Introduction

Trade secrets represent significant value for some companies, being confidential information they are privy to which provides them with a competitive edge or advantage.

Trade secrets can take many different forms. For some businesses they may be customer lists or business methods, for others they may be processes and formulas for manufacturing. One of the most famous trade secrets is the recipe for Coca-Cola.

Increasingly, EU companies are subject to the misappropriation of such information. As a result, the European Commission has sought to harmonise the very different national laws protecting trade secrets so companies can monetise their valuable information more easily, creating growth in the EU market.

The Directive sets out to create a clear and balanced legal framework to discourage misappropriation of information, whilst also trying to facilitate innovation through collaboration with a view to making the EU economy stronger and more competitive.

Current state of play

On 27 May 2016, the European Council approved the European Commission's proposal on the Trade Secrets Directive..

Once published in the Official Journal, EU countries have to two years to implement the Directive, giving it effect through their national legislation.

Effect of the Directive

Presently, some Member States do not provide protection for trade secrets, and, in those that do, the available remedies are inconsistent and often ineffective.

In the UK, protection arises under common law, but the position is not much different from that envisaged by the Directive in terms of remedies. We feel the main difference is that the Directive will oblige the UK (question of Brexit aside) to put in place legislative provisions for the protection of trade secrets, and that rather than being common law remedies, there will be statutory provision and presumably entitlement once a case of misappropriation is established.

There is also some protection written in to the Directive for whistle-blowers, for whom there is currently no clear protection under common law. 

The proposal in the Directive harmonises the definition of trade secrets and sets out what amounts to a misappropriation. It also harmonises the remedies available for misappropriation, which include:

• injunctive relief to deal with:
  • unlawful use
  • further disclosure

• injunctive relief to allow for removal of goods from the market which have been manufactured based on misappropriated trade secrets

• power of the Court to provide compensation for damage caused by the unlawful use or disclosure of misappropriated trade secrets.

It is interesting to note that the Directive comes only a few weeks after the US signed up to its only trade secrets legislation, namely, the Defend Trade Secrets Act.

Stobbs Take Home

It is important to identify confidential information which may amount to trade secrets, and to safeguard that information properly. Internal processes are key to ensuring that the risk of misappropriation of trade secrets is kept to an absolute minimum.

We frequently advise businesses in relation to trade secrets, which are gradually being granted the recognition they deserve. Their importance in innovation is rightly being acknowledged through the protective measures afforded by the Directive.

If you feel you may have trade secrets, and that your interest in them is not sufficiently protected, feel free to reach out to us for advice in relation to how best you can put protective measures in place quickly and effectively.