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

Context

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. Continue Reading New Trade Secrets Law for France

shutterstock_384957430Earlier today (by a vote of 503 to 131 with 18 abstentions), the European Parliament approved the text of a proposed Directive for the protection of trade secrets in the European Union.  Once approved by the European Council (which is typically a formality), the Directive will be binding on all EU member states and will require member states to enact national legislation that meets certain minimum requirements for the protection of trade secrets.

Up to this point, no legal framework has existed for the protection of trade secrets throughout the EU.  In 2013, the European Commission commissioned a study on trade secrets protections in EU member states by comparison to legal protections for trade secrets in the United States, Switzerland, and Japan.  Following that study, which highlighted the lack of uniformity in the laws of EU member states, the European Commission proposed an initial draft of the directive to remedy perceived inadequacies in the existing legal framework.  With adoption of the new directive, EU member states now have a period of 24 months to adopt national legislation that meets certain minimum standards of protection for trade secrets.

Several key provisions of the Directive are notable.

First, the directive provides a uniform definition of a “trade secret” as “information which meets all the following requirements: (a) 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 the kind of information in question; (b) has commercial value because it is a secret; and (c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.”  (Directive, Art. 2 ¶ 1.)

Second, the directive defines the following conduct as unlawful:

  • “Acquisition of a trade secret without the consent of the trade secret holder shall be considered unlawful, whenever carried out by . . . unauthorised access to, appropriation of, or copy of any documents, objects, materials, substances or electronic files, lawfully under the control of the trade secret holder, containing the trade secret or from which the trade secret can be deduced; [and] any other conduct which, under the circumstances, is considered contrary to honest commercial practices.” (Directive, Art. 3 ¶ 2.)
  • “The use or disclosure of a trade secret shall be considered unlawful whenever carried out, without the consent of the trade secret holder, by a person who is found to meet any of the following conditions: (a) have [sic] acquired the trade secret unlawfully; (b) be in breach of a legally valid confidentiality agreement or any other duty to maintain secrecy of the trade secret; [or] (c) be in breach of a legally valid contractual or any other duty to limit the use of the trade secret.”  (Directive, Art. 3 ¶3.)
  • “The acquisition, use or disclosure of a trade secret shall also be considered unlawful whenever a person, at the time of acquisition, use or disclosure, knew or should, under the circumstances, have known that the trade secret was obtained directly or indirectly from another person who was using or disclosing the trade secret unlawfully within the meaning of [Art. 3 ¶3].”  (Directive, Art. 3 ¶4.)
  • “The production, offering or placing on the market of infringing goods, or import, export or storage of infringing goods for those purposes, shall also be considered an unlawful use of a trade secret when the person carrying out such activities knew, or should, under the circumstances, have known that the trade secret was used unlawfully within the meaning of [Art. 3 ¶3].”  (Directive, Art. 3 ¶5.)

Third, the Directive establishes exceptions that essentially creates a whistleblower defense to trade secrets misappropriation claims, similar to language in the U.S. Senate’s version of the proposed Defend Trade Secrets Act pending in the U.S. Congress.  The relevant portion of the text provides as follows:

“Member States shall ensure that the application for the measures, procedures and remedies provided for in this Directive is dismissed when the alleged acquisition, use or disclosure of the trade secret was carried out in any of the following cases: (a) for exercising the right to freedom of expression and information as set out in the Charter of Fundamental Rights of the European Union, including respect for freedom and pluralism of the media; (b) for revealing a misconduct, wrongdoing or illegal activity, provided that the respondent acted for the purpose of protecting the general public interest; (c) the trade secret was disclosed by workers to their representatives as part of the legitimate exercise of their representative functions in accordance with Union or national law, provided that such disclosure was necessary for that exercise; (e) for the purpose of protecting a legitimate interest recognised by Union or national law.”

(Directive, Art. 4.)

