In the present Ezine, we shall examine how the Belgian legislator intends to implement the EU Directive in the existing legal framework and to what extent it has used the margin of discretion allowed by the EU Directive.
The EU Directive 2016/943 of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (“Directive”) should have been transposed into national law by 9 June 2018.
As mentioned in a previous ezine, the objective of the Directive is to establish a sufficient and comparable level of protection of trade secrets within the EU in case of theft and illicit use, in order to promote and protect innovation and allow European companies, and in particular SMEs, to be more competitive.
The Directive provides a minimal harmonisation and thus leaves a certain margin to Member States.
In Belgian law, before the adoption of the bill described hereunder, there has been no specific and homogeneous legal framework providing for the protection of trade secrets. Depending on the circumstances, one can invoke a violation of article 17, 3 ° of the act on employment contract or possibly on article 309 of the criminal Code, or an unfair act of competition (article VI.104 of the Code of Economic law (“CEL”) or a breach of the extra-contractual liability obligation (article 1382 of the Civil Code).
However, these provisions are scattered and incomplete, so that the transposition of the Directive will lead to a standardisation thereof.
On 19 January 2018, the Council of Ministers approved a draft bill on the protection of trade secrets, presented jointly by the Minister of Economy, Kris Peeters, and the Minister of Justice, Koen Geens.
Further to a second reading by the Council of State, a bill regarding the protection of trade secrets (“Bill”) was submitted to the Belgian parliament on 12 June 2018 and made public on 18 June 2018.
This Bill entails mainly a modification of the CEL (definition, substantive provisions, injunction proceedings ...), of the judicial code (competence, provisional measures, confidentiality, penalty) and of the act on employment contract.
Indeed, although the objective is not to create a new exclusive intellectual property right, it has been decided to include the main provisions in Book XI of the CEL (the book relating to Intellectual Property, which becomes the Book on “Intellectual property and trade secrets”) as the legal regime to be applied is similar in numerous points.
A. Definition of trade secrets
The Belgian legislator has adopted the definition of the Directive, namely that in order to be considered as a trade secret, the information has to meet 3 cumulative conditions:
- the information must have a commercial value,
- the information must be secret (it must not be generally known by the persons belonging to the concerned circles, or easily accessible),
- the information must have been the object of reasonable protective measures in order to secure its confidentiality (contractual provisions, physical or virtual safety mechanisms, e-filing,...).
This may thus include concepts such as the know-how of a company, or its manufacturing or trade secrets.
Taking into consideration this definition, Article 17 of the Act on employment contract shall be modified. In practice, this should not lead to significant changes, as this modification is in line with the case law and the interpretation made by the courts of the notion of manufacturing secrets.
B. Discouragement of the illicit acquisition, utilisation and disclosure
Like the Directive, the Bill considers that there is (i) illicit acquisition of trade secrets in the event of unauthorised access or unauthorised copying of a document, file, etc, and (ii) illicit utilisation or disclosure, notably in the case of violation of a confidentiality agreement. This is also the case, depending on the circumstances, when the person knew or should have known that this was illicit.
The Bill, though, allows some exceptions, notably if the acquisition, use or disclosure:
- is intended to exercise the right of freedom of speech or information,
- is necessary in view of the information or consultation of workers and of their representatives (notably in view of the works council or joint bargaining convention of work),
- has the objective of revealing a fault or an illegal activity, or of protecting the general public interest, such as may be the case for whistleblowers,
- is undertaken in order to protect a legitimate interest provided for by the law of the European Union or by national law.
C. Civil action available to the holder of the trade secrets
The proposed measures are similar to those included in the EU Directive 2004/48 of 29 April 2004 regarding the enforcement of intellectual property rights with the exception of the seizure-description which is not possible in matters relating to a trade secret as it is not a new intellectual property right.
(i) Action to be initiated and ruled on rapidly
As a reminder, one of the objectives of the Directive is that measures can be taken within a reasonable time frame and that they are effective and dissuasive.
