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Not a secret: the new Trade Secrets Directive

23/06/2016

On 5 July 2016 the Trade Secrets Directive (2016/943/EU), established by the European Union, will come into force. The EU member states will have two years to transpose the Directive into national law. The goal of the Directive is to create a better protection of trade secrets, without affecting several public interests. What will the directive bring to the table? Below a brief summary and the (possible) added value for the business community.

What is a trade secret?

Trade secrets come in all shapes and sizes. Trade secrets for example include production techniques, marketing concepts, turnover figures, margins and client lists. Most companies possess such competitively sensitive information.
According to the Directive, information can be qualified as a trade secret if the following cumulative criteria are met:

  • The information is confidential;
  • The information has commercial value; and
  • The owner of the trade secret has taken reasonable measures to keep the information confidential.

These reasonable measures could for example be: implementing technical security measures or arranging for parties involved to sign a nondisclosure agreement (NDA).

What is the scope of the Trade Secrets Directive?

The Directive prohibits the acquiring, disclosure and use of trade secrets that have been obtained unlawfully. Examples of illegal ways to obtain trade secrets are industrial espionage, the hacking of computers and buying trade secrets from employees.
The Directive does not prohibit 'reverse engineering', in other words: the investigation of a product to discover the exact internal operations of the product or to deduce the requirements that are met by the product. Furthermore, the Directive provides scope for journalists to conduct journalistic research, for whistleblowers to tell their stories and for employees who work with trade secrets to change jobs.

What actions can be claimed in a civil procedure?

The Directive mentions several possible actions that companies can bring against 'infringers':

  • The discontinuation of publication, or a prohibition to use the trade secret;
  • A prohibition to produce, commercialize, use, import or store goods that infringe upon trade secrets;(infringing goods are goods that are produced or designed using illegally obtained trade secrets)
  • The seizing of the infringing goods;
  • The destruction of documents, products and electronic files that hold the trade secret;
  • The destruction of the infringing goods;
  • Damages for the damaged suffered. For example economic damages and loss of profits, but also moral damage and reputational damage;
  • The publication of the court decision.

The costs of the measures are generally borne by the infringer.

How do we handle trade secrets during legal proceedings?

During legal proceedings parties can request the court to treat certain documents confidential. In that case secrecy regarding those documents is imposed upon the parties and their lawyers. In principle this duty of confidentiality remains in force also after the proceedings are finished.
Furthermore, the court may decide to grant access to documents that hold trade secrets to a limited amount of people; at least one person per party and their lawyers. If a judge deems certain information confidential, this information will not have to be included in the (public) decision.

When will the changes come into force?

The Trade Secrets Directive will come into force on 5 July 2016, after which the implementation period amounts to two years. The Netherlands will thus have to amend the Dutch legislation to the Directive before 5 July 2018.

Concluding remarks

The establishment of a single directive for the protection of trade secrets within the European Union is welcomed. The directive clarifies possible legal actions for companies that are confronted with the theft of their trade secrets. The directive concludes the, currently extremely fragmented, situation in European Union where each member state has its own approach towards trade secrets. It is to be expected that the implementation of the directive (and the clarification by the European Court of Justice) will give us clarity and 'tools' concerning trade secrets.

Authors

Picture of Rogier de Vrey
Rogier de Vrey
Partner
Amsterdam