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European proposal for a Directive on the protection of undisclosed know-how and business information (trade secrets) against unlawful acquisition, use and disclosure

European proposal for a Directive on the protection of undisclosed know-how and business information (trade secrets) against unlawful acquisition, use and disclosure

On 28 November 2013 the European Commission proposed the draft directive on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure. On 9 December 2013 the proposal, with procedure no. 2013/0402 (COD), was announced in the European Parliament. Currently we’re awaiting the first reading and decision by the committees of the EP.

A recent survey (November 2012) has shown that 20% of the businesses suffered at least one attempt to steal its trade secrets in the last ten years. In addition, the impact assessment reveals that very few member states have incorporated the protection of trade secrets into their national laws. This makes it difficult to determine when and how trade secrets should be protected. Consequently, one can identify two resulting problems: 1) sub-optimal incentives for cross-border innovation activities, and 2) reduced competitiveness.

The EU’s objective is to improve the legal protection of trade secrets of European businesses against misappropriation. This requires a common definition of “trade secrets”, which can be found in art. 2(1) of the proposal:

‘trade secret” means information which meets all of the following requirements:

  1. 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;
  2. has commercial value because it is secret;
  3. has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.’

The proposal also marks the circumstances under which the acquisition, use and disclosure of a trade secret is unlawful, thus entitling the trade secret holder to seek the application of certain measures and remedies. A non-exhaustive list of means by which one can achieve unlawful acquisition of trade secrets is provided – these include unauthorized access, theft, bribery and other conduct which is considered contrary to honest commercial practices:

‘The acquisition of a trade secret without the consent of the trade secret holder shall be considered unlawful whenever carried out intentionally or with gross negligence by:

  1. unauthorised access to or copy of any documents, objects, materials, substances or electronic files, lawfully under the control of the trade secret holder, containing the trade secret or from which the trade secret can be deduced;
  2. theft;
  3. bribery;
  4. deception;
  5. breach or inducement to breach a confidentiality agreement or any other duty to maintain secrecy;
  6. any other conduct which, under the circumstances, is considered contrary to honest commercial practices.’

It is important to keep in mind that these actions have to be carried out without the consent of the trade secret holder. In addition, for the acquisition to be considered unlawful it has to be intentionally or with gross negligence. The same goes for the use or disclosure of trade secrets in art. 3(3) of the proposal:

‘3. The use or disclosure of a trade secret shall be considered unlawful whenever carried out, without the consent of the trade secret holder, intentionally or with gross negligence, by a person who is found to meet any of the following conditions:

  1. has acquired the trade secret unlawfully;
  2. is in breach of a confidentiality agreement or any other duty to maintain secrecy of the trade secret;
  3. is in breach of a contractual or any other duty to limit the use of the trade secret.

4. The use or disclosure of a trade secret shall also be considered unlawful whenever a person, at the time of use or disclosure, knew or should, under the circumstances, have known that the trade secret was obtained from another person who was using or disclosing the trade secret unlawfully within the meaning of the paragraph 3.’

However, art. 3(4) shows that the use of a trade secret by a third party not directly involved in the original unlawful acquisition, use or disclosure is also unlawful, whenever that third party was aware, should have been aware, or was given notice, of the original unlawful act. In this case the unlawful act does not have to be carried out intentionally or with gross negligence.

The measures and procedures that should be made available to the holder of a trade secret are also formulated. According to art. 5 ‘Member States shall provide for the measures, procedures and remedies necessary to ensure the availability of civil redress against unlawful acquisition, use and disclosure of trade secrets.’ In section 2 of Chapter III the interim and precautionary measures are provided, namely interlocutory injunctions or precautionary seizure of infringing goods (art. 9). Section 3 provides for measures that may be ordered with the decision. This Directive will also make it easier to recall infringing goods from the market (art. 11) and the trade secret holder can be awarded damages (art. 13).

We will keep you updated on relevant developments.

By: Joost Becker

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