Fourth, the Directive requires member states to establish limitations periods for trade secrets claims, as follows: “Member States shall, in accordance with this article, lay down rules on the limitation periods applicable to the substantive claims and actions for the application of the measures, procedures and remedies pursuant to this Directive. . . . The duration of this limitation period shall not exceed six years.”  (Directive, Art. 7.)

Fifth, the Directive requires member states to establish minimum rules for protection and preservation of trade secrets during litigation, including measures that “shall at least include the possibility (a) to restrict access to any document containing trade secrets or alleged trade secrets submitted by the parties or third parties, in whole or in part, to a limited number of persons; (b) to restrict access to hearings, when trade secrets or alleged trade secrets may be disclosed, and their corresponding records or transcript to a limited number of persons; (c) to make available to any person other than those comprised in the limited number of persons referred to in points (a) and (b) a non-confidential version of any judicial decision, in which the passages containing trade secrets have been removed or redacted.”

To take full advantage of the protections provided by the new Directive, as well as the protections that will be afforded by the Defend Trade Secrets Act in the U.S., employers on both sides of the Atlantic would be wise to review their existing practices and procedures to ensure that they are taking “reasonable steps under the circumstances” to protect their trade secrets, including:

  • Reviewing IT policies and procedures for protecting sensitive information;
  • Reviewing existing employment agreements, including restrictive covenant agreements in jurisdictions where they are permitted, to ensure that they provide appropriate levels of protection permitted under applicable law;
  • Reviewing existing employment policies regarding protection of confidential information and ensuring that employees are adequately trained on the policies; and
  • Reviewing employee exiting policies and procedures to ensure that sensitive information is returned upon the end of employment.

In addition, in light of the new whistleblower protections afforded by both the EU Directive and the Defend Trade Secrets Act, employers should ensure that their policies and practices are in compliance with all applicable anti-retaliation laws and that management employees are properly trained on best practices to reduce the risks of whistleblower retaliation claims.

For more on these practical tips and background to the Directive and the Defend Trade Secrets Act, please check out our recent webinar on these topics.

shutterstock_102405310As we have previously reported in this blog, this week marks a milestone in ongoing attempts in the European Union to overhaul the existing regulatory framework for the protection of trade secrets.  Earlier today, members of the European Parliament debated the compromise text of the proposed Directive to protect trade secrets.  A full recording of the debate can be found here.

Today’s debate came on the heels of a press conference earlier in the day by MEP Constance Le Grip (European People’s Party — France), the rapporteur who has shepherded the proposed directive in the European Parliament for the past 18 months.  For those who have been following the proposed Directive, Ms. Le Grip’s comments provide an interesting explanation of the varying political considerations that produced the compromise text, including balancing the concerns of businesses and the rights of workers.

Questions posed by journalists at the press conference are perhaps more interesting.  If the questions posed by journalists (as well as the comments by many MEPs during the debate) are any indication, considerable opposition exists to the proposed directive.  While business groups and many MEPs have largely welcomed the proposed directive, other MEPs and some interest groups have expressed concern that the proposed directive will be used by companies to stifle whistleblowers and journalists.  Notably, the compromise text already includes language that expressly guarantees protection of whistleblowers, freedom of the press, and other fundamental rights, as follows:

Member States shall ensure that the application for the measures, procedures and remedies provided for in this Directive is dismissed when the alleged acquisition, use or disclosure of the trade secret was carried out in any of the following cases:

(a) for exercising the right to freedom of expression and information as set out in the Charter of Fundamental Rights of the European Union, including respect for freedom and pluralism of the media;

(b) for revealing a misconduct, wrongdoing or illegal activity, provided that the respondent acted for the purpose of protecting the general public interest;

(c) the trade secret was disclosed by workers to their representatives as part of the legitimate exercise of their representative functions in accordance with Union or national law, provided that such disclosure was necessary for that exercise;

(e) [sic] for the purpose of protecting a legitimate interest recognised by Union or national law.