As a consequence, although Member States are free to determine the statute of limitations as well as the starting date, the Directive states that it cannot exceed 6 years.
In this regard, the Belgian legislator has opted for a delay of 5 years without prejudice to Article 15 of the Act on employment contracts (1 year after its termination or 5 years after the fact that gave rise to the action without the possibility that such delay exceeds the above-mentioned one year) and without prejudice to Article XVII.5 CEL, that provides for a limitation period of 1 year for prohibiting injunctions as in summary proceedings (“action en cessation”/”vordering tot staking”).
The starting point is the same as for non-contractual liability (i.e. the day on which the claimant becomes aware of the wrongful act and the identity of the perpetrator) however with a maximum of 20 years from the day following the day on which the unlawful behaviour took place.
(ii) The preservation of the confidentiality of trade secrets during and after legal proceedings
In order to meet this essential element, the Bill provides that for each procedure involving a trade secret in a principal claim or a counterclaim, the court can take a series of measures under the new Article 871bis of the Judicial Code:
- the court may prohibit the use or disclosure of information that has been classified as confidential by the court,
- the court can expressly designate the persons or categories of persons who have access to the hearings and / or documents that the court considers to be confidential,
- the court can subject the parties (court expert, witnesses, court staff, etc.) to a duty of confidentiality that continues after the end of the procedure, unless it appears that the trade secret no longer meets the three aforementioned conditions under A,
- the judge may decide to publish or communicate what is not secret (delete what is secret).
In order to ensure that this confidentiality obligation is respected and has a dissuasive effect, the judge can decide to subject a breach of this obligation to a penalty (“dwangsom”/”astreinte”). In addition, a fine of between EUR 500 and EUR 25,000 can be demanded from the person who fails to comply with the confidentiality obligation.
(iii) Provisional and protective measures
The holder of trade secrets may request and obtain the following provisional and protective measures, under the threat of penalty (“dwangsom”/”astreinte”):
- the cessation or prohibition of the use or disclosure or the acquisition of trade secrets on a provisional basis,
- the prohibition on importing, exporting, stocking, producing, offering, placing on the market or use of goods suspected of infringing the said secrets,
- the seizure or delivery of the goods suspected of infringing such.
Such provisional measures can be obtained on the basis of Article 19, paragraph 3 of the Judicial Code (provisional measures before doing justice) or Article 584 of the Judicial Code (provisional measures in the context of summary proceedings).
Contrary to what the Directive stipulates, the Belgian legislator has not provided specific provisions requiring the holder of the trade secret to convince the court that there is a sufficient degree of certainty that the following conditions are met:
- that there is a trade secret,
- that s/he is the holder thereof, and
- that there has been an unlawful acquisition, publication or use or that such is imminent.
In fact, we already have sufficient provisions in that area (rules on evidence and the apparent nature of the right).
The judge will have to take into account a series of specific circumstances (weighing interests) in order to render a decision, and will also have the opportunity to:
- demand a guarantee or an equivalent security from the holder, which will undoubtedly have the effect of limiting these types of procedures, but which is understandable in the light of the measures that can be taken provisionally (and which therefore cannot affect the core of the case),
- provide for the continued use of the trade secret instead of the aforementioned measures by means of a financial compensation.
Finally, the measures will be revoked if no substantive proceedings are instituted within the period provided for in the decision or, in the absence thereof, within a maximum of 20 working days or 31 calendar days from notification of the decision, depending on which of the two terms is the longest, or if there is no longer a trade secret. In these hypotheses, the defendant has the right to claim compensation for the damage suffered.
This is a procedural novelty in Belgium because the Judicial Code, in the context of summary proceedings, does not require a procedure on the merits to be initiated within a certain period.
