inconsistency between Member States on the legal definition of trade secrets and the civil law remedies available to holders in the event of their misuse.
The recitals to the draft Directive describe the importance of trade secrets to small and medium-sized enterprises, innovation and competitiveness. Harmonisation across member states is intended to promote cross-border research and development, manufacturing and trade by removing risks associated with an inconsistent approach to trade secrets protection.
The draft Directive defines a “trade secret” in the same terms as TRIPS, namely that it:
(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; and
(c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.
The draft Directive requires Member states, within 24 months of its adoption, to bring into force laws regulations and administrative provisions to:
- Make acquisition, use or disclosure of a trade secret without consent unlawful;
- Provide measures, procedures and remedies to ensure civil redress against unlawful acquisition, use and disclosure of trade secrets, which are: fair and equitable; not unnecessarily complicated or costly or entail unreasonable time limits or unwarranted delays; and effective and dissuasive. Such measures must be proportionate and subject to limitation periods of not more than six years.
- Provide procedures to ensure the protection of trade secrets in legal proceedings in which they are the subject, which might include restricting access to documents or hearings.
- Provide for provisional judicial measures which amount to interim injunctions.
- Provide for remedies following a final judicial decision including damages, cessation of use, prohibitions on producing, offering, placing on the market, importing of infringing goods, recall, delivery up and destruction.
- Provide that pecuniary compensation up to the amount of an equivalent royalty/fee may be payable to the injured party as an alternative remedy in circumstances where the person concerned neither knew nor had reason to believe that the trade secret was disclosed unlawfully.
The draft Directive makes it clear that the harmonisation of protection should not affect the right to freedom of expression and information in Article 11 of the EU Charter or restrict whistleblowing activity. In addition, in contrast to the monopoly nature of patent rights, it emphasises the non-exclusive nature of trade secrets protection, noting the continued lawfulness of independent discovery or reverse engineering of a lawfully acquired product.
Trade secrets can be seen as the poor cousin of the intellectual property family, despite their crucial importance for research and development, and are offered varying degrees of protection in different jurisdictions. In the UK, trade secrets are protected by duties of confidence which can arise either in contract or in equity, but there are no criminal offences specifically dealing with the issue, unlike in most other Member States.
The compromise text of the draft Directive reflects the Council’s view that the requirement for harmonisation should be a minimum, with Member States able to apply stricter measures. As such, there is no requirement for a criminal law on trade secrets and indeed it would seem that the United Kingdom’s existing laws and procedures should not require fundamental changes in order to implement the draft Directive.
Disclaimer: This article is produced for and on behalf of White & Black Limited, which is a limited liability company registered in England and Wales with registered number 06436665. It is authorised and regulated by the Solicitors Regulation Authority. The contents of this article should be viewed as opinion and general guidance, and should not be treated as legal advice.