Finally, on 14 April 2016, the EU Trade Secrets Directive was approved by the EU Parliament… but it was very close to the wire.
After a very long gestation period (it was first considered in June 2012) the Parliament finally voted in favour 503/131 of its provisions being adopted.
This was despite protestations that it presented a major threat to press freedom, transparency and to would be whistle blowers. The main purposes of the Directive are:-
- To harmonise the law of trade secrets throughout the EU. Surprisingly there is no legislation on this subject in many EU states, including the UK which relies upon common law and precedent;
- To facilitate trade, promote innovation, investment and cross-border collaboration and
- To assist to prevent the theft of trade secrets and set out a clear and consistent set of civil remedies and sanctions. Notably it does not include any criminal sanctions for now at least.
Trade secrets can offer huge potential in terms of complimentary IP protection. They can allow potentially perpetual monopolies, provided they are kept secret. This can relate to technical knowhow and commercial information. The most common example given is perhaps the recipe for Coca-Cola.
For the first time ever there will be a clear definition of what amounts to a trade secret. Clearly the information must be secret but this is qualified by a requirement for it to be not generally known or readily accessible within circles that normally deal with that information. Of course the information must have commercial value and there must have been reasonable efforts by the holder of it to keep it confidential.
The vote in the EU Parliament came hot on the heels of the breaking of the Panama papers and this gave encouragement to the protestors against the Directive. The debate in the EU Parliament focused on the alleged chilling effect of the Directive on press freedoms, whistle blowers and employee mobility etc.
However these objections were met with good answers.
These are in the form of exceptions to when trade secrets will be recognised and enforced as set out in amendments to the Directive. These aim to create exceptions to protection where the disclosure is for the purposes of freedom of expression and information, revealing misconduct, wrongdoing or illegal activity if the party concerned is acting in the public interest.
There are also some further exemptions for employee mobility. It is not to be restricted by limiting use of information which does not constitute a trade secret, use of experience and skills honestly acquired (work product) and/or imposing restrictions not in accordance with EU/National law.
It seems difficult to argue that these provisions do not give adequate protection and from the results of the vote it seems that most MEPs agreed with this. Also the Directive offers helpful practical protections in the context of any actual litigation based on trade secret rights and sanctions also exist for any applicant found to have made a claim which turns out to have been manifestly unfounded.
With the recent US Senate’s unanimous approval of the Defend Trade Secrets Act in the US, which creates a new federal private right of action for trade secret misappropriation and generally improves the US protection and remedies available for theft of trade secrets, the EU Directive is to be welcomed as at least aiming to achieve more of a level playing field within the EU and vis a vis the USA.
The passing of the Directive (which is expected to be adopted shortly by the EU Council) and in due course local legislation in member states (within 2 years) reflect its terms should raise the profile of trade secrets and confidential information as a valuable alternative form of IP protection.
This is especially so if the information is just outside the realms of being patentable. It should also encourage IP rich technology companies to take the regime seriously in their overall IP policy and strategy planning and should represent a viable tool and incentive for them in cross-border sharing and exploitation of these valuable and secret ideas.
On April 28, 2016