See Proposed Directive [compromise text], Art. IV.   Yet despite this language, opponents of the proposed directive have argued that the directive does not go far enough in protecting whistleblowers.   Whether such concerns are wide enough to scuttle the proposed directive remains to be seen.      

A full vote on the proposed directive is scheduled for tomorrow.  For up-to-date coverage of the proposed directive, please look for an update in this blog following tomorrow’s vote.

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As a special feature of our blog—special guest postings by experts, clients, and other professionals—please enjoy this blog entry from Jeremy Morton, an English solicitor who advises in the areas of intellectual property and data protection law. 

As reported recently by Seyfarth Shaw’s lawyers in this very blog, on 13 April the European Parliament will vote on the EU Commission’s proposed trade secrets directive.  Many English legal practitioners, more or less familiar with our non-statutory protections for confidential information, will assume that nothing will change when the directive is implemented.  We already protect trade secrets pretty well, unlike other EU countries for whom reform is seen as essential in order to fill legislative voids.  But if we look more closely at the EU proposals, we find plenty of uncertainties that could arise under the EU proposals.

For starters, the English law of breach of confidence is not limited to ‘trade secrets’.

Why does it matter?

This is important not only to provide certainty for business that confidential information will be protected, but to provide comfort that businesses won’t be hit with a rush of unmeritorious claims.  The draft directive tackles that, in Article 6(2), providing that defendants should be able to ask the court for appropriate relief where a claim is “manifestly unfounded and the applicant is found to have initiated the legal proceedings abusively or in bad faith”.  We currently deal with abuse of process through sanctions such as striking-out or adverse costs awards.  But the draft directive provides that such measures may include an award of damages.  Like the current sanctions for unjustified threats in connection with intellectual property rights in the UK, this will be a trap for the unwary.

Perhaps the biggest uncertainty arises from the role of the European Court of Justice (CJEU).  When the Directive is in force, the CJEU will have jurisdiction to determine the outcome of cases where the correct interpretation of the Directive is unclear.  That will mean that the English courts will have to apply CJEU decisions, as well as themselves referring issues to the CJEU.  Our law will change.  And trade mark practitioners know how difficult things can become when one has to follow CJEU jurisprudence.

What is a Trade Secret?

Let’s look briefly at the current position in English law.  Information will be protected where it has the necessary quality of confidence and provided it has been communicated in circumstances importing an obligation of confidence.  It does not have to be a ‘trade secret’.  This equitable protection for confidentiality is separate from other measures such as contract law, the Data Protection Act, the Computer Misuse Act, database right and copyright.  It has also developed into the relatively new area of privacy protection.

Employees are under an implied duty of good faith which imports contractual obligations of confidentiality under English law.  But after their employment ends they need only preserve ‘trade secrets’, and may use information having a lesser degree of confidentiality, subject to their restrictive covenants.  For example, customer details might be protected during employment but not after.  What is a ‘trade secret’?  We may feel that we would know it when we see it.  Confidential chemical formulae sound like ‘trade secrets’, for example.  The well-known Faccenda Chicken case provides guidance here: for example, we should look at the nature of the employment, and whether the information can be easily isolated from other, non-confidential information.

Recital 1 of the draft directive gives several examples of potential trade secrets: technology; customers/suppliers (in contrast with Faccenda Chicken where customer details were not ‘trade secrets’ after employment ended); business plans; market research.  More interesting is the following cumulative definition of a “Trade Secret” in Article 2(1):

“…secret in the sense that it is not … generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question…

…has commercial value because it is secret…

…has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret”

Alarm bells are gently tinkling.  Not only is this very different from the Faccenda Chicken guidelines, but it introduces the Euro-speak notion of “circles that normally deal with the kind of information” (how do we establish who they are?), and requires a direct link between secrecy and commercial value.  Would this cover information to which employees have access because of their employment, during the term of that employment, even if not a ‘trade secret’ in the English sense?  What about a famous author, who publishes a new book under a pseudonym for artistic reasons, but whose true identity is then revealed by a trusted intermediary against their wishes?  That information arguably has more commercial value once in the public domain (although less personal value).

