To the surprise of many and the dismay of more than sixteen million United Kingdom
voters, the previously unthinkable has occurred, the UK has voted
to leave the European Union. In a tightly contested referendum,
voters have chosen to end UK's time as an EU member. Though the
referendum is not technically legally binding, most expect the
government to heed the voice of the people.
Prior to the referendum, the EU had been working for several
years on a Directive on Trade Secrets. An EU directive is
legislation that sets a goal for every EU member state to achieve.
It is, however, up to each state to compose their own laws to reach
the goals of the directive. As we have
discussed, the EU Directive on Trade Secrets was initially
proposed in November of 2013. After years of hard work, a revised
Directive was adopted by the EU Council in May 2016. The EU member
states have two years to implement the Directive into national
What Brexit means for trade secrets law in the UK is not
entirely clear and calls for close observation in the years ahead.
As we all know, the UK will not be out of the EU tomorrow. There
will be negotiations over the terms of an exit over at least the
next two years, but the impact could still be significant.
Despite the similarities between the Directive and laws in the
UK and despite the laws in the UK pre-Directive having already met
most of the Directive's standards, some differences remain. For
instance, article 3(4) of the Directive appears to allow trade
secrets owners to seek injunctions and damages against third
parties who knew or should have known the trade secret was being
disclosed unlawfully. And the UK's expansive laws on
confidentiality would actually offer greater protection than those
under the EU Directive.
Some have raised concerns about the Directive being used to
restrain whistleblowers. The fear for whistleblowers is the wide
ranging definition given to trade secrets will lead to employers
being able to sue whistleblowers who disclose confidential
information. This is potentially mitigated by two
"whistleblower" exceptions, but the scope of these
exceptions has yet to be tested by a court, thus leaving room for
ambiguity and trepidations amongst both employees and employers.
And while uncertainty remains for EU whistleblowers, in the UK,
courts will continue to apply existing domestic law that has
substantial legal history and the security that comes from such
history. But as the EU Directive gains clarity through
implementation, the appeal of a uniform European standard will
increase. Correspondingly, the UK will likely face, in the long
term, a challenge in the face of the growing appeal of a uniform
European standard. UK courts will also likely face the challenge of
interpreting contractual language and provisions designed around
the EU Directive rather than domestic laws.
Furthermore and depending on the terms of exit and the
relationship going forward, the UK will, after it has left the EU,
be subject to the issue of transferring data outside of the EEA
(European Economic Area), which is
strictly regulated. If the country outside the EEA has not put
adequate data privacy protections in place, the transfer cannot
occur unless it fits within a small number of exceptions or
transfer regimes. The United States was determined to have
inadequate protections. The UK will face a similar inquiry once
they have exited the Union, if they do not continue to be part of
the wider EEA. The UK, being a former EU member, will likely be
deemed to have sufficient protections provided its current regime
remains in place and provided it conforms with the forthcoming EU
General Data Protection Regulation framework (due to be implemented
by 2018) but this is not a guaranteed result and should be
By and large the direct impact of the Brexit on trade secret law
will initially be minimal. The Directive has not yet been
implemented in the UK. Rather than drastically altering UK trade
secrets law the Brexit insures the continued use of preexisting law
and, at least in the short term, the stability that comes from the
continued use of established legal standards.
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.
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