Trade secrets in France | Contractual protections and practical measures

Written on 15 Feb 2018

How does the law currently protect trade secrets?

Although the Trade Secrets Directive has not been implemented yet, French law does include both civil and criminal law mechanisms which may provide the holder of trade secrets with the ability to prevent or restrain the misuse of its trade secrets.

That said, when a business is going into an R&D agreement or a joint venture in which it will be sharing some of its technical know-how with another party, it is essential to put in place a strict contractual framework (which requires anticipation), accompanied by practical measures.

Establishing pre-existing rights

Even before entering into an R&D agreement or a joint venture, businesses that own the secret information to be disclosed should establish proof of its prior rights over such information, by putting the data into an escrow account with a bailiff or a specific organisation, or by filing an “enveloppe Soleau” before the French Institute of Intellectual Property (which is less expensive).

An effective NDA

After establishing prior rights, the next step is to draw up a non-disclosure-agreement (NDA), which is crucial to safeguard the negotiations from the beginning, pending the execution of an R&D agreement. The NDA should include the following mechanisms at least:

  • a precise definition of the information covered by secrecy, in order the latter be identifiable, while being sufficiently wide to avoid information that is potentially confidential falling outside the scope of such a definition. In this respect, it is important to specify that any information which is disclosed within the negotiation is confidential whatsoever its nature (technical, commercial, etc.). Also, it is important to secure the information that is exchanged on an oral basis, in order to be covered by this definition. In this respect, recent French contract law reform has introduced a general obligation of confidentiality protecting pre-contractual negotiations, which could provide additional security. Thus, article 1112-2 of the new French civil code provides for a free-standing right that disclosure of confidential information obtained during negotiations, without consent, may form the basis for an action in damages;
  • specific duties on the partner in order to ensure the partner keeps secret the concerned information and does not to use it nor try to protect it under an intellectual property right registration;
  • specific sanctions for breach of the NDA; and
  • consequences where the negotiations break off (including, depending on the medium of the information, restitution or destruction of the information disclosed to the partner).

R&D agreement

Where the negotiations are successful, the R&D agreement to be drafted should include the following:

  • a clear identification of the data previously owned by each party;
  • a comprehensive confidentiality clause with the following:
  • commitments and warranties from the partner to keep confidential the sensitive information (duties to implement specific safety measures);
  • commitments from the partner to vouch for the respect of the secrecy by its staff, its manager, its sub-providers, etc. For the sake of safety, specific non-disclosure agreements can also be entered into with these third parties;
  • means for to the owner of the sensitive data to check whether the security and safety measures implemented by the other party are sufficient; and
  • a non-competition clause, in force during the agreement but also after its termination  in order to prevent the partner from using the confidential information.

Practical measures

In parallel, depending on the research and development project contemplated, practical measures should also be taken to protect the secrecy of the information. These could include safety measures preventing from illegal intrusion on the commercial and industrial sites, or safety measures to reserve the access to the information to some employees only. Such practical measures will in any event be mandatory where personal data are concerned due to the GDPR.

Finally, within the framework of the information exchanges between the parties, the partners should ensure that they expressly identify the information provided as confidential (notably when the information is disclosed by email) and be able to track it. Where, for instance, the exchange of information is made on an oral basis, such an exchange should be formalised by writing, in order to identify which information has been disclosed, when and by who. Again, this is intended to pre-constitute proof in the event of any future dispute.

All these measures should outlast the implementation of the Trade Secrets Directive.