Also, since this directive will be concerned with “trade secrets”, does it permit the English courts to continue to protect ‘lesser’ confidential information that does not meet the “trade secret” threshold, or does it do away with such protections?  That would be surprising.  It does say (in Article 1(2a)(a) and (b)) that “in relation to the exercise of mobility of employees”, nothing in the directive offers any ground for limiting employees’ use of information not constituting a trade secret as defined in the directive,  or limiting their use of experience and skills honestly acquired in the normal course of their employment.  This seems to preserve the protections for employees under Faccenda Chicken.

Springboard Relief

The other aspect of the new legislation that will be fascinating to see unfold is its take on springboard relief.  This is where a defendant has gained a head-start by using confidential information, even if they are no longer using it as such or it is no longer confidential.  It’s a tricky area, which the English courts have discretion to tackle via the terms of any injunctive relief granted.

Article 11 of the draft directive sets out the available measures that a court may order against a defendant.  These include “the prohibition to produce, offer, place on the market or use infringing goods”.  “Infringing goods” has a special meaning here, as defined in Article 2, namely: “goods whose design, characteristics, functioning, manufacturing process or marketing significantly benefits from trade secrets unlawfully acquired, used or disclosed”.  What remains unspoken here is, first, the extent to which (if any) those goods must continue to embody any aspect of the trade secrets in question; secondly, whether the information must still be a trade secret at the time relief is granted; and thirdly whether “unlawfully” means only in breach of the trade secrets laws implementing the directive, or could include other unlawful steps under national laws.  There is plenty of room for argument on this.

Summing up, many details are far from clear (unsurprisingly), and astute English lawyers will have plenty to get their teeth into with this new legislation.  Judges in other countries may be less eager to grapple forcefully with protection of trade secrets, potentially leading to forum shopping in favour of the English courts.  And let’s not even talk about Brexit…

Jeremy Morton is an English solicitor who advises in the areas of intellectual property and data protection law.  www.harbottle.com/jeremy-morton

 

shutterstock_46364566As we reported last month in this blog, in December the European Council and representatives of the European Parliament reached a “provisional agreement” on the European Commission’s proposed Directive to protect trade secrets.  With this provisional agreement, the Council and representatives of the European Parliament agreed on compromise language to be submitted to the Parliament for approval, thus clearing the way for adoption of the proposed directive in the next few months.

At the time that we reported on this development, the compromise text was not yet available.  However, now that the Parliament and Council have completed a legal-linguistic review of the text, the full English-language version of the compromise text is now available.  With the benefit of the full text, we can now answer one final open question that we reported last month — i.e., what is the scope of the protections that will be available to trade secrets during litigation under the compromise text?

As we previously noted, the European Commission’s original text contemplated that courts in Member States may issue “Attorneys’ Eyes Only” protective orders like those that are typically used in trade secrets cases in the U.S.  Specifically, the Commission’s original text provided that:

Member States shall also ensure that the competent judicial authorities may, on a duly reasoned application by a party, take specific measures necessary to preserve the confidentiality of any trade secret or alleged trade secret used or referred to in the course of the legal proceedings relating to the unlawful acquisition, use or disclosure of a trade secret. The measures referred to . . .  shall at least include the possibility: (a) to restrict access to any document containing trade secrets submitted by the parties or third parties, in whole or in part; (b) to restrict access to hearings, when trade secrets may be disclosed, and their corresponding records or transcript.   In exceptional circumstances, and subject to appropriate justification, the competent judicial authorities may restrict the parties’ access to those hearings and order them to be carried out only in the presence of the legal representatives of the parties and authorised experts . . .

