European Parliament approves Trade Secrets Directive
The European Parliament has approved a new EU Trade Secrets Directive aimed at harmonising the protection of trade secrets across the EU, to facilitate cross-border investment. This will be of particular interest to employers, since misuse of trade secrets often arises from the activities of employees or former employees.
The new Directive defines a trade secret as information that is secret, has commercial value because it is secret, and has been subject to reasonable steps to keep it secret.
The Directive will prohibit:
• the acquisition of a trade secret through unlawful access to materials or other conduct which is contrary to “honest commercial practices”;
• the use or disclosure of a trade secret where this would breach any contractual or other duty, or where the trade secret was acquired unlawfully;
• the exploitation of goods produced using the trade secret where the user knew or ought to have known that the trade secret was acquired unlawfully.
However, independent discovery, reverse engineering, use of information for lawful trade union activities and any other practice which is in accordance with honest commercial practices will be permitted.
The Directive will not affect non-competition restrictive covenants, which will remain a matter for national law. Nor will the Directive limit employees’ use of information that is not a trade secret, or of “experience and skills honestly acquired in the normal course of their employment”. It also includes a specific exemption for whistleblowers, to acquire, use or disclose a trade secret in order to reveal misconduct, wrongdoing or illegal activity.
Member states will be required to ensure the availability of civil remedies in the event of a breach. These may include damages, destruction of goods produced using the trade secret and interim and final injunctions.
Assuming the Directive is approved by the Council (as is expected at a vote on 26 May), it will come into force 20 days after its publication in the Official Journal and member states will then have two years in which to implement it at a national level.
The Directive will give further protection to employers in England seeking to protect their trade secrets beyond the existing law of confidence, but it remains to be seen whether and how its provisions will be implemented into English law. As the Directive is intended to sit alongside contractual provisions on confidentiality and restrictive covenant clauses, it is recommended that employers continue to adopt such clauses in employment contracts. Employers may also consider clearly identifying what their trade secrets are, in accordance with the new definition and creating policies and procedures to demonstrate reasonable efforts to protect trade secrets internally.