EU Trade Secrets Directive enters into force on 5 July 2016

In the knowledge economy, the protection of trade secrets has become ever more important. Indeed, commercial and technical information, such as pricing information, market research, corporate strategy and technical knowhow, often gives a company its competitive and innovative edge. However, conventional intellectual property rights, such as copyright, patent and trademark law, do not always adequately protect such valuable knowhow. Moreover, as a result of digitisation, knowhow can easily be copied, transferred and disseminated on a global scale. The EU Trade Secrets Directive, which enters into force today, 5 July 2016, sets up a minimum standard for trade secret protection across the European Union.

Directive 2016/943, generally known as the EU Trade Secrets Directive, has been in the EU pipeline for quite some time: the European Commission already proposed a draft directive that was to align existing laws against the misappropriation of trade secrets across the EU as far back as November 2013.

The draft EU Trade Secrets Directive was met with a fair amount of resistance from the public: amongst other things, critics feared that it would lead to the criminalisation of journalists and whistleblowers, who might publish information that companies consider to be secret. Moreover, it was said that the draft Directive would jeopardise the free movement of workers, as it would diminish employees’ rights to use knowhow acquired in a previous role, and that it threatened the public’s right to access public interest information. Various petitions were launched against the Directive’s adoption, leading to soothing statements of EU officials that the right to freedom of expression and information set out in the European Charter for Fundamental rights were not at all at risk.

The European Parliament and the Council reached a provisional agreement on the text of the Directive on 15 December 2015. The final text of the EU Trade Secrets Directive was approved by the European Parliament in a legislative resolution on 14 April 2016 and unanimously adopted in the Council on 27 May 2016. On 15 June 2016, the Directive was published in the Official Journal.

The key elements of the EU Trade Secrets Directive are:.

• Definitions:

Article 2, §1, provides that information will be considered a “trade secret” if the following three requirements are met:

1. it 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 this kind of information;
2. it has commercial value because it is secret; and
3. it has been subject to reasonable steps (under the circumstances) to keep it secret by the person lawfully in control of the information.

This definition reflects the wording of Article 39 TRIPS. 

• Acquisition, use and disclosure of trade secrets:

Articles 3 and 4 of the Directive determine when the acquisition, use and/or disclosure of a trade secret shall be considered either lawful or unlawful. There will be an unlawful acquisition of a trade secret if any embodiment of this trade secret is accessed, appropriated or copied without the trade secret holder’s consent or through another unfair commercial practice. Use or disclosure of a trade secret without the trade secret holder’s consent will be unlawful in case of unlawful acquisition of the trade secret or in case such use or disclosure is in breach of a duty of confidentiality and/or a duty to limit the trade secret’s use. Any acquisition of a trade secret will be lawful (i) if it is obtained either independently, by studying or testing a publicly available product or object, through the exercise of the right to information and consultation by workers(’ representatives) or through honest commercial practises; or (ii) if it is required or allowed by law. In the latter case, the use or disclosure of the trade secret(s) shall be lawful as well.

Furthermore, Article 5 includes a number of exceptions, which are aimed at reassuring advocates of the public interest. Any acquisition, use and/or disclosure of trade secrets is legal (i) if it takes place in order to exercise the right to freedom of expression and information; (ii) if its aim is to reveal misconduct, wrongdoing or illegal activity, in a bid to protect the general public interest; (iii) in case there is a necessary disclosure by workers to their representatives as part of said representatives’ functions; and/or (iv) if it is aimed at protecting a legitimate public interest. It is said that these measures ensure that the EU Trade Secrets Directive does not pose additional limitations for the work of investigative journalists and/or whistleblowers (see also Recitals 11 and 19). As regards employee mobility, the Council has stated that the Directive does not limit employees’ rights to use the experience and skills which they have honestly acquired in the normal course of their employment.

• Measures, procedures and remedies:

According to the Directive, the Member States will have to set in place the necessary measures, procedures and remedies to ensure the availability of civil redress against the unlawful acquisition, use and disclosure of trade secrets. 

These measures, procedures and remedies will have to be fair, effective and dissuasive and may not be unnecessarily complicated or costly, nor may they entail unreasonable time limits or unwarranted delays (Article 6). The principle of proportionality should be heeded and any abuse of process should be prevented (Article 7). The limitation period for claims based on the Directive may not exceed six years (Article 8). If required, measures should be available to preserve the confidentiality of trade secrets in legal proceedings (Article 9). The competent judicial authorities should be given the possibility to order certain provisional and precautionary measures to halt unlawful use or disclosure of the trade secret(s) when certain specific conditions are fulfilled (Articles 10 and 11). As regards measures resulting from a decision on the merits, the Member States should ensure that the competent judicial authorities may impose injunctions as well as certain corrective measures, after having taken into account the specific circumstances of the case (Articles 12 and 13). Lastly, trade secret holders should be entitled to claim “appropriate” damages (Article 14) and may request the competent judicial authorities to have their decision published in full or in part (Article 15).

The Member States now have a maximum of two years to incorporate the Directive’s provisions into domestic law. The Member States may thereby, under certain conditions, provide more far-reaching protection than what is set forth in the Directive.