New regulation on the protection of trade secrets

Written on 29 Mar 2016

The EU will regulate the protection of trade secrets to ensure the competitiveness of businesses and research bodies.

After a delay of more than two years, the Directive of the European Parliament and of the Council on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (the “Directive“) will finally be published shortly.

Until now, the only way to try to ensure, as much as possible, the protection of the trade secrets and know-how of our companies was entering into confidential agreements. Such knowledge and secrets do not fall within the scope of the industrial property rights regulation and, even though they are a form of intellectual creation and, therefore, eligible for protection, the truth is that the use and disclosure of a trade secret without the authorisation of the trade secret holder had not found sufficiently strong and effective legal backing beyond the aforementioned confidentiality arrangements.

As the European legislator has acknowledged, the fact is that companies value highly their trade secrets, which cover not only the technological knowledge of their activities and businesses but also their strategic and commercial information. As an intangible asset, trade secrets are indispensable to the technological and business development of a company. Additionally, innovative businesses, which are aware of an increasingly competitive market, are more and more exposed to dishonest practices aimed at misappropriating trade secrets, such as, among other things, theft, unauthorised copying and economic espionage, whether from within or from outside of the EU.

The main purpose of this Directive is to harmonize the internal market and eliminate the different national levels of protection of trade secrets by establishing regulations against their unlawful acquisition, use and disclosure.

Thus the first thing to be pointed out is the homogenous definition of “trade secret” proposed by the Directive, which should be construed as to cover business information, technological information and know-how, where there is a legitimate interest in keeping them confidential, a legitimate expectation to preserve such confidentiality and have commercial value.

Moreover, this Directive establishes the conduct and practices which are to be regarded as an unlawful acquisition, use or disclosure of a trade secret such as, among other things, the acquisition of a trade secret without the consent of the trade secret holder through the unauthorised access to any documents under his/her control or the breach of a confidentiality agreement. It also expressly clarifies that practices such as reverse engineering, or the process from which a product information or design is extracted, as well as independent discoveries or creations are legitimate means of acquiring information.

In order to ensure a smooth functioning of the internal market with respect to the research and innovation and prevent the various laws of the Member States checking the collaboration and cooperation between companies, the Member States will provide the measures, procedures and remedies necessary to ensure the availability of civil redress against the unlawful acquisition, use and disclosure of trade secrets. Those measures, procedures and remedies shall be fair and equitable and not be unnecessarily complicated or costly, or entail unreasonable time-limits. In this respect, in order to dissuade the infringer from carrying out such unlawful conduct, the judicial authorities shall account for the value of the trade secret, the seriousness of the conduct resulting in the unlawful acquisition, use or disclosure of the trade secret as well as the impact of such conduct.

As a safeguard for trade secret holders affected by an unauthorised use or disclosure of a trade secret, the judicial authorities may require the potential infringer to cease infringing the trade secrets and prohibit their further dissemination, withdraw the infringing goods from the market and pay the trade secret holder damages for the harm suffered.