New Trade Secrets Directive expected during 2016
The Trade Secrets Directive was initially proposed by the European Commission in November 2013. It followed two studies published in November 2011 and April 2013 that found a divergence in national laws, some of which inadequately protect businesses and act as a deterrent to cross-border innovation activities.
The agreed text of the Directive was published in December 2015 and a provisional date of 08 March 2016 has been set for the European Parliament to vote on it. Assuming the Council and European Parliament approve, the Directive will be published in the EU Official Journal and come into force 20 days later. Member states will then have two years to implement it.
The object of the Directive is to: "harmonise the existing diverging national laws on the protection against the misappropriation of trade secrets so that companies can exploit and share their trade secrets with privileged business partners across the Internal Market, turning their innovative ideas into growth and jobs."
The Directive seeks to achieve this by setting minimum standards for protection of trade secrets across Europe.
What is a trade secret?
A trade secret is defined in Article 2 of the Directive as information that:
- is secret, ie, not generally known among, or readily accessible to, persons in circles that normally deal with the kind of information in question;
- has commercial value because it is secret; and
- has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.
Article 3 of the Directive gives details of infringing acts including unlawful acquisition, use or disclosure and production, offering or placing on the market of infringing goods.
Article 11 includes common remedies for IP infringements such as:
- injunctive relief preventing the use, production or sale of the trade secret;
- destruction or delivery up of infringing articles; and
- corrective measures including recall of the infringing goods from the market and depriving infringing goods of their infringing quality.
Current UK position
There is currently no concept of a trade secret in the UK. The equivalent is the common law concept of 'confidential information'.
The leading case of Coco v AN Clark (Engineers) established that information is confidential if:
- it has the "necessary quality of confidence";
- it was imparted in circumstances importing an obligation of confidence; and
- there has been unauthorised use of the information to the detriment of the communicating party.
Confidential information therefore appears to be a wider concept than a trade secret under the Directive, especially as there is no requirement for confidential information to have commercial value. The existence of commercial value was considered in Douglas v Hello! in which the majority of the House of Lords concluded that the commercial value of the photographs in question was a contributing factor in establishing the necessary quality of confidence, though not essential.
There will be a number of implications of the new law, particularly for the drafting of non-disclosure agreements and for employment law, particularly in the context of the balance between brand know-how and experience gained on the job via 'honest commercial practices'; the latter is meant to fall outside of the definition of a trade secret whilst know-how may be protected.
Some other definitions of the Directive are unclear; such as who 'controls' a trade secret; could this include a key employee and/or exclusive licensee, as well as the ultimate 'owner' of the information? Whilst it is hoped that these issues, and others, can be clarified before the Directive comes into force, it may be that we will have to wait until the Directive is tested before the courts before these matters are resolved.
Whilst the Directive aims for harmonisation, there will still be a patchwork of national laws across Europe, with differing scopes and levels of enforceability. It has been commented that the current UK position already covers some provisions of the Directive, and so it will be interesting to monitor if and how the UK will implement the Directive in the coming months.
European Commission trade secrets webpage: http://dycip.com/ectradesecrets