The protection of business secrets

30-09-2014

Aurélia Marie

The European Commission’s Innovation Union proposals, launched in 2010, aimed to give companies and non-commercial research entities the legal means to protect the special knowledge they develop.

Not susceptible to ownership through IP rights, this “confidential business information” or “undisclosed information” (know-how, business plans, customer lists, suppliers, market strategies, etc), otherwise referred to as trade secrets, nevertheless provides competitive advantages, and is often the target of espionage and theft.

Different studies conducted at European level have shown that in the different countries of the EU legal means have been put into place to try to protect these trade secrets against their use by a third party that obtains them by illegitimate means. However, disparities between member states make this protection less effective. So, the European Commission has presented a proposal for a Directive for the protection of know-how and undisclosed trade information (trade secrets) against their procurement, use and illegal disclosure (COM 813 final 2013). 

A trade secret is defined via three cumulative criteria. The information must be secret (unknown and not accessible to people in circles interested in the relevant information), it must have commercial value because it is secret, and it must have been kept secret by the exercise of reasonable care by one who has control over the information, named the “holder”.

It will be illegal to acquire a trade secret without the consent of the holder, due to intentional behaviour or as the result of gross negligence by theft, embezzlement, corruption, inducement to breach, or actual breach of, confidentiality, copying or access to an unauthorised information and more generally any behaviour deemed contrary to honest commercial practices .

The use and disclosure of the trade secret without the consent of the holder are also prohibited if they result from the unlawful acquisition of this secret, a breach of a confidentiality agreement, a breach of an obligation to keep the information secret or use outside the limits set by a contract.

"the definition of a trade secret is likely to remain a difficult concept to evaluate and therefore a difficult matter to protect in practice."

A person acts in contravention of the provisions of the Directive if he uses or discloses secret information while knowing, or not being in a position to ignore, that he obtained it from a person who had acquired the same information unlawfully.

In addition, the following are to be considered as unlawful uses of a trade secret: the conscious and deliberate production, offer or putting on the market of infringing products, as well as import, export and storage for these purposes.

The proposed Directive provides for a number of cases where obtaining the trade secret is considered lawful (independent discovery or creation, observation, study or disassembly of a product, etc) or the result of special circumstances (legitimate use of the right to freedom of expression and information, disclosure of misconduct or illegal activity, protection of a legitimate interest, etc).

Provisional and protective measures before any procedure on the merits, and the measures resulting from a judgment on the merits, are provided. The illicit goods may be seized, or destroyed and damages may be ordered.

There are also possible adjustments to court actions, so as to allow the confidentiality of the information to be preserved during and after the litigation.

The limitation period—at least one year, maximum two years from the date on which the holder has knowledge of the last event giving rise to the action or ought to have known—is short, but this is justified in the interests of legal certainty and also because a duty of care lies with the holder of the trade secret. This duration is, however, still under debate.

If passed, this Directive could help fulfil a threefold objective: to protect trade secrets uniformly at European level, to reduce the risk of misappropriation, and to allow companies to innovate and to share and develop their competitiveness without fear that their trade secrets will be appropriated without a possibility to react.

Nevertheless, the definition of a trade secret is likely to remain a difficult concept to evaluate and therefore a difficult matter to protect in practice, despite the arrangements in this Directive, especially as the definition of the legal or illegal acquisition of such a secret may also be difficult to assess in practice. 

Aurélia Marie is a partner at Cabinet Beau de Loménie. She can be contacted at: amarie@bdl-ip.com

European Commission; trade secrets;

WIPR