After the deadline and with several weeks additional delay caused by a constitutional challenge brought before the French Constitutional Council (Conseil Constitutionnel) France has joined the band of roughly half of the other EU Member States that have transposed EU Directive 2016/943 with respect to the protection of trade secrets in to local law. The Trade Secrets Directive should have been transposed by June 9, 2018 (cf., Directive (EU) 2016/493, Article 19), but the new French Trade Secrets Law was not finally promulgated until July 30, 2018 (French Law no. 2018–670).
The Trade Secrets Law imposes a new general protection scheme with respect to “trade secrets”, that is undisclosed know how and business information, by introducing in to the French Commercial Code a series of new sections (Commercial Code Articles L151–1 to L154–1). The new regime will take effect upon the publication of an implementing Decree, which is expected to take place before the end of 2018.
Following the terms of the Directive, the new French Trade Secrets Law protects trade secrets that meet the following criteria: (1) the business information and know-how is not generally known; (2) it has economic value, either in fact or potentially; and (3) it has been the object of measures undertaken by the legal holder of the trade secret to protect its confidentiality. The new law does not address the type of medium on which the trade secret is stored, nor the nature of the trade secret itself: any information or know-how that meets the three criteria defined in Article L151–1 of the Law (cf., Article 2(1) of the Directive) is protected.
Information or know-how that is generally known will of course not be protected under the new law, but that still leaves plenty of room for debate about the other two criteria.
Of note concerning the second criteria on commercial value is that in order to be protected the information or know-how need only have potential commercial value. This would protect investment in research and development that has not yet been fully brought into use by the legal holder. The general view is that a trade secret would have a commercial value if it would provide, directly or indirectly at present or in the future, a source of profit to its legal holder. For instance, one can imagine that where a company had spent some time and money in developing undisclosed know-how then it would be necessarily disadvantaged if a competitor which gained knowledge of the know-how were simply to make use of it without having had to engage the same research and development expenses and hence that know-how, even if not currently in use by the legitimate holder, could be said to have commercial value.
The third key element is that the legitimate holder of the trade secret must have tried to protect the information from illicit communication. Going forward companies will need to ensure that they have made adequate efforts to keep their trade secrets confidential and, in order to be able to prove that they have, to ensure that they have properly documented those efforts. Such efforts should no doubt include ensuring that their contractual partners have signed the appropriate confidentiality undertakings -- and possibly requiring proof thereof; creating appropriate physical security measures; ensuring that the information/know-how is properly safeguarded on the information/IT systems of the companies or kept under real or electronic lock and key. Some commentators have suggested marking such trade secrets with a “trade secret” stamp much like national security information, but one must wonder if that is really enough.
The new Trade Secrets Law also sets out how to determine who is a legitimate holder of the trade secrets, which would include the developer of the information/know-how as well as persons who have contractual authority to have knowledge of the information/know-how, for instance in the context of a license agreement.
The new Trade Secrets Law provides for civil claims against persons who illegally obtain or illegally use properly protected trade secrets. Although a possibility under the Directive, France has opted not to include new criminal liability for such unauthorized use as the Criminal Code already sanctions such activity.
Of course, such confidential information and know-how can be procured in many inventive and illicit ways, but obtaining otherwise confidential know-how is not always illegal even when not authorized, as it might be the result, for instance, of independent reverse engineering or similar types of studies.
It is worth noting that the prescription period is five years from the moment of the discovery of the illicit use of the trade secret.
In any event whether or not the know-how or information is not generally known, has commercial value or has been otherwise adequately protected will be finally left to the courts to decide. One can certainly imagine that the national courts of the various Member States will come to different conclusions with respect to the measures necessary for protecting such information. Multi-national enterprises will thus face the additional challenge of ensuring that the protective measures they take meet the tests in each Member State.