The EU Parliament recently approved new rules against industrial espionage. The draft directive on trade secrets is intended to help businesses safeguard their innovative ideas, decrease their exposure to misappropriation of trade secrets and grant them redress for theft or misuse of trade secrets.

The draft directive was shepherded through by the EU Commission in the wake of statistics showing that companies are increasingly exposed to theft of trade secrets. Existing national laws are divergent in the manner and extent to which they protect trade secrets with the result that trade secrets enjoy a different level of protection through the EU.

The proposed directive aims to achieve a level of harmonisation across the EU member states that will allow the creation of a safe and trustworthy environment for the protection of the intangible assets and know-how of European businesses, the rationale being that the current discrepancies throughout Europe deter cross-border investment.

The draft directive seeks to protect valuable information or knowledge that an enterprise has developed through research, experience or inventiveness. This gives the business a competitive edge over other operators on the market, which can be exploited and financial benefits drawn from it.

Intellectual property rights, such as patents, design rights or copyright, are used by businesses in protecting their valuable know-how and business information. However, there are certain types of information or knowledge that cannot be covered in these ways.

Skills gained by employees in the normal course of their employment are excluded from the definition of trade secrets

Business plans, customer lists, the results of marketing studies, recipes for foodstuffs or fragrances and know-how relating to manufacturing processes may fall outside the protection of intellectual property rights. But these are all examples of trade secrets and can be protected as such. Trade secrets can be relied upon by businesses in such cases to protect their competitiveness.

The draft directive introduces an EU-wide broad definition of “trade secret” that embraces know-how, business information and technological information. Three essential requisites must be fulfilled under the directive for information or knowledge to constitute a trade secret.

Firstly, the information must be secret in the sense that it is not generally known or readily accessible. Secondly, the information has commercial value because it is secret. Thirdly, the information has been subject to reasonable steps to keep it secret. Trivial information and the experience and skills gained by employees in the normal course of their employment are excluded from the definition of trade secrets. Likewise, information that is generally known among employees or is readily accessible to them is excluded.

Acquisition, use and disclosure of trade secrets may be unlawful. An unlawful acquisition of a trade secret may occur if the infringer accesses or copies without authorisation, bribes, steals, breaches or induces to breach a confidentiality agreement or engages in any other conduct which is considered contrary to honest commercial practices. Unlawful use or disclosure of trade secrets arises when use or disclosure of such information is made.

The draft directive only deals with unlawful conduct by which someone acquires or discloses, without authorisation and through illicit means, information with commercial value that companies treat as confidential in order to keep a competitive advantage over their competitors.

In particular, the draft directive provides that the acquisition, use or disclosure of a trade secret for the purpose of exercising the right to freedom of expression will not be unlawful. This exception is intended to protect journalistic rights.

Journalists will remain free to investigate and publish news on companies’ practices and business affairs. A whistleblowing defence is included in the directive. The defence would apply whenever a trade secret is acquired, used or disclosed to reveal misconduct, wrongdoing or illegal activity in the public interest.

The draft directive sets out the civil redress measures for businesses. The courts will be able to grant injunctions of appropriate duration, restraining use and disclosure of confidential information, and damages against infringers. During the course of legal proceedings, the confidentiality of trade secrets must also be preserved. For this reason, court officials, witnesses, experts, the parties and their lawyers would be bound by confidentiality in relation to disclosed trade secrets that are the subject of those proceedings. Such obligation would remain in force notwithstanding the end of the civil process.

The EU Council will be formally adopting the directive in the course of the next couple of months.

Josette Grech is adviser on EU law at Guido de Marco & Associates.

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