A study into trade secrets and Confidential information (the “Study”), prepared for the European Commission, has recently been released. The Study forms part of the Commission’s drive towards harmonising the law on trade secrets across the European Union (“EU”), and identifies how legislation at a Community level can help to achieve uniform and effective protection.

What is a trade secret?

Trade secrets are intangible assets which form an integral part of many businesses’ intellectual property portfolio. The Study explains that the approach to the protection of trade secrets is fragmented across the EU, with some Member States protecting trade secrets under civil law, some under criminal law, and most doing so through the use of general legislation or legal principles instead of dedicated legislation (for example the UK protects trade secrets using the common law rules on confidentiality).

One of the main problems identified by the Study is that there is no uniform definition of what a “trade secret” is and consequently the eligibility threshold for information to be protected varies  (Sweden, for example, is the only Member State to have adopted a formal statutory definition of the term “trade secret”). However, the Study has identified that the Member States commonly define trade secrets as relating to information which is:

  1. technical or commercial (in a business context);
  2.  secret (i.e. not public);
  3. of economic value (in so far as it provides an economic advantage); and
  4. the subject of precautions to keep it secret.

The effect of fragmentation

The fragmentation of the law on trade secrets within the EU not only affects what is protected, but also the extent of that protection and what rights and remedies are available where rights are infringed. For example, as the Study points out, “in Bulgaria, Cyprus, Estonia, Finland, Luxemburg and Malta the only remedies are injunctions and damages: return/destruction/withdrawal/seizure of infringing goods are not available”.

The ability to protect trade secrets in legal proceedings relating to them also varies and means that, in some Member States, protecting a trade secret through courts will require further disclosure. Further, the very legal basis for protection differs, and while the UK protects trade secrets using the civil law on confidential information, many other European jurisdictions treat infringement as also being potentially a criminal offence with the possibility that a court may impose fines and/or imprisonment.

As a result of this fragmentation, businesses are exposed to risks, costs and uncertainty. By contrast, a harmonised approach would provide businesses with greater confidence to share information and the ability to easily and effectively protect and enforce rights across the EU.

Benefits of uniform EU rules

Much of the Study is based on results obtained by surveying businesses within the EU which, when asked what the benefits of a harmonised approach would be, cited the following:

  • properly defining a “trade secret”;
  • defining and prohibiting infringing acts;
  • criminal sanctions;
  • protecting confidentiality during court proceedings;
  • harmonised rules across the EU on non compete and non-disclosure contracts;
  • EU-wide injunctions; and
  • the use of customs control to prohibit goods produced through infringing trade secrets.

The Study concludes that “there is sufficient economic justification for harmonization of trade secrets protection”, and that the current fragmented situation “conflicts with the very logic of the Internal Market”.

WAB Comment

The Study demonstrates that there is concerning differentiation between the methods of protecting trade secrets in Member States given the commercial importance of this asset for many businesses. There can be little doubt that the current approach is at odds with the principles of the Internal Market, as the Study suggests, and a uniform regime providing effective protection would be a welcome development. Such reform would also bring the law on trade secrets more in-line with the increasingly harmonised approach to the protection of other intellectual property rights across the European Union.

The Study can be found on the Europa website by clicking here