Businesses constantly create and develop information which they use to out-perform their competitors, whether on the basis of faster, cheaper, or otherwise more efficient processes; or better products. Europe considers this information, together with the innovation that underlies it, as being the "raw materials of the new economy", and recognises its importance to businesses of all scales. It acknowledges that whilst the investment in creating new knowledge drives competitiveness, and therefore returns on investment, trade secrets are the least well protected method of safeguarding knowledge capital in European law - despite being one of the most used.
Not all Member States have the same level of protection of trade secrets – for example, 'trade secret' is not defined in a number of jurisdictions – and so in a single market it can be difficult for businesses to protect their legitimate business interests when it comes to knowledge capital.
Around 18 months ago I blogged about the European Commission's proposal for a directive on the protection of trade secrets, which aimed to reinforce the legal protection available to protect trade secrets from misappropriation and set a minimum level of protection across the continent. On 18th December 2015, a full revised text was agreed by the legislative bodies on terms that mean it is unlikely to change further before it passes into European law.
The core definition is expressed as follows – a trade secret is information which:
- 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;
- has commercial value because it is secret; and
- has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information (the "trade secret holder"), to keep it secret.
In a similar way to copyright, the directive does not prevent the information being created independently. Further, it allows observation and study of products publicly available and other honest commercial practices.
What it prohibits and makes unlawful, is the acquisition of a trade secret by unauthorised access to or appropriation of information, or any other conduct considered contrary to honest commercial practices (including where the acquirer ought to have known that such acquisition was unlawful); and the use or disclosure of a trade secret after it has been obtained unlawfully, or in breach of a duty of confidentiality.
Article 5 of the Directive now leaves it to each Member State to put in place civil redress mechanisms to make remedies available to trade secret holders in the event of unlawful use of their trade secrets, including injunctions/corrective measures and damages.
It is hoped that the Directive will give businesses more confidence in using their trade secrets in the knowledge that there will be a greater availability of measures and remedies available to them in addition to those specified in contractual terms, and may also sooth some of the anxieties felt by potential litigants. What remains absent from the Directive however, are any measures for collecting evidence of illegal disclosure, acquisition, or use. As always, it will be important to watch how the new law is implemented.