Just as 2015 was coming to a close, Europe’s key legislative bodies (the EU Commission, the EU Council and the European Parliament) suddenly reached surprise political agreement on a number of pieces of proposed legislation. This included the draft Trade Secrets Directive.
This Directive was originally proposed by the Commission back in 2013. Not much has been heard about it since then leading to suspicions that the legislation might be going nowhere. However, it seems to be firmly back on the agenda. In fact, subject to final approval from the EU Council and the European Parliament, the Directive could come into force during the first half of this year.
The Directive will harmonise the law on trade secrets, and how it is enforced, across the EU. The Commission proposed the Directive following a study into how each member state of the EU currently protects trade secrets. It found a patchwork of laws across Europe, some of which the Commission felt inadequately protected businesses. The objective of the Trade Secrets Directive is to bring clarity by creating a minimum level of protection for trade secrets across Europe encouraging greater innovation and investment in European businesses and putting them on an equal competitive footing with businesses outside Europe.
Since political agreement was reached, the agreed text of the Directive has been published. It is largely unchanged from earlier drafts. The Directive will prohibit the ‘unlawful acquisition, use or disclosure of a trade secret’ – what constitutes a protectable trade secret will be defined. A common set of remedies will be available where a trade secret has been misused, including interim and permanent injunctions, the destruction of goods which result from the misuse of trade secrets and compensatory damages. Member states are given discretion to set the limitation period for actions, with the proviso that this must not exceed six years. The Directive sets minimum requirements for legal redress so that any member state may provide for more far-reaching protection for trade secrets if it wishes to do so, provided certain safeguards in the Directive are respected.
It also seems that agreement has been reached around some of the more controversial aspects of the Directive. For example, it is clear that whistle-blowers acting in good faith who disclose trade secrets in the public interest will be protected from legal action. Also, the Directive provides that employees moving on to pastures new will not be prevented from using “experience and skills honestly acquired in the normal course of their employment”. It remains to be seen how “honestly acquired” will be interpreted. It is likely that Europe’s highest court, the Court of Justice of the European Union, will be asked to rule on this. This interpretation will be pivotal in whether the Directive really does extend the law in the UK beyond the existing common law of confidence and whether the fears previously expressed by businesses that the Directive will allow employees to take whatever they have learned during their employment to a competitor will be founded.
A provisional date of 8 March 2016 has been fixed for the European Parliament vote on the Directive. Assuming it is approved by both the Parliament and the Council, the Directive will be published in the EU Official Journal and come into force 20 days later. Member states will then have two years to implement the Directive into national law.
We will continue to track the progress of the Directive and post updates.
To discuss the potential implications for you or your business, please feel free to contact Carlton Daniel.