(iv) Judicial orders and corrective measures
The holder of trade secrets can request and obtain the following measures, under the threat of a penalty:
- the cessation or prohibition of unlawful use, disclosure or acquisition,
- the prohibition of importing, exporting, stocking, producing, offering, placing on the market or use of infringing goods,
- the application of appropriate corrective measures (the recall of the infringing goods, the disposal of the infringing capacity of the infringing goods, etc.),
- the destruction or delivery of the infringing goods to the claimant. In this respect, the Bill does not provide for specific measures in the case of bad faith of the offender as opposed to what exists with regard to intellectual property rights: this would go too far given the absence of the exclusive character of right. On the other hand, in the case of delivery of the infringing goods, the holder can choose to get them back or to have them handed over to charitable organisations, destruction of all or part of the document or object that contains or embodies the trade secret or the handing over thereof to the claimant,
- full or partial publication of the judgment inside or outside the institution and in the newspapers for a fixed term and with due observance of the confidentiality obligations.
From now on, all of these measures can be demanded in the context of prohibiting injunctions in summary proceedings (“vordering tot staking”/”action en cessation”) (this was impossible in the past because it was assumed that the information had lost its secret character due to the disclosure) or via a classical claim on the merits (only a few modalities will differ depending on the chosen procedure). However, the prohibiting injunction in summary proceedings is not possible against the intermediaries, contrary to what is provided regarding intellectual property.
The holder of the trade secrets can also request compensation if the infringer was aware of the unlawful nature (the compensation may consist of lost profits, unlawful profits and non-material damage, which is therefore more than the royalty of a legitimate licensee, as well as any identification and investigation costs). It is necessary to prove the error (i.e. in this case the material breach of a contractual provision (contractual error)) or a legal or regulatory provision that makes the offender liable under civil law, provided that this violation was voluntarily and consciously committed (extra-contractual error), the causal link and the damage to be repaired (i.e. repairing the totality of the damage actually suffered). If it is impossible to quantify the amount exactly, the court can do this on the basis of a lump sum. This measure is only possible in the context of a classical claim on the merits.
As with the provisional and protective measures, the court will have to take into account a series of specific circumstances in taking its decision (value of the trade secret, measures taken to protect it, the conduct of the infringer, the effects of the unlawful use or disclosure, the legitimate interests of the parties, the protection of fundamental rights, etc;).
Moreover, if the infringer did not know or could not have known that the trade secret was obtained from another person who used or disclosed the trade secret in an unlawful manner and if the aforementioned measures would cause disproportionate damage, the court may replace these measures with a financial compensation that may not exceed the amount that would have been paid as compensation or royalties.
Finally, at the request of the infringer, the measures will be revoked if the trade secret no longer meets the definition.
(v) Abuse of legal process
The defendant has the right to claim compensation if the legal proceedings were initiated abusively or in bad faith by the trade secret holder. Here too, the Belgian legislature has ruled that the Belgian judicial arsenal was sufficiently extensive (civil fine, maximum legal judicial indemnity) and so has not provided any additional provisions.
(vi) Competent courts for the main claim
The CEL and the Judicial Code will be amended to provide that only the commercial courts that are established in the seat of a court of appeal (court of appeal of the domicile of the defendants or claimants if the defendant is not domiciled or has no residence in Belgium) are competent, even if the parties are not companies and irrespective of the amount of the claim, except in the case of a dispute with an employee if the latter is still in employment.
Moreover, if another provision of the CEL is breached at the same time, it is the violation of the trade secret that will determine the territorial jurisdiction.
D. Date of application
The new law will apply to the legal facts that occur after its entry into force (in principle, 10 days after its publication in the Belgian Official Gazette), but also to the legal facts that occurred under the old law but which continue to exist under the new law. In the procedures pending at the time of its entry into force, the parties will not be able to rely on the new provisions and this in order to avoid legal uncertainty.
We invite you to (i) clearly identify and inventory the information that is considered confidential within your company, (ii) identify the persons who have access to it, (iii) identify the protective measures taken or to be implemented, (iv) review and adapt all your agreements / clauses relating to confidential information / trade secrets including your employment contracts.
In the event of a dispute, you will then be more likely to obtain a prohibiting injunction in summary proceedings (which is quicker) restricting access or prohibiting the use of certain essential information.