There is no doubt that trade secrets are valuable business assets, have a direct impact on innovation and are important drivers of competitive advantage in the market. Greater use of outsourcing and collaborations, combined with easier access to data and rising statistics of commercial espionage mean that there is currently an increased risk of trade secrets misuse.
With this and Brexit’s far-reaching effect in mind, we gave a presentation to clients and colleagues in London on the protection of confidential information and the Trade Secrets Directive EU 2016/943 (“the Directive”). The session covered the following points:
- Some typical scenarios for trade secrets misuse
- The Directive
- The related effect of Brexit
- What businesses should be doing now
This post gives a summary of these points with links to the presentation and relevant documents.
The EU Trade Secrets Directive
There is currently no harmonisation of trade secrets protection in Europe or a uniform definition of a “trade secret”. The varying protection mechanisms across member states create difficulties in cross-border protection and enforcement. Similarly, remedies available are also inconsistent. With the US Defend Trade Secrets act of May 2016 [see our earlier post], there is a global trend aiming to harmonise and regulate trade secret protection. The Directive which is to be implemented into national law in the EU by June 2018 defines a “trade secret”, lays out direct and indirect infringement scenarios, exceptions, preservation of confidentiality and defines a framework for remedies.
If UK does not implement the Directive and if the UK has not exited the EU by June 2018 (which is likely), the Directive will be directly applicable, or at least the courts have to interpret the national laws in the light of the Directive. It is important to note that businesses with interests outside the UK, seeking protection for their trade secrets outside the UK, will still have to comply with the requirements of the Directive. Therefore, the Directive should not be ignored. In any event, it’s good practice for businesses to follow the Directive requirements to take reasonable steps to keep information secret in order to ensure comprehensive protection of their trade secret portfolio across Europe.
What should businesses be doing now?
One of the requirements of the Directive is for businesses to take reasonable steps to keep information secret, be it through comprehensive protection measures (including through its documentation) or other means. As a first step it’s important to carry out a trade secret audit to identify what is worthy of protection – what is your valuable know-how and do you have sufficient means to protect it through practical means and contractual obligations? It may be the case that your current protection measures are not up-to-date or that your protection measures are not properly documented.
When reviewing contracts in the context of trade secrets protection, there are three main considerations. The trade secrets holder must define the scope of permitted use and assess their protection measures and confidentiality clauses. Any recipient of trade secrets should also review their warranties and protection against third party claims for misuse of trade secrets.
On a more general level, there are some practical steps that businesses can take to keep information secret. The following should be considered as a minimum:
- Education of employees about the importance of confidential information and best practice for keeping it secret
- Review of provisions in employment contracts to ensure confidential information is protected during and after employment
- Ensure proper documentation around the creation and disclosure of confidential information
- The adoption of appropriate physical and IT security measures (including regulating access to know-how and trade secrets to those who needs to know it)
The full presentation provides further detail on the above points. Our Report on Trade Secrets for the European Commission also provides an overview of trade secrets protection across the EU with related statistics and studies.
*The Hogan Lovells IP Academy runs information sessions for colleagues and clients by invitation on mainstream and trending IP topics