In contrast, in its draft Legislative Resolution, the European Parliament’s Legal Affairs Committee watered down this language with the following proposed language that would appear to eliminate true “Attorneys’ Eyes Only” protective orders:

The measures referred to . . .  shall at least include the possibility: (a) to restrict access to any document containing trade secrets or alleged trade secrets submitted by the parties or third parties to a limited number of persons, in whole or in part provided that at least one person from each of the parties, and, where appropriate in view of the proceedings, their respective lawyers and/or legal representatives, are given access to the document in full; (b)  to restrict access to hearings, when trade secrets or alleged trade secrets may be disclosed, and their corresponding records or transcript to a limited number of persons, provided that it includes at least one person from each of the parties, and, where appropriate in view of the proceedings, their lawyers and/or legal representatives . . .

Based on the compromise text, the Council and representatives of the Parliament appear to have adopted the Legal Affair’s Committee’s approach, albeit with different language.  The relevant portion of the compromise text now reads as follows:

Member States shall also ensure that the competent judicial authorities may, on a duly reasoned application by a party, take specific measures necessary to preserve the confidentiality of any trade secret or alleged trade secret used or referred to in the course of the legal proceedings relating to the unlawful acquisition, use or disclosure of a trade secret. Member States may also allow competent judicial authorities to take such measures on their own initiative.

The measures referred to in the first subparagraph shall at least include the possibility:

(a) to restrict access to any document containing trade secrets or alleged trade secrets submitted by the parties or third parties, in whole or in part, to a limited number of persons;

(b) to restrict access to hearings, when trade secrets or alleged trade secrets may be disclosed, and their corresponding records or transcript to a limited number of persons;

(c) to make available to any person other than those comprised in the limited number of persons referred to in points (a) and (b) a non-confidential version of any judicial decision, in which the passages containing trade secrets have been removed or redacted.

The number of persons referred to in points (a) and (b) of the second subparagraph shall be no greater than what is necessary in order to ensure compliance with the right to an effective remedy and to a fair trial of the parties to the proceedings and shall include, at least, one natural person from each party and the respective lawyers or other representatives of those parties to the proceedings.

Proposed Directive, Article 8, ¶ 2.

Assuming that this compromise text is approved by the European Parliament, legislatures and courts in Member States will no doubt take different approaches to effectuate this language.  Although the final compromise text is somewhat weaker than the protections that U.S. practitioners typically see in trade secrets litigation, on balance the compromise language provides a reasonable baseline for protection of trade secrets during litigation that is probably more than sufficient for most disputes.

The compromise text is expected to be submitted to the full European Parliament for approval in the next few months.  If the Parliament approves the text on a first reading, the European Council will approve the European Parliament’s position and the Directive will be adopted.  Member States then will be required to enact national law consistent with the Directive within two years.  We will continue to track progress of the proposed Directive as it crosses the final hurdle necessary for adoption.

shutterstock_178722866As regular readers of this blog will note, we have been tracking progress of the European Commission’s proposed Directive to protect trade secrets as it has made its way through the European Union’s complicated legislative process over the past several years. Last week, the proposed Directive crossed yet one more procedural hurdle with a “provisional agreement” on the Directive reached by the European Council (represented by the Luxembourg presidency) and representatives of the European Parliament.

The European Commission first proposed the Directive in November, 2013 to provide greater and more consistent protection of trade secrets throughout the EU’s 28-Member States. Earlier this year, the European Parliament’s Committees on Internal Market and Consumer Protection and Industry, Research, and Energy published comments and proposed amendments to the Directive.  The Parliament’s Committee on Legal Affairs subsequently issued a draft Legislative Resolution that adopted some (but not all) of the amendments proposed by the other committees.  The provisional agreement now clears the way for a vote in the European Parliament next year.

