The European Council today formally adopted the EU Directive on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (the “Directive”).

Background

The Directive seeks to streamline and harmonise the protection of trade secrets and innovative ideas within the EU, which until now have been subject to some uncertainty. This is part of a wider EU Commission strategy to protect investments in the knowledge base, reduce costly fragmentation within the EU and make Europe a more rewarding place for innovation. The Directive is also intended to have a deterrent effect against the illegal disclosure of trade secrets, without undermining fundamental rights and freedoms or the public interest, such as public safety, consumer protection, public health, environmental protection and mobility of workers.

Discussions in relation to what would become the Directive initially commenced in 2012, with the text of the Directive being agreed after a lengthy legislative process. The EU Parliament finally adopted the Directive on 14 April 2016.

Changes under the Directive

Pursuant to the Directive, Member States will have to provide certain minimum standards for trade secret protection. Some key provisions to be introduced under the Directive include the following:

  1. A standard definition for "trade secret" will be introduced, which must contain the following three elements:
    • the information must be “secret”, i.e. not generally known or readily accessible;
    • the information must have commercial value because of its secrecy/confidentiality; and
    • the trade secret holder should have taken reasonable steps to keep the information a secret;
  2. Certain remedies will be available in the event of a misuse or misappropriation of trade secrets (e.g. injunctive relief, damages and/or seizure of goods); and
  3. Certain measures may be taken by the courts to prevent the disclosure of trade secrets during legal proceedings (e.g. restricted access to documents containing trade secrets and/or hearings where trade secrets may be disclosed, together with their associated transcripts).

Under the Directive, unlawful conduct in respect of trade secrets will depend on whether a person knew or should have known or was on notice that use or disclosure of the trade secret was unlawful. As such, it will be important for those using, disclosing or accessing trade secrets that consent be obtained from the trade secret holder. For those seeking to protect their trade secrets, it will be important to have robust non-disclosure and confidentiality agreements in place. In addition, they should ensure they can demonstrate that they have taken proper care and active steps to protect the trade secret from unlawful use and disclosure.

The issue of whistle-blowers was a subject of much debate in relation to the Directive, as concern was expressed that it may penalise whistle-blowers for disclosing information considered secret. The Directive has sought to address such concerns by providing in its Preamble that whistle-blowers should not be restricted from disclosing trade secrets in the public interest in so far as relevant misconduct or wrongdoing is revealed.

Next Steps

After publication of the Directive in the Official Journal of the EU, Member States will have a maximum of two years to implement legislation in line with the Directive. In preparation, businesses should at this time identify clearly any valuable trade secrets they own and ensure that they have robust policies and procedures in place to protect them.