Trade Secrets Directive Becomes Directly Effective: Changes To The Law In The UK, France And Germany?

On 9 June 2018, the deadline expires for EU Member States to implement the necessary legislation to give effect to the 'Trade Secrets Directive'. Our European experts explain the provisions of the Directive, the extent of harmonisation to be expected in the EU, and the changes expected in the UK, France and Germany.

The full name of the Trade Secrets Directive is 'Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition'.

What is the background to the enactment of the Trade Secrets Directive?

The Directive was introduced following a study, instigated by the European Commission, of trade secret protection in the (then 27) EU Member States. The study noted that it would be advantageous if there were consistency as to the types of confidential information that could be protected, but suggested that it was probably unnecessary to attempt to produce a detailed and comprehensive definition of a "trade secret". The Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS Agreement) simply uses the expression "undisclosed information" and specifies the criteria which must be met for such information to be protectable.

The Commission, however, favoured harmonisation, as explained in the Recitals to the Directive. Recital (4) states that the unlawful acquisition, use or disclosure of a trade secret:

"...compromises legitimate trade secret holders' ability to obtain first-mover returns from their innovation-related efforts. Without effective and comparable legal means for protecting trade secrets across the Union, incentives to engage in innovation-related cross-border activity within the internal market are undermined, and trade secrets are unable to fulfil their potential as drivers of economic growth and jobs..."

Recital (5) states that important differences remain in the Member States' legislation as regards the protection of trade secrets, notwithstanding the TRIPS Agreement. For example, not all Member States have enacted national law defining a "trade secret" or what constitutes "unlawful acquisition, use or disclosure" (ie. infringement). Therefore, the scope of trade secret protection differs across Member States and these differences are not readily apparent.

The Trade Secrets Directive was passed by the EU's legislature on 8 June 2016; Member States have until 9 June 2018 to bring into force any laws, regulations and administrative provisions necessary to comply with it.

What does the Directive do?

The focus of the Directive is upon ensuring that the national laws of each Member State recognise a standalone right in trade secrets which may be asserted and enforced against third parties ie. trade secret protection as a form of intellectual property right.

The Directive lays down rules on the protection against the unlawful acquisition, use and disclosure of trade secrets (Article 1).

What is a 'trade secret' for the purposes of the Directive?

The meaning of 'trade secret' is defined as follows (Article 2):

"(1) 'trade secret' means information which meets all of the following requirements:

(a) 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;

(b) it has commercial value because it is secret;

(c) it has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret"

What are the prohibited/permitted acts in relation to trade secrets?

The Directive seeks to ensure that in each Member State, legal remedies are available to restrain, address and compensate for the unlawful "acquisition", "use" or "disclosure" of a trade secret. Such unlawful actions are defined in Article 4. Unlawful "acquisition" covers unauthorised access to, appropriation of, or copying of any documents, objects, materials, substances or electronic files and any other conduct which, under the circumstances, is contrary to honest commercial practices. Unlawful "use" or "disclosure" may be of unlawfully acquired information, or of lawfully acquired information in breach of a confidentiality agreement or other contractual or other duty to limit the use of the trade secret. Unlawful use also extends to actions in respect of infringing goods, which are defined as "goods, the design, characteristics, functioning, production process or marketing of which significantly benefits from trade...