Although the text of the provisional agreement is not currently available, a press release issued by the European Council provides a general overview of the terms.  As expected, the proposed Directive will provide that EU member states must ensure that adequate civil procedures and remedies are available to redress illegal acquisition, use, and disclosure of trade secrets without undermining fundamental rights and freedoms or the public interest.  Consistent with concerns raised (and amendments proposed) by the Parliamentary committees that previously reviewed the proposed Directive, the Council and representatives of the European Parliament agreed that the proposed Directive (i) will protect whistleblowers, (ii) will not place any limitations on investigative journalism, (iii) will not place any restrictions on workers in their employment contracts, and (iv) will not affect employees’ rights to enter into collective bargaining agreements.

In addition, the press release suggests that the Council and representatives of the Parliament have reached an agreement about the limitations period for claims of trade secret misappropriation.  The Legal Affairs Committee’s draft resolution from earlier this year provided that “Member States shall ensure that actions for the application of the measures, procedures and remedies provided for in this Directive may be brought within three years after the date on which the applicant became aware, or had reason to become aware, of the last fact giving rise to the action.”  While this three-year limitations period is longer than the Commission’s original text (which proposed a limitations period of “at least one year but not more than two years), it is still somewhat short by comparison to the existing limitations period in some EU member states. (For example, in the UK, a common law claim for breach of confidence or breach of contract is six years.)  Based on the European Council’s press release, it is now clear that the Council and representatives of the European Parliament have agreed on a limitations period that “will not exceed six years.”

The press release is less clear on the protections that will be available to trade secrets during litigation.  The Commission’s original text provided that:

Member States shall also ensure that the competent judicial authorities may, on a duly reasoned application by a party, take specific measures necessary to preserve the confidentiality of any trade secret or alleged trade secret used or referred to in the course of the legal proceedings relating to the unlawful acquisition, use or disclosure of a trade secret. The measures referred to . . .  shall at least include the possibility: (a) to restrict access to any document containing trade secrets submitted by the parties or third parties, in whole or in part; (b) to restrict access to hearings, when trade secrets may be disclosed, and their corresponding records or transcript.   In exceptional circumstances, and subject to appropriate justification, the competent judicial authorities may restrict the parties’ access to those hearings and order them to be carried out only in the presence of the legal representatives of the parties and authorised experts . . .

In other words, the original text contemplated “Attorneys’ Eyes Only” protective order like those that are typically used in trade secrets cases in the U.S.

In contrast, in its draft Legislative Resolution, the Legal Affairs Committee watered down this language with the following proposed language that would appear to eliminate true ““Attorneys’ Eyes Only” protective orders:

The measures referred to . . .  shall at least include the possibility: (a) to restrict access to any document containing trade secrets or alleged trade secrets submitted by the parties or third parties to a limited number of persons, in whole or in part provided that at least one person from each of the parties, and, where appropriate in view of the proceedings, their respective lawyers and/or legal representatives, are given access to the document in full; (b)  to restrict access to hearings, when trade secrets or alleged trade secrets may be disclosed, and their corresponding records or transcript to a limited number of persons, provided that it includes at least one person from each of the parties, and, where appropriate in view of the proceedings, their lawyers and/or legal representatives . . .

Unfortunately, the Council’s press release does not explain how the provisional agreement resolves this conflict but states only that “[w]here necessary, confidentiality of trade secrets will also be preserved during the course of and after the legal proceedings.” 

Now that the provisional agreement has been reached, the Parliament and Council will conduct a legal-linguistic review of the text.  Once that process has been completed, the proposed Directive will then be submitted to the full European Parliament for approval.  Currently, the European Parliament is expected to vote on the initiative around March 2016, but the precise date for a first reading has yet to be determined.  If enacted, Member States will be required to enact national law consistent with the Directive within two years.

We will continue to track progress of the proposed Directive, as well as the proposed Defend Trade Secrets Act in the U.S. Congress (which currently has 20 co-sponsors in the Senate and over 100 co-sponsors in the House).  In the meantime, companies on both sides of the Atlantic should review their current procedures for protecting trade secrets to ensure that they can fully take advantage of these proposed laws if enacted next year.  For practical tips on ways to maximize protection of trade secrets in the workplace, please check out the best practices highlighted in our 2014 webinar series.

