By 9 June 2018, the UK must implement the new EU Trade Secrets Directive (the Directive). The objective of the Directive is to harmonise the meaning of a ‘trade secret’ throughout the EU member states.
Trade secrets constitute confidential information but not all confidential information is a trade secret. For information to be considered confidential it must have the "necessary quality of confidence" and be contingent upon an obligation of confidence. Although English law does not have a statutory definition of ‘trade secret’, the meaning of the term has developed over numerous years through case law. In order to qualify as a ‘trade secret’ under English law, the confidential information must additionally cause real or significant harm if disclosed to a competitor.
The Directive brings the definition of ‘confidential information’ closer to that of the English law definition of a ‘trade secret’. Under the Directive, a ‘trade secret’ must meet the following requirements: (i) the information must be confidential; (ii) the information must be of commercial value as a result of its confidentiality; and (iii) the holder of the trade secret must have made reasonable efforts to maintain its confidentiality.
Confidential information and trade secrets are increasingly taking centre stage with recent changes in data protection law and in a world where the threat of cyber crime is ever‑present. The insurance industry has seen a rising number of general breach of confidence claims, especially in circumstances where directors and officers move from one company to a competitor company, and businesses are becoming more aware of the need to protect themselves against potential liabilities concerning intangible property.
Insurers may wish to review policy wordings prior to the UK’s implementation of the Directive, for example to assess the suitability of the definitions of ‘confidential information’ and/or ‘trade secret’, as well as any exclusions pertaining to the same.