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Protections Afforded by EU Trade Secrets Directive

The protection afforded to trade secrets is disparate across the EU. In order to protect trade secrets as potential drivers for economic growth and jobs and to create a level-playing field within Europe, the European Parliament has now approved the Trade Secrets Directive.

This Directive aims to provide a minimum, uniform level of protection in respect of undisclosed know-how and business information (trade secrets) against unlawful acquisition, use and disclosure. The intent is for this protection work in parallel with the existing uniform EU law protecting intellectual property.

The Directive provides a minimum standard framework, with common definitions, procedures and sanctions. Higher levels of protection are permitted. Accordingly, countries which already enjoy higher levels of protection (e.g. UK and Germany) will not necessarily need to take any steps to implement the requirements. Nonetheless, decisions of the ECJ interpreting the Directive may well have a bearing on the existing national law of Member States in relation to trade secrets.

The following is a list of the notable aspects of the Directive:

Recitals 27(a) – Post termination restrictions

There are no requirements to harmonise the laws in relation to post-termination restrictions, including non-compete clauses.

Article 1.2a – Subject matter and scope

The Directive does not seek to limit an employee’s use of their experience and skills honestly acquired through the normal course of their employment. This means that what amounts to a trade secret must be above and beyond something that is mere skill and experience. Additional restrictions cannot be put on employees to reduce their mobility because of the Directive.

Article 2 – Definition of “trade secret”

Under the Directive, a “trade secret” is information that (i) “is secret in the sense that it is not….generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question; (ii) has “commercial value because it is secret”; and (iii) “has been subject to reasonable steps under the circumstances, by the person in control of the information, to keep it secret” (emphasis added).

This broad definition reflects the wording of article 39(2) of international TRIPS Agreement (Trade-Related Aspects of Intellectual Property Rights), an agreement administered by the World Trade Organisation. It is also similar to the definition of trade secrets under the U.S. Uniform Trade Secrets Act.

This will be a definition that is ripe for judicial interpretation by the ECJ, especially those parts emphasised in italics.

Article 4(b) – Exception for whistleblowers

One exception to the general prohibition against disclosing trade secrets is for whistleblowers. Article 4(b) explicitly permits the disclosure of trade secrets by whistleblowers, where such disclosure involves raising “misconduct, wrongdoing or illegal activity, provided that the [whistleblower] acted for the purpose of protecting the general public interest”. We anticipate that the scope of this exception will be an area of controversy.

Article 9 – Provisional and precautionary measures

This gives judicial authorities the power to take certain interim actions and precautionary measures against an alleged infringer before a decision has been made. These would include: the cessation or prohibition of the use or disclosure of the trade secret on a provisional basis; a prohibition on producing, offering or placing on the market or using infringing goods or importing or exporting infringing goods; and seizing or delivering up suspected infringing goods. The Article is silent on other interim measures that judicial authorities may have the power to do e.g. search orders, freezing orders and pre-action disclosure.

Article 11 – Injunction and corrective measures

Once the case has been decided, the Directive gives judicial authorities to  grant final remedies in addition to or as an alternative to an award of damages, such as orders prohibiting the use or disclosure of the trade secret; prohibiting the production, offering or placing on the market or use of the infringing goods, or importing or exporting or storing infringing goods; adopting appropriate corrective measures with regard to the infringing goods; and destroying or delivering up of relevant documents, objects, materials, electronic files. These remedies will be familiar to UK lawyers.

Article 13 – Damages

This gives judicial authorities the power to award damages for misuse of trade secrets. Interestingly, the legislation expressly provides Member States with the option of limiting the liability for damages of employees where the misuse was unintentional.

Next Steps

The European Parliament has formally approved the Directive. It will now need to be endorsed by the Council of the European Union, which we expect to occur in May. Member States will then have two years to ensure that the national law is in accordance with the Directive, or implement it.

© 2019 Proskauer Rose LLP.

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About this Author

Daniel Ornstein, Litigation Attorney, Proskauer Law FIrm
Partner

Dan Ornstein leads our London labor and employment team and is a co-head of our International Labor & Employment Group. He has over 15 years of experience dealing with a broad range of UK and international employment issues. Dan is a go-to advisor for clients who rely on his sophisticated advice both on day-to-day matters and high-stakes situations. Dan is ranked in Chambers UK, which describes him as "incredibly analytical", "incredibly intelligent and an excellent sounding board” and someone who “displays both empathy and an assured knowledge of the best way to...

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John P Barry, Proskauer Law Firm, Labor Employment Attorney
Partner

John P. Barry is a Partner in the Labor & Employment Law Department and co-head of the Non-Compete & Trade Secret Group, resident in the Newark office.

973-274-6081
Peta Anne Barrow, Special International Labor and Employment Counsel, Proskauer, London Law firm
Special International Labor and Employment Counsel

Peta-Anne Barrow is co-head of the International Privacy & Data Security Group and a member of the Labor & Employment Law Department.

Peta-Anne has extensive labor and employment law experience in the UK and internationally. Contentious work includes Employment Tribunal claims such as unfair dismissal and unlawful discrimination and High Court proceedings such as the enforcement of restrictive covenants and bonus disputes. Non-contentious work includes Board level reorganisations and executive terminations, drafting senior level...

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Kelly McMullon, London, Proskauer Rose, Labor Matters Lawyer
Associate

Kelly M. McMullon is an associate in the Labor & Employment Law Department and member of the International Labor & Employment Group.

Kelly assists clients in a wide range of contentious and non-contentious labor and employment law matters, including claims for unfair dismissal, discrimination and whistleblowing in a variety of sectors such as asset management, hospitality, retail and information technology.

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