At the end of 2013, the European Commission proposed a new Directive with the aim of harmonising the protection of trade secrets and confidential business information across member states. The EU Council recently issued an opinion on the Commission’s proposed Directive which has suggested certain amendments.

Purpose of the Directive

The proposed Directive is intended to facilitate an increase in research and development and to assist companies which are reliant on trade secrets/ confidential business information such as SMEs and start-ups. The Commission was concerned that the know-how developed and held by such companies was not sufficiently protected within the EU as existing trade secrets and confidential business information often do not meet the requirements for patent protection. In addition, applying for patent protection requires the disclosure of information  and comes at a cost, which may be unappealing or inadvisable. Under the proposed Directive Member States will have a harmonised approach to the misuse of confidential business information including changes to court procedure and improved remedies.

The proposed Directive is designed to be aligned to the international Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) and to bring the EU’s protection of trade secrets in to line with that provided in the US and Japan.

Protection for Trade Secrets and Confidential Business Information

Under the proposed Directive information will constitute a “trade secret” where

  1. it is secret (i.e. the information is not in the public domain);

  2. it has commercial value; and

  3. the trade secret holder has made reasonable efforts to keep it confidential.

The Directive prohibits both unlawful acquisition of a trade secret and the unlawful use or disclosure of a trade secret.

Unauthorised access to or copying of a trade secret e.g. through theft, bribery, breach, deception or inducement to breach a confidentiality obligation is prohibited. In addition the use or disclosure of trade secrets will be unlawful where e.g. the acquisition of the trade secret was itself unlawful or where the subsequent use or disclosure is in breach of a confidentiality agreement or other duty which limits the use which should be made of a trade secret. The Council ‘s view is that unlawful use or disclosure should not require intent or gross negligence and has proposed that the use or disclosure must be contrary to honest commercial practices.

The Directive provides for standardised court procedures to ensure that trade secret holders are able to enforce their rights through the courts without fear that this will lead to the trade secrets becoming public or subject to further publicity. This is achieved by ensuring that the trade  secret remains confidential during legal proceedings and giving judicial authorities the power to take specific measures to ensure that the information remains secret. Under the amendments to the draft Directive proposed by the Council, trade secret holders would, however, be obliged to submit reasons for requesting confidentiality in court proceedings and the relevant court would then decide if the confidentiality provisions contained in the Directive should apply to such proceedings.

The Directive also sets out various remedies for trade secret infringement such as injunctions which would prohibit further use of the trade secret, prohibitions on manufacture and sale or orders for seizure or delivery up of articles made through the trade secret. The Directive also provides for the award of damages against infringing parties taking a variety of factors such as unfair profits and moral damage into account and allows the court to award lump sums in lieu of fees or royalties.

Under the Council’s amendments to the proposed Directive, it will contain a six year limitation period for the bringing of claims from the time at which the plaintiff became aware or should have been aware of the  facts giving rise to the cause of action. This is instead of the rather short 2 year period proposed by the Commission.

This is a “minimal harmonisation” directive which allows Member States a wider discretion in transposing the Directive in  to national law, which means that Ireland can retain the existing protections for confidential information of this kind.

Likely Impact of the Directive

Irish law already has a well developed action for breach of confidence which is designed to protect confidential information from misappropriation, misuse or unauthorised disclosure. In light of the this existing protection it is unlikely that the Directive will revolutionise the protection of trade secrets in Ireland or other countries which already provided such protection on an equitable/common law basis such as  the UK. The proposed Directive will, however, represent a welcome addition to countries that do not provide such protection and  will ensure that companies are confident in the protection of their trade secrets in their dealings throughout the EU.