This summer has seen a number of trade secrets claims filed against employees and third parties, as manufacturers and software developers race to harness new technologies in connected and autonomous vehicles (CAVs). Apple was even reported to have commenced criminal proceedings in the US against a former employee, who allegedly downloaded substantial information relating to power requirements, battery systems and drivetrain suspension mounts before taking up employment with a rival manufacturer based in China.
CAV technology provides enormous potential for commercialisation and financial growth, but for that potential to be realised, it is essential that valuable confidential information is protected. Here, we take a look at the new definition of “trade secrets” and steps that funders can take to protect their CAV investments.
What is a trade secret?
The EU Trade Secrets Directive (2016/244/EU) was implemented in the UK earlier this summer. Whilst it largely reflects the pre-existing UK law on confidential information, it has introduced a new harmonised definition of a “trade secret”.
Information will be considered a trade secret if it:
- 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 this kind of information;
- has commercial value because it is secret; and
- has been subject to reasonable steps (under the circumstances) to keep it secret by the person lawfully in control of the information.
Whilst this definition should make it easier for businesses to protect their trade secrets, they must be able to demonstrate that they have taken reasonable steps to protect the secret if they wish to rely upon specific rights and remedies under the Directive.
Tips for protecting confidential information
Whilst there remains some uncertainty as to how the Directive’s requirement for “reasonable steps” will be interpreted by the courts, it is clear that there are actions that CAV investors can (and should) take to protect valuable confidential information.
Here are some of our key tips:
- CAV research and development will most likely require collaborative projects with a number of different partners. Ensure that conversations take place at the outset to establish who will own the know-how and other intellectual property derived from the project and who will take forward its commercialisation. We strongly recommend that this is recorded in a written agreement.
- Ensure third party collaborators enter into NDAs, with appropriate terms tailored to the scope of the particular project.
- Where information is to be shared as part of a wider consortium, consider whether to include confidentiality and usage provisions as part of any data-sharing agreements.
- Require the investee to develop and implement procedures for marking, segregating and storing trade secrets. This could include new IT procedures to ensure that the information is encrypted, or warnings appear before the information is sent externally.
- Designate a team (including an investor representative) who will have overall responsibility for the protection of trade secrets and keep a record of who has access to the confidential information.
- Require the R&D lead to provide training to those employees and suppliers who are most likely to access confidential information.
As we have discussed in a previous Insight, different jurisdictions will also have their own specific national laws – such as the legal right for German academics to publish their work – or practices, such as putting confidential data into escrow with a bailiff in France. Whilst the Directive introduces more clarity and consistency across EU Member States, in the race to harness CAV technology, protecting trade secrets will remain far from straightforward. Please contact Clare Robinson, Becky Crawford or your usual Osborne Clarke contact to discuss how we can assist you.