Trade Secrets Directive Agreed

The European Parliament has approved a new EU Trade Secrets Directive aimed at harmonising the protection of trade secrets across the EU. Assuming that the draft is approved by the Council at a vote on 26 May 2016, Member States will have two years in which to bring in legislation implementing the Directive.

The definition of a trade secret

The Directive introduces an EU-wide definition of a trade secret. A trade secret is defined as information that is:

• secret;
• has commercial value because it is secret; and
• has been subject to reasonable steps by the holder of the information to keep it secret.

What is prohibited?

The Directive prohibits:

• 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 it was acquired unlawfully; and
• the exploitation of goods produced using the trade secret where the user (for example, a subsequent employer) knew or ought to have known that the trade secret was acquired unlawfully. 

However, independent discovery, reverse engineering (identifying a trade secret by dismantling a product which is publicly available), using 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 restrict employees’ use of “experience and skills honestly acquired in the normal course of their employment”.

Remedies for breach

Member States will be required to ensure that civil remedies are available for breach, which may include damages, destruction of goods produced using the trade secret and interim and final injunctions. Member States will be permitted to restrict employees’ liability to damages where they acted without intent (i.e they neither knew, nor ought to have known, that the trade secret was obtained unlawfully). In order for damages to be awarded, it must be shown that other remedies, such as injunctive relief, would cause disproportionate harm and that pecuniary compensation appears reasonably satisfactory.

Legal proceedings will be able to be held in private and access to documents restricted so as to preserve the confidentiality of the trade secret. 

Restrictive covenants

The Directive will not affect restrictive covenants and these will remain a matter for national law. 

Whistleblowers

The Directive contains an exemption for whistleblowers. It will not be unlawful for a person acting for the purpose of protecting the general public interest to acquire, use or disclose a trade secret in order to reveal misconduct, wrongdoing or illegal activity. Unlike under the UK whistleblowing legislation, there is no requirement that the whistleblower’s belief that they are acting in the public interest is reasonable.