EU: Trade Secret Law Reforms
Since the EU Trade Secret Directive came into force, various Member States have revised their trade secret laws. This table provides you with an overview of 16 national law reforms following the Directive.
Changes since implementation of directive
In Austria, a set of new provisions was added to the Unfair Competition Act to implement the Directive. The new provisions require companies to take adequate measures to protect their business secrets from disclosure in order to benefit from the extended catalogue of sanctions that was introduced by the implementing act. This means that companies must identify their know-how and take active steps to protect it, such as making sure that employment contracts contain post-employment confidentiality obligations, implementing IT-guidelines that prohibit storage of confidential information on external data carriers, providing access on a need-to-know basis, holding regular staff trainings, and checking the system for security gaps. Unfortunately, the Austria legislator has not taken the opportunity to introduce more effective measures to preserve evidence, which would have further improved the enforcement of trade secret theft.
The Directive was transposed in Belgium by introducing (through the Trade Secrets Act) new provisions in already existing laws (the Code of Economic Law, the Judicial Code and the Act on Employment Contracts). Most importantly, trade secrets, lawful and unlawful acts as regards trade secrets and infringing products have now been defined, particular civil enforcement measures have been put into place and safeguards have been introduced to protect the confidentiality of trade secrets in the framework of judicial proceedings. To make sure that their trade secrets are actually considered as trade secrets, the holders of trade secrets now have to take and, above all, to document appropriate measures to maintain secrecy, which have often been incomplete. Many companies may therefore need to revise and concretize employment contracts and NDAs, systematically review existing trade secrets and the corresponding technical and organizational protective measures and potentially optimize their system for monitoring and protecting trade secrets.
The Directive was transposed into the Bulgarian Protection of Trade Secrets Act, which increased the protection of trade secrets beyond the context of unfair competition. At present, proceedings for claiming damages in court and for pleading for sanctions for unfair competition by the competition authority can run in parallel. The new act uses the same definitions for a trade secret, trade secret holder, infringer and infringing goods, but the at the same time it goes a step further by ensuring protection against not only infringing goods but also infringing services. To gain the legal protection granted by the new law, companies are required to take reasonable steps under the circumstances to keep the confidential information secret. For example, they should establish or strengthen their internal regulations governing the usage of confidential information; revise their contracts with third parties; take measures aimed at restricting access to such information by technical and other means.
Even before the Directive 2016/943 was adopted, trade secrets were protected in the Czech Republic under unfair competition rules. Therefore, it was not necessary to change/amend substantive law in the Czech Republic. Nevertheless, Czech law did not provide for certain specific remedial measures for protection of trade secrets as foreseen by the Directive 2016/943. Based on the similarity of the remedial measures provided for in the Directive 2016/943 with those provided for in the Directive 2004/48/EC on the enforcement of intellectual property rights (which is implemented in the Act on enforcement of industrial property rights), the Directive 2016/943 was implemented by amendment of one provision into the existing Act on enforcement of industrial property rights which was renamed to the Act on enforcement of industrial property rights and on protection of trade secrets.
The Directive was implemented into a French Law (Law No 2018-670 of 30 July 2018) with its application decree (Decree No 2018-1126 of 11 December 2018). The implementation is generally in line with the Directive and the new French regime is more protective. In this context, the companies will have to strengthen their measures to protect trade secrets. French courts have already started to apply the new texts. For instance, on a patent decision “Conversant” dated 16 April 2019, the Paris Court of Appeal authorized confidential legal submissions and in camera hearing.
The Directive was transposed into a new comprehensive law on the protection of trade secrets. In particular, the requirements for the protection of trade secrets have been increased and the standard level of protection under criminal law has been somewhat reduced. The holders of trade secrets now have to take and, above all, to document appropriate measures to maintain secrecy, which have often been incomplete. In order to maintain the existing level of protection, many companies therefore need to revise and concretize employment contracts and NDAs, systematically review existing trade secrets and the corresponding technical and organizational protective measures and potentially optimize their system for monitoring and protecting trade secrets.
The Directive was transposed into a new comprehensive law on the protection of trade secrets. The new law is drafted on the model of intellectual property laws, as a result of which trade secrets and know-how now enjoy a special protection similar to that of intellectual property rights (prior to the implementation trade secrets and know-how were protected under the regime of personality rights). The new law explicitly states that trade secrets and know-how are transferable and licensable rights (earlier this was not clear from the law, however the legal practice already handled them as such). The sanctioning regime of infringing these rights has been somewhat widened, introducing the possibility of obliging the infringer to pay monetary compensation instead of applying the objective sanctions, if the circumstances of the case do not justify the application of the objective sanctions. Besides the objective sanctions or the monetary compensation, damages may also be claimed under general civil law rules. The new law sets out that the amount of the compensation or the damages may not be less than the license fee lost by the right holder as a result of the infringement.
Italian Code of Industrial Property already provided the protection of “secret information” similar to the rules indicated by the Directive for "trade secrets". Particular attention shall now concern the unlawful acquisition, use and disclosure of trade secrets; it is considered unlawful whenever a person, at the time of the acquisition, use or disclosure, knew or ought, under the circumstances, to have known that the trade secret had been obtained directly or indirectly from another person who was using or disclosing the trade secret unlawfully. In this context it will not therefore be sufficient to adopt generic NDAs or refer to loyalty obligations, but trade secrets shall be identified as well as the character of the information transmitted properly communicated, also in order to be able to sustain, in a possible judgment, the fault ( or the fraud) of the discloser (the subjective element can also be considered for the purpose of defining the damage).
