As a special feature of our blog—guest postings by experts, clients, and other professionals—please enjoy this blog entry from Gilles Rouvier, founding partner of Lawways.
On July 31st, 2018, France adopted a law on trade secret protection, loi n°2018-670 (hereafter “French Trade Secret Law“). The aim of this French Trade Secret Law is to offer companies protection for their economic and strategic information. This legislation implements the Directive 2016/943/EU on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use, and disclosure, enacted by the European Parliament and the Council of the European Union (EU) on June 8th, 2016.
France’s history as one of the first few members of the EU to produce local legislation specifically addressing trade secret protection dates back several decades. As early as 1968, France had already adopted its flagship measure to prevent the disclosure of information covered by business secrecy. The so-called “Loi de blocage” (i.e., blocking law), n°68-538, was enacted on July 28th, 1968, as a countermeasure to combat such disclosures, to the extent consistent with international treaties. In practice, however, the law was rendered virtually ineffective by foreign legislation, notably U.S. laws providing for the exclusion of any laws depriving U.S. Courts of the right to order the disclosure of documents or information in discovery proceedings.
Following the observable inefficacy of the “loi de blocage,” the legal frame for trade secrets in France remained unsettled for years. As a result, sensitive data outside the realm of preexisting intellectual property protections were not effectively protected in France. Therefore, many companies preferred to negotiate, and eventually lose money, rather than go to trial.
This new French Trade Secret Law places French companies on an equal footing with foreign competitors who already benefit from regulated business secrecy, including U.S. and Chinese companies. The French Trade Secret Law was not only needed for these kinds of business issues, but also for privacy issues, as Article 8 of the European Convention on Human Rights (which provides a right to respect for private and family life) applies to legal entities as well as individuals. Based on this principle, corporations could protect their information as if they were physical persons.
These improvements to trade secret protections in the EU and France were not well received by all; journalists—and surprisingly, whistleblowers—opposed the added protections, viewing the Directive as an attempt to suppress freedom of speech and the right to access information. Both freedom of speech and the right to access information are guaranteed by Article 10 of the European Convention on Human Rights. Fortunately for businesses operating in France, the French Constitutional Council (i.e., the French Supreme Court) finally issued its decision on July 31st, 2018, affirming that the law is compliant with the French Constitution. Indeed, the French Trade Secret Law makes an explicit effort to reconcile these conflicting imperatives and clearly explains the concepts it introduces.
New concepts: trade secrets, legitimate holder, lawful obtention
The French legislature identifies the information protected by this new legal regime in Article L. 151-1 of the French Commercial Code, as any information that (i) is not generally known or easily reachable by specialists of the matter; (ii) is of commercial value, actual or potential, because of its secret nature; and (iii) is subject to reasonable protective measures by its legitimate holder to keep it secret.
“Trade Secret” under the new Law may cover situations that fall outside the scope of traditional intellectual property rights. Alternatively, this Law may be considered as a supplement to intellectual property protection: trade secret protection could cover elements that are not included in a patent and should not be revealed to competitors, or elements that are not patentable but still valuable (e.g., R&D, commercial strategy, business acquisition projects, the launch of a new product, customer or supplier files, strategic business data, etc.).
Trade Secret protection is conferred upon information or a product when “lawfully” obtained. Article L. 151-3 of the French Commercial Code establishes as lawful the acquisition of information by discovery or even by independent creation. Secret information ascertained from the study, disassembly, or testing of a product made available to the public is also considered a lawful means of acquisition, unless contrary contractual provisions exist.
Unlawful acts and remedies available in legal actions
Article L. 151-4 of the French Commercial Code also defines unlawful acts prohibited. Obtaining a secret without the consent of its rightful owner is unlawful when: (i) the acquisition of the information results from unauthorized access or unfair behavior; or (ii) the exploitation of a product is related to a breach of trade secrecy. The French Trade Secret Law extends its scope to persons who knew or should have known that the information displayed was unlawfully obtained or used (Articles L. 151-5 and L. 151-6 of the French Commercial Code).
French civil and commercial Courts may be seized in the event of unlawful breach of trade secret protection. The legislature has chosen not to adopt any specific criminal procedure, even where the Directive allowed EU members to do so. As for preventive actions, Article L. 152-3 of the French Commercial Code establishes that the judge may order the cessation of any use or disclosure of the protected information. Equipped with the opportunity to seek both damages and cessation of infringement, these new proceedings should significantly increase the ability of French companies to compete with their international peers, in Europe and elsewhere.
In order to comply with the concerns regarding free speech and access to information crystallized by journalists (see above), the French Parliament had to adjust the legal frame for trade secret protection. The French Trade Secret Law provides that, in trade secret infringement litigation, secrecy cannot be used as an argument where doing so would jeopardize or suppress freedom of speech. This same mechanism also applies where whistleblowing is at issue.
Since the French Trade Secret Law came into force this summer, we have not been informed of specific case law, but this will definitely evolve in the future as French companies begin to take advantage of the new protections afforded to them. Companies operating in France have a strong interest in identifying their trade secrets and protecting them accordingly, since doing so can help to maintain their competitive edge.