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27-06-2016 » The protection of trade secrets: a European affair

Confronted by an increasing number of thefts of information, misappropriation of know-how, and lack of harmonized regulations, in 2013 the European Commission took up the issue of the protection of trade secrets.

Despite discussions that took place about possible harm to freedom of expression, and the right to investigate and to protect sources of information, which journalists are so cautious about, Directive 2016/943 of Council and Parliament, of June, 8 2016 on protection of undisclosed know how and business information (trade secrets) against their unlawful acquisition, use and disclosure was eventually adopted and published on June 15. It will enter into force on July 5, 2016, and Member states will have two years for implementation.

The Directive defines trade secrets in Chapter 1 (article 2). There are three cumulative conditions:

  • The information must be 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;
  • It must have commercial value because it is secret;
  • And reasonable steps must have been taken by the person lawfully in control of the information to keep it secret.

This definition is the same as that provided in the TRIPS agreement (article 39).

Even though “information”, “commercial value” and “reasonable steps” are not defined in greater detail in the body of the text, the  “whereas” clause 14 in the introduction of the Directive excludes from the definition of trade secrets: “trivial information and the experience and skills gained by employees in the normal course of their employment, and also information which is generally known among, or is readily accessible to persons within the circles that normally deal with the kind of information in question”. On the other hand, according to the same “whereas” clause, trade secret protection should cover know-how, business information and technological information where there is both a legitimate interest in keeping them confidential and a legitimate expectation that such confidentiality will be preserved.

Commercial value can be either actual or potential and such commercial value should be admitted when its unlawful acquisition, use or disclosure is likely to harm the interests of the person lawfully controlling it, in that it undermines that person’s scientific and technical potential, business or financial interests, strategic positions or ability to compete. As a result the Directive covers all kind of information.

However, Chapter 2 of the Directive provides some limits on the protection given by article 3.

The protection does not apply when information is obtained by the following means:

  • When it is an independent discovery or creation;
  • In the case of reverse engineering of a product that is available to the public or lawfully owned;
  • In the case of an exercise of the rights of a workers’ representative to information and consultation in accordance with union and national law or practice;
  • When it concerns any other practice which under the circumstances is in conformity with honest commercial practices.

Even if the information is acquired by other means, action is not possible when it concerns:

  • the right to freedom of expression and information;
  • the revelation of a misconduct, wrongdoing or illegal activity when the acquisition, use or disclosure of the trade secret was necessary for such revelation and when it was done in the public interest;
  • a disclosure by workers to their representatives as part of the legitimate exercise of their representative function ;
  • a non-contractual obligation ;
  • the protection of a legitimate interest.

(article 5)

Articles 4.2, 4.3 and 4.4 list the different acts of unlawful acquisition, use and disclosure of trade secrets:

  • the fact of obtaining this information without the consent of the holder, which could be defined by an unauthorized access, a non-compliance (or incitement not to comply) with an obligation of confidentiality or secrecy, a conduct contrary to honest practices, or a related conduct;
  • the use or disclosure without the consent of the holder (by a person who obtained it illegally);
  • the breach of a confidentiality agreement.

The use of a trade secret is also unlawful if, at the time of the use or disclosure, the person knew or should have known that the said secret was obtained from another person who unlawfully used or disclosed it.

As a result, intentional and deliberate production, supply and placing on the market of products incorporating the trade secret and the import/export and storage of such products are also illegal.

There are no criminal measures provided by Chapter 3 of the Directive but there are civil remedies (preliminary injunction, seizure and recall of products, final orders, publication of the decision).

The Directive specifies the approach to use to assess the damages that can be requested, by considering negative economic consequences (loss of profit and non-pecuniary damage), profits unfairly made by the infringer, possibility of a lump sum (amount of royalties) and possible limitation of liability for employees.

Protection of trade secrets during legal proceedings is also provided for through some innovative measures:

  • restricted access to any document containing trade secrets or alleged trade secrets;
  • restricted access to hearings;
  • non-confidential version of legal decisions, in which the passages containing trade secrets have been removed or redacted.

It is to be noted that even though trade secrets are not considered to be IP rights, the measures of protection provided by the Directive are very similar to those existing in the other fields of IP.

However, many grey areas remain and we now have to wait and see how the Directive will be implemented by the Member states and the jurisprudence of the EUCJ for assessing whether or not the measures that have been adopted truly give to European companies the efficient tools that the European Commission wanted to provide.

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