[BreachExchange] Safeguarding trade secrets

[Audrey McNeil]

http://www.timesofmalta.com/articles/view/20160427/business-news/Safeguarding-trade-secrets.610184

The EU Parliament recently approved new rules against industrial espionage.
The draft directive on trade secrets is intended to help businesses
safeguard their innovative ideas, decrease their exposure to
misappropriation of trade secrets and grant them redress for theft or
misuse of trade secrets.

The draft directive was shepherded through by the EU Commission in the wake
of statistics showing that companies are increasingly exposed to theft of
trade secrets. Existing national laws are divergent in the manner and
extent to which they protect trade secrets with the result that trade
secrets enjoy a different level of protection through the EU.

The proposed directive aims to achieve a level of harmonisation across the
EU member states that will allow the creation of a safe and trustworthy
environment for the protection of the intangible assets and know-how of
European businesses, the rationale being that the current discrepancies
throughout Europe deter cross-border investment.

The draft directive seeks to protect valuable information or knowledge that
an enterprise has developed through research, experience or inventiveness.
This gives the business a competitive edge over other operators on the
market, which can be exploited and financial benefits drawn from it.

Intellectual property rights, such as patents, design rights or copyright,
are used by businesses in protecting their valuable know-how and business
information. However, there are certain types of information or knowledge
that cannot be covered in these ways.

Business plans, customer lists, the results of marketing studies, recipes
for foodstuffs or fragrances and know-how relating to manufacturing
processes may fall outside the protection of intellectual property rights.
But these are all examples of trade secrets and can be protected as such.
Trade secrets can be relied upon by businesses in such cases to protect
their competitiveness.

The draft directive introduces an EU-wide broad definition of “trade
secret” that embraces know-how, business information and technological
information. Three essential requisites must be fulfilled under the
directive for information or knowledge to constitute a trade secret.

Firstly, the information must be secret in the sense that it is not
generally known or readily accessible. Secondly, the information has
commercial value because it is secret. Thirdly, the information has been
subject to reasonable steps to keep it secret. Trivial information and the
experience and skills gained by employees in the normal course of their
employment are excluded from the definition of trade secrets. Likewise,
information that is generally known among employees or is readily
accessible to them is excluded.

Acquisition, use and disclosure of trade secrets may be unlawful. An
unlawful acquisition of a trade secret may occur if the infringer accesses
or copies without authorisation, bribes, steals, breaches or induces to
breach a confidentiality agreement or engages in any other conduct which is
considered contrary to honest commercial practices. Unlawful use or
disclosure of trade secrets arises when use or disclosure of such
information is made.

The draft directive only deals with unlawful conduct by which someone
acquires or discloses, without authorisation and through illicit means,
information with commercial value that companies treat as confidential in
order to keep a competitive advantage over their competitors.

In particular, the draft directive provides that the acquisition, use or
disclosure of a trade secret for the purpose of exercising the right to
freedom of expression will not be unlawful. This exception is intended to
protect journalistic rights.

Journalists will remain free to investigate and publish news on companies’
practices and business affairs. A whistleblowing defence is included in the
directive. The defence would apply whenever a trade secret is acquired,
used or disclosed to reveal misconduct, wrongdoing or illegal activity in
the public interest.

The draft directive sets out the civil redress measures for businesses. The
courts will be able to grant injunctions of appropriate duration,
restraining use and disclosure of confidential information, and damages
against infringers. During the course of legal proceedings, the
confidentiality of trade secrets must also be preserved. For this reason,
court officials, witnesses, experts, the parties and their lawyers would be
bound by confidentiality in relation to disclosed trade secrets that are
the subject of those proceedings. Such obligation would remain in force
notwithstanding the end of the civil process.

The EU Council will be formally adopting the directive in the course of the
next couple of months.
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