UK: Want To Know A Secret? The EU's Trade Secrets Directive

Last Updated: 20 May 2016
Article by Kate Meagher

If we were to ask you to cast your mind back to the festive period, no doubt your immediate (and happy) recollection would be that of the long-awaited publication of the EU's Trade Secrets Directive.

The legal protection of trade secrets across the Union has been previously described by the European Commission as "uneven", "fragmented" and even "sub-optimal", as a result of the 28 different systems of trade secret protection in existence across the EU.

The Directive attempts to harmonise the internal market's protection of trade secrets, and is expected to be voted though by the European Parliament this spring. If so, it will be published in the Official Journal, and Member States will have then two years in which to incorporate the Directive into domestic law.

What is a trade secret?

According to the Directive, a trade secret is information which:

(1) is secret in the sense that it is not generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;

(2) has commercial value because it is secret; and

(3) has been subject to reasonable steps by the person lawfully in control of the information to keep it secret.

The broad scope of this definition means that lists of clients, customers and contacts, computer programs, financial information, business plans and methods, recipes, formulae, technical processes, improvements, inventions (until or unless patented) and business statistics are (amongst other things) considered to be trade secrets for the purposes of the Directive.

Under the definition, a trade secret holder ("any natural or legal person lawfully controlling any trade secret") will have to demonstrate the steps taken to protect the information and to keep it confidential. The definition further prescribes that information must not be generally known "within the circles" that normally deal with its kind.

Commercial practices

The Directive provides that the acquisition of a trade secret without the consent of the trade secret holder may be unlawful when carried out by (amongst other things):

(1) unauthorised access to any documents, etc. lawfully under the control of the trade secret holder, containing the trade secret or from which the trade secret can be deduced; or

(2) any other conduct which, under the circumstances, is considered contrary to honest commercial practices.

This is another very wide definition which is likely to present challenges for businesses and lawyers until the courts have explored its interpretation.

The acquisition, use or disclosure of a trade secret by another who knew, or under the circumstances should have known, that the trade secret was obtained unlawfully, will create a secondary liability.

Employees

The Directive addresses the conflict between the protection of trade secrets and the restriction of employees' ability to move jobs, insofar as it appears to be weighted in favour of employee mobility.

The Directive's first Article reads:

"Nothing in this Directive shall be understood to offer any ground for restricting the mobility of employees. In particular, in relation to the exercise of such mobility, this Directive shall not offer any ground for:

(a) limiting employees' use of information not constituting a trade secret as defined [in the Directive];

(b) limiting employees' use of the experience and skills honestly acquired in the normal course of employment; or

(c) imposing any additional restrictions on employees in their employment contracts other than in accordance with Union or national law."

The literal reading of this wording suggests that enforcing the Directive against former employees will prove difficult. The implication is that trade secrets which form part of an employee's experience and skill set may not be limited by the Directive. But information which does not comprise employees' "honestly acquired" skills or experience will, it seems, be afforded trade secret protection under the Directive.

This is likely to prove a difficult question of fact which is not helped by the lack of further definition for "experience and skills". While there is a similar concept of "stock in trade" in England and Wales, this Article is likely to be the subject of judicial scrutiny.

Exceptions

The Directive contains exclusions in respect of those who acquire, use or reveal trade secrets:

a) for exercising the right to freedom of expression and information as set out in the Charter of Fundamental Rights of the European Union;

b) for revealing a misconduct, wrongdoing or illegal activity, provided that it was for the purpose of protecting the general public interest;

c) by workers to their representatives, as part of the legitimate and necessary exercise of their representative functions; or

d) for the purpose of protecting a legitimate interest recognised by law.

The implication of (b) above is that a disclosure may be made to reveal a misconduct or wrongdoing, regardless of the extent of the disclosure or whether such a disclosure is crucial for the purposes of protecting the general public interest.

The Directive does not determine the test that should be applied to decide whether a matter is in the general public interest, nor does it limit the extent of the whistle-blower's actions. Once again, it is likely that these points will have to be clarified by case law.

The Directive states that the courts may allow a disclosure where it had been made in good faith. This goes further than the current law in England and Wales, which considers the aspect of good faith to be a factor when considering damages but not liability.

Enforcement and injunctions

The previous draft of the Directive prescribed a three-year limitation period for claims, but the final text has extended this to a six-year period.

The Directive has set out a list of factors which the courts must take into account when considering applications for injunctions. The list is far more detailed than the present approach adopted by the English courts takes following the American Cyanamid case.

Conclusion

The Directive contains a number of broad definitions and terms which leave a lot of uncertainty as to their scope. Arguments are therefore likely to abound until the courts have the opportunity to set parameters and provide businesses with guidance regarding particular details. It will also be interesting to observe how the Directive will be transposed into UK law, and whether UK lawmakers provide clarity regarding the matters raised above.

What is apparent is that the burden on businesses has increased. Unless businesses can show the steps they have taken to protect the information and its commercial value, they are unlikely to benefit from the protection afforded by the Directive and they may have to consider relying instead on their rights under common law.

The protection for employees seems to be one of the most troubling areas for businesses. The arguments for enforcing the Directive against employees will need to satisfy greater scrutiny than would otherwise apply.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.