 

As a special feature of our blog –special guest postings by experts, clients, and other professionals –please enjoy this blog entry by Bartosz Sujecki, an attorney from Bavelaar Advocaten in the Netherlands, on the European Commission’s proposed Directive to provide harmonized trade secret protections in Europe.

-Robert Milligan, Editor of Trading Secrets

By Bartosz Sujecki

The protection of trade secrets is very important for every company. At the beginning of a patent, a design or a copyright, there is an idea. The idea must be kept secret in order to enjoy the later protection. Therefore, the protection of know-how is as well essential for the protection of intellectual property rights. In the European Union, the protection level of know-how differs in the Member States. Some Member States do not have any rules regarding the protection of know-how. In only few Member States, the national laws define the term trade secrets or protect trade secrets. Additionally, the national laws of all Member States do not have the opportunity to file for a cease and desist order against infringers of trade secrets. Besides that, the rules on the calculation of damages for the infringement of intellectual property rights are inadequate for the infringement of trade secrets. In addition, the national rules do not have criminal sanctions in cases of infringement or even theft of trade secrets. Another problem of the national laws of the Member States is that they do not have any rules regarding the protections of trade secrets during litigation.

Due to the divergences in protection of trade secrets in the different national laws of the Member States, companies in the European Union have called for the introduction of harmonized rules for the protection of trade secrets within the European Union. The absence of rules regarding the protection of trade secrets is having negative effect of the Internal Market in the European Union.

On 28th November 2013, the European Commission has therefore introduced a Proposal for a Directive on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure, COM (2013), 813 final. With the introduction of these measures, the European Commission aims to improve the effectiveness of legal protection of trade secrets in the European Union and ensure the competitiveness of European business and research bodies.

In its first Chapter, the proposal defines the scope of application as well as the meaning of trade secrets. According to article 2 of the proposal, trade secrets must have three elements in order to gain protection: First, the information must be confidential. Second, the information must be of commercial value due to the confidential character. Third, the trade secret holder should have made reasonable efforts to keep the information secret. The definition is based on the definition of “undisclosed information” as laid down in the TRIPS Agreement.

In Chapter II, the circumstances and requirements are set out under which the acquisition, the use and the disclosure of trade secrets is considered to be unlawful, see article 3 of the proposal. If these requirements are fulfilled, the holder of the trade secrets is entitled to seek the application of the measures and remedies as laid down in the proposed directive. The key requirement in this context is the absence of consent of the trade secret holder. In addition, article 3 of the proposal also determines that the use of trade secrets by a third party is as well unlawful, if that third party was aware, should have been aware, or was given notice of the unlawful act.

Chapter III of the proposal establishes the measures, procedures and remedies that the Member States shall make available to the holder of trade secrets in case of unlawful acquisition, use and disclosure of these trade secrets by a third party. Section 1 of Chapter III contains the general principles applicable to the civil enforcement instruments in order to prevent and repress acts of trade secret misappropriation, namely effectiveness, fairness and proportionality, see article 5. Article 6 of the proposal safeguards to prevent abusive litigation. An interesting provision is article 7 of the proposal, which introduces a period of limitation according to which actions for the application of the measures, procedure and remedies must be brought within at least one year but no more than two years after the date on which the applicant became aware, or had reasons to become aware, of the last fact giving rise to the action. Article 8 of the proposal aims to safeguard confidentiality of trade secrets in case of discloser within court proceedings. Section 2 provides for provisional and precautionary measures in the form of interlocutory injunctions or precautionary seizures of infringing goods.

