A company's trade secrets might include new manufacturing processes.

But could include improved recipes, information relating to the name, price and launch date of a new product or the price offered in a bidding process

“Keep it secret, keep it safe”: The Trade Secrets Directive

A company’s trade secrets might include new manufacturing processes, improved recipes, information relating to the name, price and launch date of a new product, or the price offered in a bidding process.

It has been reported that every year one company out of every five is the victim of theft of trade secrets and since the current protection afforded to trade secrets varies significantly across the EU, the discrepancies risk deterring cross-border investment. It is said that this new Directive should allow the creation of a safe and trustworthy environment for European companies by securing their intangible assets and know-how. Assuming the European Council approves the text of the Directive next month, UK legislation can be expected in May 2018.

This is of particular interest in the employment sphere, not least because the misuse of trade secrets is often associated with the activities of employees and ex-employees. Although it will provide protection to companies, the legislation will add a further layer of complexity associated with the enforcement of express and implied confidentiality provisions in employment contracts.

The Directive defines a trade secret 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.

The Directive will prohibit the following:

  • 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. Independent discovery, reverse engineering and the 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 the possibility of concluding non-competition agreements between employers and employees and restrictive covenants unrelated to trade secrets 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’.

There is specific exception for whistleblowers in that it will not be unlawful for an individual 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. Similarly, the acquisition, use or disclosure of a trade secret for the purpose of exercising the right to freedom of expression and information as set out in the Charter of Fundamental Rights of the European Union will not be unlawful. This exception is intended to provide protection for journalists.

The Directive will require EU member states to ensure that victims of misuse of trade secrets are able to defend their rights in court and seek compensation.

  • Author
  • Knowledge
  • News & Events
Colin Smith profile
Colin Smith Partner

T: 01622 776451

Email Colin Smith