Following a legislative process dating back to November 2013, culminating in its formal adoption by the European Council on 27 May 2016, Directive (EU) 2016/943, more commonly known as the Trade Secrets Directive (the Directive), was published in the Official Journal of the European Union on 15 June 2016.
WHAT IS A TRADE SECRET?
The Directive defines a trade secret as information which is:
- is valuable because of its secrecy; and
- has been subject to reasonable steps by the person in control of the information to keep it secret.
The definition of a trade secret in the UK is currently governed by common law. The new EU definition of what constitutes a trade secret appears to be somewhat wider than the English definition, which business leaders will feel offers them greater protection.
WHAT IS THE AIM OF THE TRADE SECRETS DIRECTIVE?
Industrial espionage is a major concern for corporate entities in Europe, as countless companies operate across multiple national borders. Other jurisdictions have adopted stringent penalties for breaching laws protecting trade secrets, and the EU has sought to follow the prevailing global trend and seek greater protection for businesses within its member states.
One of the aims of the Directive is to ensure equivalency of protection across the European Union. Although there are currently several ways of protecting such commercially sensitive information, they tend to vary widely between member states, a situation which is increasingly unworkable in a large, open market such as the EU.
It had been feared that the previous discrepancies between member states were acting as an impediment to truly free cross-border trade, as companies were reluctant to expose themselves to the risk of allowing their trade secrets to be known in a jurisdiction with a lower standard of protection of trade secrets.
It is hoped that the Directive will instil confidence in the level of protection available in every EU member state, and encourage further cross-border business innovation.
The Directive will offer a right to damages for those whose trade secrets have been misused, which should act as a deterrent to the improper use of such sensitive commercial information.
STANDARD OF PROTECTION
The Directive introduces what is known as a “minimum harmonised standard” across the European Union. The intention is to establish a certain level of protection which will be present in every member state, whilst the legislation leaves the option open for member states to impose even stricter rules if they wish.
WHEN WILL THE DIRECTIVE COME INTO FORCE?
The Trade Secrets Directive will come into force twenty days after its publication in the Official Journal, so on 5 July 2016. EU member states will then have until 9 June 2018 to implement equivalent legislation into their domestic law.
If the UK remains within the European Union following the referendum, it will have to adopt national legislation on the timeline noted above. Even if it leaves, however, the UK will likely come under significant pressure to implement legislation in accordance with the harmonised EU standard.