Trade secrets are as important as protecting your patents, designs and trademarks and must be part of your daily IP strategy.
Scope of trade secrets protection:
Prior to the Directive (EU) 2016/943 of 8 June 2016 on trade secrets in Europe, there was neither harmonization nor standardization of the concept of trade secrets. Only the TRIPS Agreement of 15 February 1994 provided details on undisclosed information under Article 39. The Article provides that anyone should “have the possibility of preventing information lawfully within their control from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices” where such information “is secret, (…) has commercial value (…) and has been subject to reasonable steps (…) to keep it secret.”
Legal provisions and specific protection measures were not provided in Europe, particularly in France, where actions for misappropriation of trade secrets were based on torts law (unfair competition) or contractual liability.
In France, the Directive (EU) 2016/943 was implemented with the introduction of Law No 2018-670 of 30 July 2018 and a recent Decree of 11 December 2018 No 2018-1126.
Implementation of the Directive into French Law:
French law on trade secrets published on 30 July 2018, and specified by the Decree of 11 December 2018 No 2018-1126, is codified in:
- Code of Commerce under Articles L. 151-1 à L. 154-1 and Articles R.152-1 to R.153-10 (created by the decree of 11 December 2018): Protection of trade secrets
- Judicial Organization Code under Articles:
- L. 644-1, L. 741-4, L. 775-1, L. 775-2: Protection of information protected by trade secrets
- L. 77-13-1 et L. 77-13-2: Disputes relating to the protection, cease and compensation of violation of trade secrets
- Criminal Code under Article 314-4-1: Diversion of economically protected information
- Intellectual Property Code under R.332-1 and R.343-1: New provisions to preserve the confidentiality of documents protected by trade secrets in the course of a saisie-contrefaçon.
The implementation of this Directive in Europe took place during mid 2018 in most member states including Italy, Sweden, Czech Republic and Belgium however is still pending in some countries, notably Germany and Spain.
Uniform definition of trade secrets: what is protected information?
Protected information is subject to three cumulative conditions:
- any information that is secret (not generally known among or readily accessible to persons within the relevant circles of trade) and;
- has a commercial value, effective or potential, because it is secret, and;
- subject to reasonable protection measures: the mere intent of protection no longer suffices, the proof that reasonable protection measures have been actively taken need to be established.
This definition is codified under Article L.151-1 of the French Code of Commerce.
Impact on your IP strategy:
- What information can be qualified as trade secrets?
- What is the most adequate protection?
Understand and structure your secrets:
- Implement adequate "secrecy" policies and procedures to ensure that everyone is clear about what information is to be treated as confidential
- Train employees on an ongoing basis
- Classify and mark confidential materials as such
- Structure internal processes on a need-to-know basis: Segregate production and development, limit the number of people having access to the relevant information and bind such people by appropriate NDAs
Track and control your secrets:
- Monitor and document compliance with internal policies, in particular in relation to new and departing employees
- Track the flow of confidential information to (and from) customers, suppliers and external business partners
- "Black-box" or directly supervise certain sensitive departments
Check Your agreements!
- Reverse engineering is allowed as a matter of principle while it is the exception in some countries in Europe
- Check your agreements with your partners, check whether they contain provisions preventing reverse engineering, which is now allowed as a matter of principle, failing a specific provision for the contrary
- Check and possibly revise confidentiality clauses in contracts with employees and external business partners
- Check (and regularly maintain) IT security for adequate internal protocols, access controls and encryption (especially on mobile devices)
Finally, be prepared for a crisis:
- Establish enforcement and crisis protocols in case of trade secrets misappropriation.
Protection of trade secrets before courts (R.152-1 and R.153-1 to R.153-10 C.Com):
The Decree of 11 December 2018 in application of the Law of 30 July 2018 implementing the EU trade secrets Directive contains provisions aiming at preserving trade secrets.
Communication of pieces of evidence and trade secrets:
- The pieces of evidence can be placed under escrow to ensure the protection of trade secrets upon the decision of the judge when application (ex parte or inter partes) for collecting evidence prior to trial under Article 145 of the French Code of Civil procedure is filed in court (R.153-1 C.Com).
- Possibility to restrain the communication of some pieces of evidence that contain trade secrets information to a strict number of persons, equivalent to the well-known clean team system (R.153-2 to R.153-9 C.Com).
A restriction of the number of persons accessing to the courtroom is also possible under Article L.153-1 of the French Commercial Code.
Possibility to redact portions of a judgment (Article R.153-10 C.Com) :
- Upon request of a party, an extract of the judgment only containing the operative part, bearing the enforcement order can be issued.
- A non-confidential version of the decision, in which information covered by trade secrets is redacted, may be provided to third parties and made available to the public in electronic form.
To award a financial compensation, which is set in taking in count (L.152-6 C.Com):
- The negative economic consequences of the trade secrets breach, including loss of profit and loss suffered by the injured party, including loss of opportunity;
- The moral prejudice caused to the injured party;
- The profits made by the author of the breach of trade secrets, including the savings in intellectual, material and promotional investments that the perpetrator has made because of the breach.
- A lump sum could also be granted, taking into account the fees that would have been due if the infringer had requested authorization to use the trade secrets.
Injunctions/special measures (Article R.152-1 C.Com):
- Injunction not to perform or continue the disclosure of the trade secrets;
- Injunction not to produce, offer, place on the market or use infringing goods, or to import, export or store infringing goods for these purposes;
- Total or partial destruction of any document, object, material, substance or digital file containing the trade secrets;
- Recall of infringing products from the commercial channels.
The highly confidential system that exists in the US would have been preferential in order to protect trade secrets more strictly while enforced in Court. However, the changes to the measures of protection and enforcement of trade secrets that the new legal system have introduced are a welcome improvement.
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