The Directive was transposed into a new comprehensive law on the protection of trade secrets on June 26th (here) after a one year delay. The recent Luxembourg Law is a literal transposition of the EU Directive and notably give a definition of “trade secrets” which was until now only defined by the court during a proceeding. The requirements for the protection of trade secrets have been increased. The holders of trade secrets now have to take and, above all, to document appropriate measures to maintain secrecy, which have often been incomplete. In order to maintain the existing level of protection, many companies therefore need to revise and concretize employment contracts and NDAs, systematically review existing trade secrets and the corresponding technical and organizational protective measures and potentially optimize their system for monitoring and protecting trade secrets. Finally, the holders of trade secrets will only have 2 years after the date they become aware of the violation and the identity of the infringer to request injunction, corrective remedies or even to claim damages in court.
The Directive has been transposed into a separate Trade Secret Act ("TSA") which has entered into force on 23 October 2018. The implementation is generally in line with the Directive; the Dutch legislator did not decide to introduce any more protective rules. The TSA has introduced a special provision providing for reimbursement of the legal costs in trade secret proceedings. This provision looks a lot like the special provision for reimbursement in IP laws (further to art. 14 of the Enforcement Directive). However, where the IP provision obliges the Dutch Court to award a substantial amount of the legal costs, the TSA provision allows the Court to award a substantial amount of the legal costs. The limitation period to initiate civil proceedings in the Netherlands is 5 years. The TSA introduces rules that also allow for confidentiality arrangements in proceedings that do not involve trade secret infringement, e.g. patent infringement proceedings where also trade secrets may be discussed. The new rules even allow for a "confidentiality club" in such non-trade secret proceedings, only consisting of lawyers (and no persons from the parties involved). The TSA explicitly stipulates that counterfeit seizure and seizure of evidence in case of trade secret infringement is possible as preliminary measures. Finally, the option in the Directive that infringing goods can be donated to a charitable organisation is not implemented in the Dutch law.
Polish legislator decided to transpose the Directive into the national legal system by amending several Polish legal acts. The implementation of the Directive did not change the existing scope of the information constituting a trade secret (as already binding provisions provided the relevant definition in this scope) but specified it in a more precise manner. However, compering to the Directive, Polish law presents different approach to regulating the obligations of the companies that must be met in order for information to be considered as a trade secret. Instead of "reasonable actions", the Polish legislator used the concept of "due diligence". In order to maintain an adequate level of protection, many companies may need to revise existing agreements and provisions concerning protective measures included in e.g. NDAs, employment agreements and cooperation agreements.
The Directive was transposed into the Industrial Property Code on 10 December 2018. It has been transposed to protect the holders of trade secrets. However, the Code only protect secrets that meet certain requirements, including the fact that business secret holders must take all necessary steps to keep information secret. In view of this change, which entered into force on 1 January 2019, it is necessary for companies to update all information their possession about the secrets they hold.
In Romania the EU Trade Secrets Directive received a late implementation through Government Emergency Ordinance no. 25/2019, which entered into force on 19 April 2019. Therefore, it is currently difficult to determine the full extent of its impact upon the national market, which remains to be monitored in the upcoming period. It is worth mentioning however that the above-mentioned Ordinance appears to closely implement the provisions in the EU Trade Secrets Directive and that there are no significant deviations.
The Directive was transposed into national legislation in 2017 by way of an amendment to the Commercial Code. The term “entrepreneur” was changed to “proprietor of trade secrets“ in all provisions concerning trade secrets. Further, the scope of possible violations of trade secrets was broadened in order to include as many unlawful instances as possible. Finally, the Commercial Code introduced new provisions on the instruments of protection against violations of trade secrets, such as urgent measures, remedial measures and the publication of judicial decisions.
The Directive has been transposed into Spanish law through Law 1/2019 of 20 February 2019 on Trade Secrets. Until then, there was no specific law in Spain regulating trade secrets, which were protected through different rules in the Criminal Code, in the Unfair Competition Act and through confidentiality clauses. The new regulation defines the concept of trade secret, regulates its patrimonial nature and, above all, creates defense tools so that the company that considers its trade secrets violated can act against the offender. In order to properly protect their trade secrets, companies will need to demonstrate that they have both technical and legal protection protocols in place to prevent the leakage or disclosure of their confidential information.
Trade secrets have historically been protected in the UK by the “common law” of confidentiality, with no formal statutory provision. Last year, the Trade Secrets (Enforcement, etc.) Regulations 2018 (the “Regulations”) implemented the Directive in the UK, becoming the first codified legislation on trade secrets in the UK. The Regulations exist alongside (rather than replacing) the common law action for breach of confidence. The statutory provisions now provide increased legal certainty for UK businesses by providing for a definition of ‘trade secrets’ and include an express requirement of reasonable steps to keep it a secret by those lawfully in control of such information. Whilst the Regulations do not introduce any new powers as such, existing interim and final legal remedies for infringement have been extended to include compensation in lieu of a final injunction or order where the infringer knew or ought to have known that trade secrets were obtained unlawfully (section 17). Businesses should be looking to implement or continue to maintain procedures as “reasonable steps” for managing the use of trade secrets by optimising IT systems for data encryption when dealing with third parties, providing training to employees likely to access confidential information and fortifying NDAs with suitable confidentiality provisions.
Tom Scourfield, Elijha Wong