On 15 December 2015, the European Council and representatives of the European Parliament reached a consensus on the European Commission's proposed Directive on "the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure." The Commission's original proposal of November 2013 was part of its wider Europe 2020 strategy, in which the Commission has undertaken "to create an Innovation Union, protecting investments in the knowledge base, reducing costly fragmentation, and making Europe a more rewarding place for innovation." The compromise text of the Directive has yet to be adopted by the European Parliament.
At present, notwithstanding the TRIPS Agreement (and notwithstanding the fact that trade secrets are among the most widely used types of intellectual property protection), the level of protection conferred to trade secrets varies significantly among EU Member States. For example, there is no consistency as regards the civil remedies available in cases of unlawful acquisition, use or disclosure of trade secrets.
The Directive is supposed to harmonize trade secret legislation across the EU by setting a minimum standard of protection which, in turn, is supposed to facilitate the cross-border transfer of know-how and foster competition and innovation. However, Member States may implement or maintain higher levels of protection, except where the Directive imposes maximum limits.
The Directive will prohibit the "unlawful acquisition, use or disclosure of a trade secret." The conduct and practices which are to be regarded as unlawful acquisition, use or disclosure of a trade secret are defined in Article 3. The common remedies available in cases where a trade secret has been misused include interim and permanent injunctions, the destruction of goods which result from a misuse of a trade secret and compensatory damages.
As originally proposed by the Commission, reverse engineering shall remain permitted. Article 4 expressly clarifies that independent discovery and reverse engineering are legitimate means of acquiring information. The Parliament's proposal to allow for contractual restrictions on reverse engineering was not adopted. However, the Directive intends to set a minimum standard only. Thus, individual Member States remain entitled to introduce such an option. For example, Germany where reverse engineering is regarded illegal in some cases, in particular, where the process of obtaining a trade secret through reverse engineering requires "substantial investments," may decide to do so.
Originally published February 22, 2016
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