The Trade Secrets Directive aims to protect innovation and development by simplifying the laws governing trade secrets.
The EU Trade Secrets Directive (EU 2016/943) (the “Directive”), was adopted by the European Parliament and Council on 8 June 2016. The Directive aims to protect innovation and development by clarifying and standardising laws on the unlawful acquisition, use or disclosure of trade secrets.
Members States are required to transpose the provisions of the Directive by 9 June 2018. With this date now fast approaching, we set out below a brief summary of the key features of the Directive.
Definition of “Trade Secret”
The Directive harmonises the definition of a “trade secret”. Article 2(1) defines a “trade secret” as information which:
- is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
- has commercial value because it is secret; and
- has been subject to reasonable steps under the circumstances by the person lawfully in control of the information, to keep it secret.
In its Consultation on Transposition of EU Directive 2016/943, the Department of Jobs, Enterprise and Innovation said that trade secrets can comprise technical information (such as manufacturing processes, recipes or chemical compounds) or commercial information (such as customer lists, product launch dates or results of marketing studies).
Lawful and unlawful acquisition of a trade secret
Article 3 outlines circumstances in which the acquisition of a trade secret is considered lawful, namely where it is obtained by means of:
- independent discovery or creation;
- observation, study, disassembly or testing of a product or object that has been made available to the public or that is lawfully in the possession of the acquirer of the information who is free from any legally valid duty to limit the acquisition of the trade secret;
- exercise of the right of workers or workers' representatives to information and consultation in accordance with Union law and national laws and practices; or
- any other practice which, under the circumstances, is in conformity with honest commercial practices.
Article 4 outlines circumstances where the acquisition of a trade secret is considered unlawful, namely:
- unauthorised access to, appropriation of or copying of any documents, objects, materials, substances or electronic files, lawfully under the control of the trade secret holder, containing the trade secret or from which the trade secret can be deducted; or
- any conduct considered contrary to honest commercial practice.
Article 4 also outlines circumstances in which the use or disclosure of a trade secret is considered unlawful, namely where such use or disclosure is made by any person who:
- without the consent of the trade secret holder who acquired the trade secret unlawfully;
- in breach of a confidentiality agreement; or
- any person in breach of a contractual or any other duty to limit the use of the trade secret.
Article 5 provides for exceptions where the acquisition, use or disclosure of a trade secret in certain circumstances can be permitted, including where such acquisition, use or disclosure was carried out in any of the following cases:
- right to freedom and expression as set out in the Charter;
- for revealing misconduct, wrongdoing, etc.;
- disclosure by workers to their representatives as of the legitimate exercise in accordance with the law; or
- for the purpose of protecting a legitimate interest recognised by EU or Member State law.
Measures, procedures and remedies
Article 6 requires Member States to provide for measures, procedures and remedies for civil redress against the unlawful acquisition, use and disclosure of trade secrets, which must be:
- fair and equitable;
- not be unnecessarily complicated or costly, or entail unreasonable time-limits or unwarranted delays; and
- be effective and dissuasive.
Article 7 sets out the manner in which such measures may be applied and, in particular, requires that they are applied in a manner which is proportionate, avoids the creation of barriers to trade and provides safeguards against their abuse.
Article 8 provides for a maximum time limit of 6 years, within which claims must be lodged.
Court Procedure and corrective measures
Article 9, provides for the protection of confidentiality of trade secrets in the course of legal proceedings by, inter alia, permitting judges to restrict access to trade secret documents or by limiting access to the hearing itself. This should give some comfort to business who may previously have been deterred from bringing legal proceedings for unlawful use or disclosure of confidential business information due to a concern that the trade secret in question would then become public knowledge during the course of the proceedings.
Articles 10 and 12 prescribe certain corrective measures which may be taken by courts in legal proceedings involving trade secret claims, and permit courts to:
- order the cessation, or prohibit, the use or disclosure of trade secret;
- prohibit the production, offering, placing on the market or use of infringing goods; and
- order the destruction of all or part of any document, object, material, substance or electronic file donating or embodying the trade secret.
The courts may also make an order: recalling the infringing goods from the market; depriving the infringing goods of their infringing quality or the destruction; or withdrawing the infringing goods from the market place.
Under Article 14, the court may award damages against the infringer, at the request of the the competent judicial authority.
Articles 11 and 13 outline the factors that must be considered by the courts when considering whether to apply any/all of the measure set out in in Articles 10 and 12.
Features of trade secret protection
Unlike other forms of IP, trade secret protection is not limited in time. Nonetheless, the value of certain types of information may reduce over time, as well as the likelihood that such information will remain a secret within the meaning of Article 2(1)(a) of the Directive.
Like copyright, there is no official procedure or cost involved in obtaining protection (such as a filing or registration fee), nor are there any costs involved in maintaining this protection (such as renewal fees).
Trade secrets are of particular value to SMEs, who may not be in a financial position to obtain patent protection for valuable processes (if such protection would even be available), as well as for businesses who have valuable information which is not otherwise protectable by traditional forms of IP. Although the protection afforded by the Directive is, in many ways, similar to the protection which is afforded under the existing laws in Ireland of breach of confidence or misuse of confidential information, businesses will no doubt be pleased to see that this protection has now been clarified, and given statutory footing.
If a business wishes to rely on trade secret as a form of protection for its confidential business information, it will be important that such information meets the criteria set out in Article 2 of the Directive in order to qualify as a trade secret.