EU Directive on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure.
WHAT ARE THE EXISTING PROBLEMS WHICH THE DRAFT DIRECTIVE AIMS TO ADDRESS?
The European Commission considers there to be three main problems:
- There is a growing issue of trade secret theft. According to the Commission's figures as many as 1 in 4 European companies reported at least one case of information theft in 2013.
- The level of protection for trade secrets varies substantially between EU member states: trade secrets in the UK are protected under common law whereas some of the civil law countries have made specific provision for the protection of trade secrets, and other EU states appear to lack significant protection altogether.
- The EU legal system for trade secret protection in its current form is considered to be unclear for users.
MAIN FEATURES OF THE DIRECTIVE
A trade secret is a valuable piece of information for an enterprise that is treated as confidential and that gives that enterprise a competitive advantage. This may include technical information such as manufacturing processes and chemical compounds as well as commercial information such as lists of customers or results of marketing studies amongst others.
The European Commission is working to harmonise the existing national laws with the aim that companies should be more easily able to safely exploit and share their trade secrets with privileged business partners across the Internal Market, which in turn should enable growth.
The draft Directive seeks to help businesses protect their trade secrets by:
- providing means of stopping the unlawful use and further disclosure of stolen trade secrets
- removing from the market goods that have been manufactured on the basis of a trade secret that has been illegally acquired, and
- including a right to compensation for the damages caused by unlawful use or disclosure of a stolen trade secret.
The draft Directive also seeks to preserve freedom of expression and right to information and deals only with unlawful conduct by which someone acquires or discloses trade secrets, without authorisation and through illicit means.
WHAT STAGE IN THE DRAFTING PROCESS HAS BEEN REACHED?
- 28 November 2013 - the Commission proposed a draft Directive with the intention to align existing laws against the misappropriation of trade secrets across the EU
- 25 March 2014 - the European Economic and Social Committee published its favourable report on the proposal
- 26 May 2014 - the Council of the European Union agreed its general approach for establishing the legal framework
- 22 June 2015 - the European Parliament's Committee on Legal Affairs carried out its detailed scrutiny of the proposals
- The report prepared by the Committee on Legal Affairs will next be referred to the Parliament in plenary and this review by the Parliament is forecast for November of this year; as this is a co-decision process, the Parliament and the Council will have to reach agreement on the text of the Directive
COUNCIL’S GENERAL APPROACH
The main features sought by the Council include the harmonisation of different law regimes which will allow member states to apply stricter rules if they so choose and establishing a set of common principles, definitions and protections which are in line with international agreements.
The Council also put forward a limitation period of six years for bringing claims for infringements of the rules. Other features include the preservation of confidentiality in legal proceedings, and ensuring a favourable regime to employees in respect of their liability for damages in case of violation of a trade secret if they are acting without intent.
PARLIAMENT’S COMMITTEE ON LEGAL AFFAIRS’ APPROACH
The Committee’s approach added a provision stating that the legislation should not affect the freedom of the media, and a clause stating that the rules do not affect the disclosure of business-related information by EU institutions and national public authorities.
The Committee also voted in support of amendments to the Commission plans that will ensure there are no unjustified barriers to workers’ mobility and that experience and skills honestly acquired by employees in the normal course of their employment shall not be considered a trade secret.
The Committee further proposed an amendment to the limitation period which, if introduced into the final version would mean that claims for infringements of the rules would need to be brought within three years rather than six.
The concept of minimum harmonisation allows member states to impose stricter regimes than that set out by the Directive and as such, businesses operating in more than one member state must be aware of this potential variance in the rules and requirements.
The Directive should provide additional protections for businesses, particularly smaller ones who may not have gone to the lengths of registering their intellectual property. There is also an overlap here with Data Protection - in theory, this Directive should result in increased protection for personal data as it would further discourage others from taking such information.