Organisations should take steps now to ensure their valuable know-how and business information can be classed as a 'trade secret' to obtain the protection offered by new Irish Regulations.
The Irish Trade Secrets Regulations transpose the EU Trade Secrets Directive into Irish law, and will benefit those seeking a remedy for the unlawful acquisition, use or disclosure of their trade secrets.
The Regulations place trade secret protection on a statutory footing for the first time in Ireland. Until now, trade secrets were only protected through the common law action for breach of confidence.
WHAT IS A TRADE SECRET?
A trade secret, as defined by the Directive, is information which:
- is secret, in the sense that it is not generally known or accessible;
- has commercial value; and
- has been subject to reasonable steps to keep it secret.
The recipe for Coca-Cola is the classic example of a trade secret, but trade secrets come in many forms and most organisations will have valuable knowhow and business information of some description. The definition of a trade secret in the Directive is broad enough to encompass a business plan, pricing strategy, supplier or customer list, formula or process, for example.
IS IT BETTER TO SEEK PATENT PROTECTION?
In some cases an invention cannot be patented because it does not meet the necessary criteria for patentability or it may not make commercial sense to seek patent protection (as obtaining a patent requires the disclosure of the invention). In such cases trade secret protection may be an effective alternative.
Unlike patents, which last only for 20 years, trade secrets are protected from the time of their creation and remain protected indefinitely, provided they are kept secret.
WHAT STEPS CAN YOU TAKE TO PROTECT YOUR TRADE SECRETS?
While you do not need to register a trade secret to obtain protection, there are certain steps organisations should take to proactively protect their valuable know-how and business information. Taking these steps now will likely reduce the risk of having to bring costly legal proceedings to stop someone from unlawfully using or disclosing your trade secrets. It will also mean that, in the event that legal proceedings are necessary, your case will not fall at the first hurdle as you should be able to demonstrate to the court that you took reasonable steps to keep the information secret. In summary, you should:
- Identify the information that you regard as a trade secret and ascertain whether this information meets the definition in the Directive;
- Ensure trade secrets are stored securely. If in hard copy, ensure they are marked 'Confidential' and stored under lock and key. If in electronic format, ensure they are password protected or encrypted.
- Segregate trade secrets, insofar as possible, from other information on your IT system;
- Ensure you can track access to documents containing your trade secrets and that you can easily ascertain who has viewed, edited, printed or forwarded them.
- Ensure access to trade secrets is limited to appropriate people and that these people have signed Non-Disclosure or Confidentiality Agreements;
- Ensure all employment contracts include confidentiality and nondisclosure provisions and that these continue to apply even if the employment relationship ends, and that employee handbooks, policies and procedures also reinforce the duty of confidentiality.
IF SOMEONE MISUSES YOUR TRADE SECRETS, WHAT CAN YOU DO?
If someone unlawfully acquires, uses or discloses your trade secrets, you can issue legal proceedings in the District, Circuit or High Court (depending on the value of the claim).
Before the court can intervene, you will need to show that you took reasonable steps to keep the information secret.
The court has powers to make various orders, including orders:
- prohibiting the wrongdoer from using or disclosing the trade secret, or stopping them from doing so;
- prohibiting the placing of any object embodying the trade secret on the market;
- that any object embodying the trade secret be destroyed or recalled, or that it be deprived of its infringing quality;
- directing the wrongdoer to pay damages.
The court may also make orders to protect the trade secrets pending the full determination of the proceedings.
You may also have a claim under the common law for breach of confidence. How these remedies will interact or overlap remains to be seen.
HOW CAN YOU KEEP YOUR TRADE SECRETS SECRET DURING LEGAL PROCEEDINGS?
The court can order that those involved in the legal proceedings (including court officials, witnesses and experts) cannot use or disclose any alleged trade secret of which they become aware as a result of their involvement in the proceedings.
The order will remain in force after the proceedings have been determined. However, the order will cease to have effect if the court determines that the alleged trade secret is not in fact a trade secret within the terms of the Directive or if the information becomes generally known or readily accessible.
The court can also restrict access to any document containing an alleged trade secret, restrict access to hearings when an alleged trade secret might be disclosed and restrict access to the corresponding transcript. This is similar to setting up a confidentiality club or ring in commercial proceedings between business competitors.
The statutory protection of trade secrets is a welcome development for those organisations that invest in acquiring, developing and applying trade secrets to give them a competitive advantage in the market. Such organisations should take active steps now to ensure that their trade secrets are adequately documented and kept secret. Taking these steps will increase the likelihood that the Regulations will provide a remedy to organisations in the event that their trade secrets are misused.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.