Trade secrets under French law

Written on 21 May 2015

The protection of trade secrets is not expressly provided for within the French commercial code. However, French law does recognise the concepts of know-how and trade secrets, and affords protection for trade secrets under criminal and civil law.

The subject of trade secret protection in France has
been considered recently by the French Parliament, with a bill for trade secrets
introduced by the French Government for the first time in January 2015. However,
it has since been withdrawn in the face of concerns about its impact on freedom
of information.  

Pending re-introduction of this or another measure,
such as the implementation of the proposed EU Trade Secrets Directive (the EU
Directive), trade secrets have some protection under French law, but not as
part of the French commercial code.

The current
protection under French law

What is
protected?

Know-how and manufacturing secrets/trade secrets are both
protected under French law.

“Know-how” as a notion under French law arises from the
2004 EU Regulation on Technology Transfer Agreements 2004/772/EC, where it is
defined as technical information, patentable or not, which has a substantial
economic value.  Such information must be
secret, meaning unknown to the public or not easily accessible.

Trade secrets, which are part of the more general concept
of know-how, are defined by French Courts as any manufacturing process having a
practical or economic interest, implemented by an industrialist and kept secret
from competitors. Trade secrets may or may not be patentable, but French courts
consider they must have a certain originality, and a practical, economic or
technical interest.

What protection
is available?

Know-how and trade secrets are not protected by a
proprietary right. However, protection is afforded through several legal mechanisms:
 

  • Under criminal law, it is an offence for a director
    or employee of a company to disclose a trade secret, punishable under French
    law by a two-year jail sentence and a €300,000 criminal fine (articles L621-1
    of the Intellectual Property code and L. 1227-1 of the Labour code). The
    beneficiary recipient of the information can be accused of being an accomplice
    and can also be punished for receiving stolen goods (“recel”).
     
  • Under general tort and civil law, the use of someone else’s
    know-how obtained by fraud constitutes an act of unfair competition, namely any
    act that goes against the law or fair commercial habits and causes an
    intentional damage to a competitor or an act of parasitism (to be in the wake
    of a competitor to benefit from investments that company made for its own
    benefit). Both are compensated by damages awards. Damages can also be claimed
    under common tort law, as the fraudulent procuring of secret information causes
    prejudice to the owner of such information, such as a loss of competitive or
    economic power.
  • In contract, practitioners commonly attempt to
    protect their trade secrets and other know-how by inserting confidentiality clauses
    in their contracts with third parties.

The Macron Bill

Whilst French law currently provides some protection
for trade secrets, there have been recent efforts to insert express protection
for trade secrets into the French commercial code.  A recent bill, called the “Macron Bill” after
the current French Minister for Economy and Finance, was presented to the
National Assembly on 12 January 2015, with this purpose.

The definition of protected information under the
Macron Bill is similar to the current one. Trade secret information would be
protected under the Bill if it consisted of undisclosed information (unknown or
not easily accessible) that has an economic value. What would be new under the
Macron Bill would be an obligation on the owner of the information to keep it confidential
by implementing reasonable protection measures.

The
disclosure and communication of protected information, in violation of the implemented
measures or without its owner’s consent, would be prohibited under the Macron Bill.
Civil and criminal sanctions would be as follows:

  • Damages would be available for a deliberate or negligent infringement,
    except if strictly necessary to the protection of an overriding interest, such as
    the freedom of expression and information. To calculate damages, factors taken
    into consideration would be the negative economic impacts, the moral prejudice
    and the economic investments and benefits realised by the wrongdoer.  These are similar to factors currently used
    in calculating damages for infringement of intellectual property rights.
    Advertising measures could also be ordered.
  • The civil judges’ powers would be reinforced, as they could:
    • take measures to prevent or cease the infringement in fast proceedings hearings;
    • forbid the use or disclosure of the information obtained; and/or
    • order the seizure of documents and goods related to those trade secrets.
  • On the criminal side, infringement would be punishable by a fine of up to €375,000 in the case of infringement damaging commercial interests, but by a three-year jail sentence, a fine of up to €750,000 and 7 years’ imprisonment  if the infringement damages the sovereignty, security and economic interests of the French state.

Opposition to
the Macron Bill

The Macron Bill was welcomed by many, but met opposition
from journalists and media houses. “Le Monde”, on 29 January 2015, argued in an
article entitled “Trade secrets, to inform is not a crime” that the Macron Bill
was challenging the information work of journalists and was handing judges the
exclusive right to determine what information should or should not be protected
by the freedoms of information and expression.

In
fact, the exemptions from liability for disclosure in the draft EU Directive
are wider than they would have been under the Macron Bill. The exceptions under
the Macron Bill were to be limited to what was strictly necessary to ensure
freedom of information.  By contrast, the
draft Directive provides for exemptions for the legitimate use related to those
freedoms, the disclosure of a fraud or the protection of a legitimate interest.

In
light of the opposition to it, the Macron Bill was finally withdrawn in
February by the French government.  It
seems that France will have to wait for the EU Directive to implement new
measures to protect trade secrets under its national law.