What disappears when you speak its name?
A riddle as old as time itself. But, as anyone charged with the keeping of secrets knows; once silence is broken, a great many more things might go the same way.
Among those things, there's your intellectual property.This may seem a little counterintuitive. Common sense dictates a good idea must be disclosed to the public one way or another if it is to evolve into a good venture.Indeed, it is generally the case that intellectual property must be declared or expressed publicly before it can even become vested with the law's protection.
Reality, however, is rather more complicated, as reality tends to be.
Take patents as an example:
The Malta Patents and Designs Act provides that an invention shall only be patentable if it is, among other things, "new". 1
Article 5(1) defines "novelty" as anything which does not form part of the prior art.
And what is the "prior art"?
"The prior art means everything which was available to the public in writing or in other graphic form by an oral description, by use or in any other way anywhere in the world..."2
Yeesh, that is one wide definition ... Aye, and there's the rub.
Now you see why the legal consequences of being overly-enthusiastic about a fantastic idea can be just as fantastically dire. The greater the idea, the greater the temptation and the greater the consequences ... which brings us to the subject of trade secrets – that shamelessly shunned catchall of the intellectual property world.
EU Directive 2016/943 3 on the protection of undisclosed know-how and business information is due for transposition into Maltese law in June. When transposed, this law will lay out a consolidated regime for the protection of just about any monetizable idea an aspiring entrepreneur can come up with, subject to one condition. Just one.
You guessed it. Mum's the word.
This may seem pretty clean, pretty convenient – pretty straightforward.
There are however a few immediate problems. One very big and very ugly problem in particular. You see, a Maltese statute tailored to the standards of EU Directive 2016/943 would impose a general duty of confidence upon anyone privy to a secret with commercial value. And we do mean anyone:Employees, relatives ... journalists.
Has the penny dropped yet?
Like Midas' touch, a law that turns all ideas to gold may not be all it's cracked up to be.Predictably, the advent of a European trade secret regime has added fuel to the fire of the eternal free speech debate. Reporters Without Boarders wasted no time in expressing their sentiments over the newly proposed Directive.
Now, before anyone who has never heard about the directive until just now gets ahead of themselves, the concept is actually not all that radical. Most countries afford some form of protection to trade secrets. Malta is no exception. The common law of confidence has been around for a very long time, as has the law of fiduciary obligations. It is on the foundation of this latter regime that the protection of trade secrets under our own law presently sits.
At first blush, current practice, which generally relies on the scope of the current law coupled with the application of so-called "Non-Disclosure Agreements" is arguably as broad in scope as the new EU regime that is soon to replace it – to the extent that this modus operandum may be relied on to silence any would-be confidant on pain of a civil suit. In fact, these obligations may arise where anyone, without being entitled to do so, appropriates or makes use of confidential business information.4
This would at least seem to cover an extremely wide range of activities, including the sort of activities typically undertaken by journalists. To date, however, Maltese law of fiduciary obligations has never been relied on to silence the press or to castigate people who the press typically rely on for the latest scoop – pretty significant considering the regime precedes the Protection of the Whistleblower Act by almost a decade.
The question as to whether the new EU regime is liable to change this largely depends on future jurisprudence of the EU courts and the European Court of Human Rights. However, there are a few immediately apparent novelties – not least of which the introduction of the very concept of a trade secret as a quasi-property right.
"Why does it matter whether a property right in trade secrets is created if the general effect of the law is pretty much the same?"
... you may wonder.
Well, actually, it matters quite a bit. For one, property rights are also fundamental rights under the European Charter, and a corporation's fundamental right to privacy is – shall we say – slightly less entrenched than its right to property.
"Does that include intellectual property rights?" you say.
"Yes," we say.
And in case there was any doubt about that, here's Article 17(2) of the Charter of Fundamental Rights of the EU (CFREU):
"Intellectual property shall be protected."
Got that? Shall be protected. Shall be...
Ok, so it's not much to go by. But it's there ... whatever it means. Laconic laws aside, this does beg a question which might seem nomenclatural: Can trade secrets be properly be defined as "intellectual property"?
Under present Maltese law they are not. That much is certain. Nowhere in the existing body of Maltese intellectual property laws is the term "trade secret" even mentioned, much less defined.
What about the new EU regime?
Well, references to intellectual property rights are strewn across the preamble to the directive (even though the law is quite careful in distinguishing trade secrets from the "traditional" IP fields).
On the other hand, the format followed by the directive parallels every other statute regulating the traditional IP fields; beginning with a definition of the subject of protection, followed by a definition of the rights vesting in the subject, the conditions which must be fulfilled for acquiring those rights, the exceptions to said rights and, finally, the full table d'hôte of damages in the event of a breach – negative economic consequences, lost profits, unfair profits made by the infringer AND ... dun dun duuun ... moral prejudice.
So, if what the EU has created is not "intellectual property" within the ordinary (or perhaps not so ordinary) meaning of the term – if not the meaning of CFREU A.17(2), then at least we can say that they have created something that is quite similar in all the legal details that matter.
Now, the multi-million Euro question:What does all this mean for business owners – Maltese business owners specifically?
The short answer is that it is too early to tell. And we do mean way too early.
It should come as no surprise to anyone familiar with EU statutes that the actual law under the Directive is preceded by the customary preamble, carefully formulated to explain exactly what the law is trying to say by what it is not actually saying. Nevertheless (or consequently, depending how you look at it) the Directive leaves more room for creativity than a Maltese or European judge can shake a stick at. This is well-represented in the Directive's tenor on the subject of the free press, incidentally. The convolution toward which over-lobbied EU statutes are naturally pre-disposed is equally well-represented in the definitional criterion in Article 1(a), which provides that information can only be defined as a "trade secret" if:
"it is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question."
You'd think the words of "it is secret" were pretty self-explanatory...
There are other problems of course and these problems ought to give rise to many a colourful and doubtlessly controversial court judgment in the years to come.
There are however a couple of rather general predictions one can make with reasonable certainty:
The status of confidential business information under the new EU regime will definitely be augmented to the point where the usefulness of the ubiquitous "Non-Disclosure Agreement" will be diminished significantly. How significantly is a matter for debate, which means that dispensing with the use of NDAs entirely is probably a bad idea – for now at least.
Then there's the consequences of infringement under A.14(2). Remember those magic words "moral prejudice". That gives the Civil Court free rein in awarding damages to trade secret holders, limited only by the degree of egregiousness which a creative lawyer can attribute to a violation.
Of course, none of this really matters until Parliament transposes the directive. So far, they have not. The deadline (for anyone interested in spurring things along) is 9 June.
1 Patents and Designs Act, Laws of Malta Chapter 417, A.
2 Ibid. A. 5(2)
3 OJ L 157, 15.6.2016, p. 1–18
4 Civil Code, Laws of Malta Chapter 16, A. 1124A(3)(a)
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