Listen! Do you want to know a secret? It’s the implementation of the Trade Secrets Directive

There has been a long and, some might say, drawn out process for the consideration of how trade secrets are to be protected across the EU. Different countries have different levels of domestic legislation designed to protect the trade secrets of businesses and some are more codified than others. For example, Germany, Denmark and Spain do not have a legal definition of what a trade secret is.  Belgium, Netherlands and France (and the UK) do not have specific legislation to cover issues relating to the misuse of trade secrets, relying instead on a patchwork of other types of legal protection such as breach of confidence, or competition law.

In light of this, the European Commission has sought to harmonise trade secrets legislation and so encourage trade and the flow of information across borders. The result is the Trade Secrets Directive.

The current draft of the Directive received its first reading this month and seeks to offer a uniform system to protect trade secrets across the EU.

The Directive also defines what a Trade Secret is – it must:

• Be secret, in the sense that it is not generally known among or readily accessible to persons within the circles that normally deal with that type of information.
• Have a commercial value because it is kept secret; and
• Have been subject to reasonable steps, under the circumstances, to keep it secret.

This largely correlates with the approach of the English courts, so there should be little change to the position in the UK. It does mean that other jurisdictions will have to adopt a similar approach to trade secrets.

One area which will be of interest to UK-based organisations is that the Directive seeks to enforce the rights once they have been incorporated into a product. It’s proposed firstly that a broad definition of infringing goods is included, namely any product which “significantly benefits” from unlawfully obtained trade secrets and secondly that the import or sale of such goods will be unlawful if the importer or seller had actual or constructive knowledge that the manufacture of the product has benefited from the misuse of trade secrets.  The test of unlawful use of a trade secret will be defined as conduct which is contrary to honest commercial practices.

This should make it easier for the owners of trade secrets to take action against importers or manufacturers of goods that misuse trade secrets.

As ever, individual cases will turn on their own facts. Trade secrets are often a difficult category to define and enforce, and much will turn on how that information is treated by the owner.  The Directive (assuming the UK remains in the EU) will be implemented within the next two years, and will set out a clearer framework to protect trade secrets – a key intellectual property right and potentially an extremely valuable asset.

It will not prevent employees from using their general skill and knowledge acquired during their employment, but it hopefully will set out a codified legislative framework confirming what qualities the trade secret must possess to be afforded protection, and also give some additional protection to prevent infringing products from being imported or sold in the UK.

If you would like more information on trade secrets and how to protect them, please contact  Stephen McVey on 0113 227 0245 or at stephen.mcvey@gordonsllp.com or Catherine Woodward on 0113 227 0366 or at catherine.woodward.gordonsllp.com.