Finally, Sections 3 of Chapter III (articles 11-14 of the proposal) provides for the measures that may be ordered with the decision of the merits of the case. Article 11 of the proposal provides for the prohibition of the use or the disclosure of the trade secrets, the prohibition to make, offer, place on the market or use infringing goods and corrective measure. The corrective measures request the infringer to destroy or deliver to the holder of the trade secrets all information he holds with regard to the unlawfully acquired, used or disclosed trade secrets. The rules regarding the compensation of damages are set out in article 13 of the proposal. The calculation of the damages is based on all the relevant factors, such as the negative economic consequences, which the injured party has suffered. However, in certain cases other than economic factors, such as the moral prejudice caused to the trade secret holder, can be taken into consideration in the calculation of the damage.

With these proposed rules, the European Commission introduced a new framework of protection of trade secrets. In general, these new instruments can be seen as an appropriate solution for the protection of trade secrets in the European Union. On aspect of the proposal needs, however, still to be adjusted. One of the key issues of the enforcement of intellectual property rights as well as trade secrets is evidence. This proposal does not contain any rules with respect to the facilitation of the burden of proof. Therefore, this proposal should be adjusted on this point.

Bartosz Sujecki, PhD, partner Bavelaar Advocaten, Amsterdam, the Netherlands.

As previously reported here, the EU Council issued its position on the directive in the spring of 2014. In general, the Council supports the Directive with some minor changes: a) the Council proposes a six–year limitation period on suing over trade secrets compared to the two years proposed by the Commission; b) the Council’s version clarifies that national laws may provide greater protection for trade secrets than that set out in the directive; and c) and the Commission’s draft required a trade secret holder to show that an alleged infringer had acted ‘intentionally’ or with ‘gross negligence’ and the Council has removed this requirement. The Council has also requested changes to allow the restricted disclosures of trade secrets during and after trade secret litigation which are broader than permitted in the Commission’s proposal.

The Directive is currently being reviewed by the EU Parliament’s Legal Affairs, Internal Market, and Industry Committees and their decisions have not been released yet. While the Parliament has not yet voted on the proposal, it is expected that the matter will be scheduled for a first reading in the Parliament during the first half of 2015.

Seyfarth IP, International and Trade Secret Attorneys are participating in the ITechLaw 2014 European Conference in Paris, France this week.

ITechLaw is a not-for-profit organization established to inform and educate lawyers about the unique legal issues arising from the evolution, production, marketing, acquisition and use of information and communications technology.

Seyfarth partner Robert Milligan, an ITechLaw Member of the Board of Directors, will facilitate a discussion with some of the over 300 international attorneys in attendance on “Trade Secret Protections and Legislative Developments in the US and EU,” on Friday, October 17th.

Trade secrets and proprietary information are an often overlooked form of intellectual property in some countries or not considered intellectual property in others. Nevertheless, many companies derive tremendous value from such information, and litigation often ensues when misappropriation or breach occurs. Additionally, advances in technology continue to facilitate and encourage the proliferation of information.

The discussion will cover the latest developments in the United States and EU to enhance trade secret protections, including the proposed federal legislation to create a civil cause of action for trade secret misappropriation in federal court and the EU Directive to increase the trade secrets protections afforded to companies with operations in the EU which may greatly enhance cross-border certainty and uniformity across Europe.

The IP workshop will discuss the proposed legislation, the various interests involved, and the pros and cons of such legislation, its chances of success, and it will facilitate a lively discussion of the basic principles any legislation should contain. The discussion will also address whether increase protections for trade secrets will stifle creativity and employee mobility.

The outcome of the discussion will provide a critical assessment of trade secrets, how they are presently protected, and how the United States and Europe are proposing to increase protections for trade secrets, as well as a greater insight on the pros and cons of providing greater protections for trade secrets, while still promoting creativity and innovation.

For reference, please find a discussion paper prepared on these issues for the presentation.

Seyfarth will have a staffed table at the event, Seyfarth attorneys Ilan Barzilay, Ming Henderson, and Robert Milligan are scheduled to attend and participate. For more information, please click here.