A proposed new law aims to protect businesses’ trade secrets across Europe. It will affect who can use your technical know-how and commercial information, like customer databases. Although the new law is generally good news for business, it has some worrying implications. We’re raising some of our clients’ concerns directly with the EU; if this issue is important to your business, we can help you influence the debate.
The good news
- trade secret laws will be harmonised
The draft directive aims to harmonise the current patchwork of laws throughout the EU. Currently, each EU country has different rules on protecting sensitive business information. Having some certainty about the law should be helpful for businesses that trade across Europe.
- new court rules will protect trade secrets during litigation
The directive will help businesses protect their sensitive information during court proceedings. Courts will be able to restrict parties’ access to hearings, so that only a party’s legal representatives and experts will hear the other side’s confidential information. These representatives and experts will then be under confidentiality obligations.
This should make it easier for businesses to litigate to protect their trade secrets. We’ve certainly seen cases where companies’ strategic interests have been prejudiced by having to disclose their know-how to the other side.
The question has been raised as to whether this proposal might conflict with the fair trial principles in the European human rights convention – this is likely to be hotly debated as the directive proceeds.
- new protections against infringing goods
As well as harmonising the laws on using secret information, the draft law introduces new rules on infringing goods - ie goods whose design or manufacturing process significantly benefits from others' trade secrets. The proposal bans the sale and use of these goods, and provides remedies for their seizure, recall and destruction.
The bad news: wide exceptions to protecting know-how
The draft directive contains some rather wide language allowing the use of others’ trade secrets in some circumstances, including:
- ‘for the purpose of fulfilling a non-contractual obligation’; or
- ‘for the purpose of protecting a legitimate interest’.
These carve-outs will be new to most national laws. If the courts interpret them widely, this could be a major problem for companies that rely on keeping their know-how secret.
It’s unclear whether the directive, as currently drafted, might affect confidentiality provisions in contracts. If the carve-outs were to over-ride a confidentiality clause or an NDA, the exact scope of ‘legitimate interest’ would become very important. We’ve raised this issue with the Commission, and we hope it will be clarified.
If you’re affected, we can help you access the EU decision-makers
The draft directive is still at the start of its legislative journey, so there’s still time to influence its content. We’re speaking directly to the EU institutions to try to protect the interests of our clients.
The EU Parliament, Council and Commission are all looking at the proposal. The decision-making process has already started, but is likely to continue throughout 2014. Given the EU Parliament elections in May, we expect MEPs to finalise their position in the autumn of 2014. The EU Member States will be negotiating at the Council throughout the year. And the Commission will be involved in talks throughout, to defend – and, we hope, amend – its current text.
Our experience in litigating trade secrets in Europe means we can help the institutions understand how the proposal will play out in practice – and point out any unintended consequences. Our EU team, based in Brussels, has huge experience in representing clients’ interests within the EU legislative process.
If you’d like to talk to us about your concerns, we can include these in our discussions at the EU. We can also set up meetings for you with:
- the Commission team responsible for drafting the proposal;
- representatives from the Member States;
- key MEPs; and
- industry stakeholders with whom we might be able to form a coalition (including other companies and trade associations).
