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EU to introduce new regime to protect trade secrets

31-05-2016

New legislation represents an attempt to harmonise approach to protecting trade secrets across Europe.

The European Council has voted to adopt a new trade secrets directive in an attempt to consolidate the various approaches taken at present in the different member states; some have specific trade secret legislation, whereas others rely still on contract law (e.g. the UK). By harmonising the law in this area, the EU hopes to encourage cross-border investment and innovation.

EU member states will have two years to implement the new directive into their national laws. Among other things, it includes new rules against the unlawful acquisition, use and disclosure of trade secrets. However, it also allows that the acquisition of trade secrets will be 'lawful' if they are obtained by: independent discovery or creation, reverse engineering, or any other 'practice that conforms with honest commercial practices'.

What are trade secrets?
Trade secrets are a valuable form of intellectual property, but are often overlooked as a result of their intangible nature. However, trade secret law exists to protect confidential information from which its owner derives value as a result of keeping it secret: the recipes for Coca-Cola and Kentucky Fried Chicken are often cited examples.

Under the EU Directive, a 'trade secret' is described as any information that: (i) is 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; (ii) has commercial value because it is secret; and (iii) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

What constitutes 'reasonable steps' may vary according to the trade secret’s value. To maintain the desired secrecy in practice, employees generally have to sign extensive confidentiality agreements or employment agreements that contain such clauses. However, once these agreements have been signed, there is the question of enforcement: pursing claims of trade secret theft is notoriously costly and challenging to prove. High-profile disputes in this area include the famously messy battle between doll manufacturers Barbie and Bratz.

Contentious exceptions
The new EU directive also provides for various exceptions. One of the most contested of these relates to the provisions against whistle blowing. In particular, it states that the new trade secret protection does not extend to cases in which information is disclosed for the purpose of revealing relevant misconduct, wrongdoing, or illegal activity (so long as the discloser was acting to protect the public interest). Critics of this exception argue that it may be misapplied and that what constitutes 'public interest' is currently not clear.

For more information on capturing and protecting trade secrets, contact our team.