Many businesses and entrepreneurs will have missed the new law which quietly, and one might even say almost secretly, made it onto our statute books mid-June.
The Trade Secrets Directive 2016 has the aim of aligning trade secrets protection across EU member states. The Directive has been implemented in the UK by the Trade Secrets Regulations (“the Regulations”) which came into force on 9 June this year.
Protection of trade secrets across EU member states was inconsistent, although the UK’s law of trade secrets was seen as being ahead of many EU member states, and indeed the new law largely mirrors the existing UK law.
|Key facts summary|
What is a trade secret?
A piece of confidential information which gives a business or organisation a competitive advantage. A classic example is the Coca-Cola recipe.
What’s the new law?
The Trade Secrets Regulations 2018, which is based on the EU Trade Secrets Directive.
What is its aim?
To align protection for trade secrets across all member states in the EU.
What about Brexit?
Brexit will have no effect, as the Regulations are now already part of UK law.
What is the existing UK law on confidential information?
Confidential information is protected in the UK if:
- It has the necessary quality of confidence – i.e. it’s not publicly known;
- It was disclosed in circumstances importing an obligation of confidence – this can be contractual but also can be implied because of the circumstances surrounding its disclosure.
Therefore in the UK and prior to the Regulations coming into force, a business would protect its trade secrets through the law of confidential information.
Does the UK law on confidential information still stand?
The existing UK law on confidential information, which has been developed through case law, is not eradicated by the Regulations; instead, it appears that the two systems will co-exist. In particular, Regulation 3 indicates that if the acquisition, use or disclosure of a piece of information constitutes a breach of confidence in confidential information, then that is unlawful use of a trade secret.
However, the manner in which the existing UK case law on trade secrets and the Regulations will interact will only be fully known once case law has developed in this area.
What is a trade secret under the new law?
The definition of a trade secret, which now applies uniformly across the EU, is that the information:
(a) is secret in the sense that it is not generally known or readily accessible to people who normally deal with that kind of information,
(b) has commercial value because it is secret, and
(c) has been subject to reasonable steps under the circumstances to keep it secret, by the person lawfully in control of that information.
Will the Regulations be an advantage to businesses?
For multinational organisations which operate in several markets in the EU, the new law will help, as it provides a uniform definition of what a trade secret is, and the remedies available if a trade secret is unlawfully accessed or appropriated.
Furthermore, as some new processes or concepts in our increasingly online tech-driven world are not protectable through traditional IP rights such as patents or designs, trade secrets are likely to play a wider role to fill that protection gap.
Are there any steps an organisation should take to protect its trade secrets?
Yes there are, as organisations have to take reasonable steps to keep them secret under the Regulations.
Businesses should consider:
- Keeping an up-to-date log of trade secrets, noting what the trade secret is, who is in control of it, and what NDAs are in force to protect it when it is disclosed to third parties. As trade secrets are more than just confidential information, and are of real commercial value, they will not be each and every piece of confidential information.
- Training its workforce on identifying trade secrets and keeping them confidential, and who to speak to if it believes a trade secret is or has leaked.
- Using appropriate systems for protecting its trade secrets – these could be IT security features, as well as physical systems such as secure storage.
- Using appropriate confidentiality provisions in non-disclosure agreements, collaboration agreements, and employment contracts and in any arrangements where products or services are being commissioned or supplied.
- Putting in place NDAs at an early stage when information is being disclosed. Although the absence of an NDA may not be fatal to protection of a trade secret (see above “Does the UK law on confidential information still stand?”), it will certainly help to have one in place.