Today a Bill concerning a new Danish act on trade secrets went out for consultation. Danish enterprises will lose the right to proceed against misappropriation of their trade secrets unless they take adequate steps to protect them.
On 27 May 2016 the EU Directive on trade secrets was adopted, requiring all EU Member States to introduce rules for the protection of enterprises’ trade secrets. The Bill that went out for consultation today sets out to out to implement the provisions of the Directive into Danish special legislation.
Directive on protection of confidential know-how and confidential trade secrets The aim of the Directive is to enhance the protection of enterprises’ trade secrets and know-how, and the Directive was adopted in order for enterprises to improve and optimise their business operations.
Trade secrets and know-how play a considerable role in many enterprises, particularly innovative enterprises, for whom trade secrets may be their most valuable asset. In this context, the protection of intellectual property rights (such as brands, patents, copyright or design rights), which enterprises may otherwise obtain merely forms a secondary basis for protecting the competitiveness of the enterprise. With the Directive, the EU wants to standardise Member States’ rules on the protection of trade secrets and know-how as well as the enforcement of such rules on misappropriation.
This area was not previously covered by any harmonised EU regulation, and consequently the Directive includes various innovations such as:
- A relatively specific and wide definition of the concept "trade secrets".
- A requirement that enterprises implement appropriate measures to protect trade secrets if they want to proceed against any subsequent misappropriation.
- Several provisions regulating when the acquisition, use and disclosure of trade secrets is unlawful.
- The introduction of legal remedies to prevent misappropriation of trade secrets, including compensation, penalty payments, injunctions, delivery up and seizure of products.
- A catalogue of situations that are basically lawful.
Bill concerning new Danish act on trade secrets Today a Bill for a Danish ”trade secrets act”, implementing the provisions of the Directive into Danish special legislation, went out for consultation. EU Member States have until 9 June 2018 to implement the Directive into their national legislation.
S. 23 (previously s. 19) of the Danish Marketing Practices Act (markedsføringsloven) regulates the prohibition against unlawful use and disclosure of trade secrets for persons who used to be affiliated with an enterprise. When the special legislation comes into force, s. 23 of the Marketing Practices Act will be repealed, and after 9 June 2018 regulation of trade secrets and know-how will be subject to the new special legislation.
The Directive allows enterprises several legal remedies in the prosecution of unlawful acquisition, use and disclosure of trade secrets. According to the Bill, the act will expand the remedies available to enterprises on misappropriation of their trade secrets.
On infringement of the rules, sanction options are expanded to include seizure and delivery up of infringing products. Financial remedies are expanded so that an enterprise may be financially compensated in addition to receiving damages.
According to Article 8 of the adopted Directive, the EU leaves it to the Member States to restrict substantive claims and actions to a limited period; however, the Directive states that the limitation period may not exceed six years. The Bill proposes that infringement of the rules on trade secrets be assessed in accordance with the current provisions of the Danish Limitation Act (forældelsesloven). This means that claims will generally be limited to a period of three years. A new feature is a restriction on the possibility of initiating action, setting a six-month limit to the period within which the holder of the trade secret must file for a preliminary injunction/order or initiate proceedings regarding infringement of the rules.
Another innovation in Danish legislation is the Directive’s provision that the courts may, in exceptional cases, allow continued misappropriation of trade secrets against the provision of guarantees or financial compensation for the holder of the trade secret. The Bill includes provisions on this matter, in actual legal proceedings as well as in cases of temporary measures (preliminary injunctions/order).
A number of the provisions of the Directive are implemented by reference to or direct application of existing rules in the Danish Administration of Justice Act (retsplejeloven). This includes provisions concerning confidentiality in legal proceedings with regard to trade secrets, where the "trade secrets act" is supplemented by the current provisions of the Administration of Justice Act on access to documents, closed doors in proceedings concerning confidential matters, editing of rulings, etc.
Comments by Bech-Bruun The adoption of the Directive is expected to enhance enterprises’ possibilities of proceeding against misappropriation of know-how and trade secrets. One such enhancement is that enterprises will have a clearer definition of what may be characterised as a trade secret. Moreover, the Directive offers enterprises several new options and remedies in their fight against unlawful use of trade secrets. As such, the outer framework is defined by the EU legislator, and it is for the Danish legislators and, ultimately, the courts to determine the final framework for enterprises’ protection of trade secrets.
As the Directive involves a significant degree of standardisation of the rules protecting trade secrets in EU Member States, it is of relevance to all Danish enterprises with cross-border activities.
The new Bill introduces several innovations in Danish legislation, for which all enterprises must prepare. These include new remedies and sanctions for enterprises whose trade secrets are misappropriated, and new deadlines for initiating legal proceedings.
However, it is important that enterprises consider carefully how to protect their trade secrets.