On Saturday, 9 June 2018, with little or no fanfare, the UK’s Trade Secrets (Enforcement, etc) Regulations 2018 (SI 2018 No. 597) came into force. These Trade Secret Regulations implement into UK law the 8 June 2016 EU Directive on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure ((EU) 2016/943) (“the EU Directive”). Subject to any change of policy by the Government, the Regulations will remain in force in the UK after Brexit.
Over the coming weeks, Lime Green IP News will be focussing on key aspects of the UK’s Trade Secrets Regulations, including time limits and limitation periods, procedural protections in disputes before the courts, as well as interim and final remedies. We start by looking at the provisions at the heart of the new law.
The EU Directive is not directly effective in EU Member States (unlike an EU Regulation) and so it has to be implemented by national legislation in all 28 countries. The Directive is a minimal harmonising legislation, which means that Member States are permitted to provide for a higher level of protection for trade secrets, so long as at least the same level of protection and minimum standards for measures, procedures and remedies are ensured for trade secret holders.
Prior to 9 June, trade secrets in the UK were protected by the law of confidence derived from principles of equity and based almost entirely on case law: there was no statute defining a trade secret and no standalone legislation dealing with the procedural safeguards and remedies required under the Directive*. According to the UK Intellectual Property Office, many stakeholders responding in the short (one month) consultation period on the draft Trade Secret Regulations felt that no transposition of the Directive into a UK statute was necessary because the current system worked well, and indeed it has long been (rightly) held up as one of the gold standards in Europe. Nevertheless, after the consultation, the UK Government explained in May why it had decided (whilst taking on board many comments on the detailed drafting) to go ahead and put trade secrets protection on a statutory footing, as follows:
“… where it is clear that measures are already provided for under current legislation, case law or courts rules, there is no need for [the UK] to implement these. Where there is uncertainty as to whether the provisions of the Directive apply across all legal jurisdictions, in order to put matters beyond doubt and ensure transparency, coherence and consistency, the Government has taken the view that certain provisions should be implemented fully.“
The new UK law on Trade Secrets
The Trade Secrets Regulations revolve around Regulation 3, which folds the Directive’s definition of a trade secret into the UK’s existing law of confidence in this way:
“The acquisition, use or disclosure of a trade secret is unlawful where the acquisition, use or disclosure constitutes a breach of confidence in confidential information.“
Regulation 3 goes on to confirm that wider protection and measures, procedures and remedies may be applied for and granted by UK courts than those set out in the Regulations so long as the safeguards set out in the EU Directive are complied with.
“Trade secret” is defined (in Regulation 2) as follows:
“trade secret” means information which –
(a) 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,
(b) has commercial value because it is secret, and
(c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret;”
Looking at the definition first: parts (a) and (b) are broadly the same as current law, but part (c) introduces a new element. By contrast, under the existing law of confidence it is necessary to show that information was imparted in circumstances of confidence. Whilst there is likely to be a large overlap so that most information protected by the existing law of confidence will also be protected under the new law, the two tests are not quite equivalent. As a result, some information could lose its protection unless businesses show that they have taken steps to protect their information. This overlap remains to be tested and clarified by the courts, and so prudent businesses should consider stepping up efforts to audit their trade secrets protections, including as to the measures put in place by those they share their trade secrets with under know-how licences and NDAs.
Going back to the operative provision of Regulation 3(1), the addition of the words “in confidential information” appears to be unnecessary in light of the definition of trade secret. Putting that aside, there will inevitably be doubts as to how the new statutory test for trade secrets misuse will operate in practice until we get a judgment at Court of Appeal level (or higher). The Government’s approach has been to try to mesh the Directive with existing (case) law: how successful that has been remains to be seen.
The additional clarity that the Regulations (as enacted) provide over the initial draft as a result of the inclusion of near word-for-word transposition of some of the Directive’s Articles is to be welcomed. Nevertheless, as we shall see in our forthcoming blogs on some of the other provisions, the patchwork quilt effect created by the Government’s approach to implementation (summarised in the quote above) is likely to lead to uncertainty for longer than perhaps would have been the case if an all or nothing approach had been taken.
* A more detailed summary of the UK’s law of confidence and existing procedural protections in the UK (and all other Member States), is in Hogan Lovells’ 2013 Report for the European Commission here.
For an overview of Trade Secrets law around the world: see Hogan Lovells Trade Secrets Global Guide.