One of the most litigated but least legislated aspects of the UK employment relationship is the concept of the trade secret. Over the years there have been many cases in senior Courts across the UK, but each is to a large extent dependant on its own facts.  The key questions of exactly what is and is not a trade secret and how it can be protected therefore remain to some degree unclear for employers.

The problem is compounded for businesses with operations across the EU, since each country’s jurisdiction has veered off in different directions in this respect, sometimes by a degree or two and sometimes much more sharply. This means that what is protectable or achievable in trade secret terms in one EU country might not be so in another.  Concerns that this could be off-putting to external investors and so leave the EU at a competitive disadvantage led to the EU Commission proposing a Trade Secrets Directive in 2013.  To dispel any suggestion at all that the EU moves slowly in key economic affairs (the very idea!), the draft Directive was rushed out at the end of 2015.  Its Introduction contains an unusually clear shot across the bows of any body or member state thinking of a little further negotiation – “The result achieved represents a compromise that goes to the limits of the flexibility of the [EU negotiating parties]. It has therefore to be considered as a package-deal that cannot be reopened at any part without jeopardising the whole agreement”.  So there.  It seems likely that this draft is not going to change much in the process of ratification by the European Parliament.

(i) What is a trade secret? – by Article 2, “Information which meets all of the following requirements: (a) [it] 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; (c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret”. 

Employers should note (c) in particular – if you do not take proper care of your secret information in the workplace, the EU Directive will not help you.

(ii) Whistleblowing – no remedy will lie under the Directive where the use or disclosure of the trade secret was carried out “for revealing a misconduct, wrongdoing or illegal activity, provided that the [employee] acted for the purpose of protecting the general public interest”.

This will give employers approximately no comfort at all in relation to the sanctity of their information – the difficulty of proving bad faith in the discloser’s purpose is material. The question of what is in the public interest obviously very much depends on your views of, say, animal experimentation, nuclear power, GM crops, executive compensation, green-belt building, etc., and if you are against such things then you will almost inevitably regard disclosure as being in the public interest.   There is no requirement in the draft Directive that your belief that a disclosure would be in the public interest is in any way reasonable.

On the other hand, while the Directive makes the discloser’s purpose a key consideration, it also seems to limit protections to where there is a wrongdoing, misconduct, etc., rather than where the discloser merely believes there to be so.  It is unlikely, however, that this absolute objective test of wrongdoing will survive the translation into UK legislation.

(iii) Use of expertise – Article 1.2 does not allow the use of the Directive for “limiting employees’ use of the experience and skills honestly acquired in the normal course of their employment”.  For so long as “experience and skills” is not extended to cover knowledge and information, this does little more than reflect the current UK position in relation to later use of tricks of the trade as against confidential or proprietary information.

(iv) Remedies – If the Directive is transposed into UK law as is then a breach will be punishable by an injunction or damages.  Article 11 notes that the injunction can include the destruction of all or part of any document, material or electronic file containing the trade secret, delivery up to the rightful owner of the trade secret and/or prohibitions on using it to bring any product to market.  However, under Article 13 it is suggested that “member states may limit the liability for damages of employees towards their employers for the unlawful acquisition, use or disclosure of a trade secret of the employer when they act without intent”, so there may well be some disputes about whether a particular disclosure was negligent or a quick and cunning spot of ground-laying for future competition.   Article 13 also indicates that where monetary compensation can remedy the harm done by the unlawful disclosure, it is likely to be the default solution in the place of injunctive relief.

(v) Legal proceedings – for those employers worried that Court proceedings against ex-employees would entail the disclosure of the very secret they are trying to maintain, the Directive includes provision for relevant hearings to take place in private.

Current expectations are that the European Parliament will vote on the draft in March and that members states will then get 2 years to implement it domestically.