The draft Trade Secrets Directive is to go to a vote in the European Parliament this week.  Despite recent amendments, it still faces opposition.

When the Trade Secrets Directive was first proposed, there were concerns about the balance it struck between the protection of confidentiality for businesses and the concerns of journalists, whistleblowers and employees.

A compromise draft published in December 2015 aimed to address those concerns.  In particular, Article 4 requires Member States to ensure that any proceedings to enforce trade secrets be dismissed where, amongst other things, use or disclosure of the trade secret was carried out:

• in accordance with the EU Charter rights of freedom and expression and information, including respect for freedom and pluralism of the media; or
• to reveal a misconduct, wrongdoing or illegal activity, provided the respondent acts for the purpose of protecting the general public interest.

To ensure that additional restrictions are not placed on employees, Article 1(2a) specifically states that the Directive should not be understood to restrict employee mobility by limiting use by them of information which is not a trade secret or of experience and skills honestly required in the ordinary course of their employment, or by imposing additional restrictions in their employment contracts.

Ongoing concerns

Nonetheless, German Pirate Party MEP Julia Reda states that the Directive broadens the scope of trade secrets protection in many states whilst requiring whistleblowers and investigative journalists to prove that an exception applies, with little guidance on what the “public interest” constitutes.  Ms Reda expresses concerns that large leaks of raw data such as the Panama Papers would become “even riskier”.  The fact that the draft Directive addresses only civil law remedies means that states could impose stricter requirements on whistleblowers under the criminal law.

A coalition of groups including an association of Spanish lawyers, investigative journalists and organisations opposed to corporate lobbying have expressed similar concerns and call for the European Parliament to vote against the draft Directive.  They point to the fact that case law will be required to define the scope of the exceptions set out in the current draft.

WAB Comment

From an English legal perspective, alarm at the draft Trade Secrets Directive seems overstated.  The draft Directive imposes minimum standards of civil (not criminal) law protection in the form of procedures and remedies. In fact, it is not clear that there will be significant changes to UK law in its implementation: in 2013 the House of Commons European Scrutiny Committee noted that, “the protection of trade secrets under the UK’s common and contract law is consistent with the terms of the proposed draft Directive”.

Those who oppose the draft Directive from the perspective of “pirate politics” and investigative journalism will naturally have a different perspective on the balance of competing interests than businesses.  The draft Directive is based on a recognition of the commercial value of confidentiality to early research and development, innovation and SMEs.

UK law as it has been developed in the courts shows that a fair balance can be struck.  Trade secrets protection in England and Wales consists of contractual and equitable duties of confidentiality which have evolved almost entirely through case law.  Businesses’ interests in their confidential assets are already effectively balanced against other rights and interests: journalist’s sources are protected on rights grounds and employee mobility is defended by the doctrine against restraint of trade.  Implementation of the Directive need not sweep away that balance.

UPDATE: The European Parliament passed the Trade Secrets Directive on 14 April 2016 by 503 votes to 131, with 18 abstentions.