Home Knowledge How Safe Are Your Secrets? Directive (EU) 2016/943 “EU Trade Secrets Directive”

How Safe Are Your Secrets? Directive (EU) 2016/943 "EU Trade Secrets Directive"

With one in four European companies fallingvictim to at least one case of information theft in 2013, compared to 18% in2012, Directive (EU)2016/943 on the protection of undisclosed know-how and business information(trade secrets) against their unlawful acquisition, use anddisclosure (the “Directive”) is awelcome step towards harmonised EU protection for sensitive businessinformation. Prior to the enactment of the Directive, the lack of Europeanguidance led to a fragmented and uncertain regulatory framework in Europe wheretrade secrets, unlike in the US, were not treated as intellectual propertyrights (IPR) in themselves.

Protection of “tradesecrets”

The Directive prohibits the unlawfulacquisition, use and disclosure of trade secrets.

The acquisition, use or disclosure of a tradesecret will also be considered unlawful where the person knew or ought, underthe circumstances, to have known that the trade secret had been obtaineddirectly or indirectly from another person who unlawfully used or disclosed thetrade secret.

What type of information constitutes a’trade secret’?

Article 2(1) defines a ‘trade secret’ asinformation which meets the following criteria:

  1. 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
  2. It has commercial value because it is secret
  3. It has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret

The ‘trade secret’ definition is derived fromthe World Trade Organisation’s Art.39 (2) of the Agreement on Trade-RelatedAspects of Intellectual Property Rights (TRIPS). Despite the seeminglyall-encompassing definition, it remains unclear whether protection is extendedto information such as client lists or pricing structures that are commerciallyvaluable but freely available to large numbers of staff within an organisation.

Prior to the Directive, Ireland hasfollowed the approach of UK Court of Appeal case in Faccenda Chicken Ltd vFowler (“Faccenda Chicken”) when adjudicating on cases concerning thelevel of protection for confidential business information. In Faccenda Chicken,sales information pertaining to suppliers, contractors, distributors andpricing structures were not deemed to be trade secrets. The Court found thatsuch information was ‘readily accessible’ to large numbers of company staffincluding sales managers and administrative staff dealing with the financialaccounts and as such the employer had not taken sufficient steps to guaranteethe confidentiality of the information in question.

Court procedure

The Directive also includes provisions topreserve the confidentiality of trade secrets in the course of legalproceedings. For instance the court can restrict access of any trade secretdocument or access to the hearing to a limited number of persons. This willoffer some comfort to companies who may have been deterred in the past fromenforcing their legal rights in court in case this in turn led to the tradesecrets being disclosed to more people.

Effect of theDirective

In Ireland, companies and individuals alreadyhave recourse to the court to protect their confidential information under thelaw of equity. Accordingly, it is unlikely that the Directive will havesignificant impact on the protection of trade secrets in Ireland. Nevertheless,the new Directive is to be welcomed for the following reasons:

  • The current law on confidential information has no statutory footing
  • There is little harmonisation with respect to the law of confidential information
  • The Directive does for the first time offer a de minimis degree of protection for trade secrets across the entire EU

However, businesses wishing to avail of theprotection of the Directive must bear in mind the requirements to be fulfilledbefore a document will be classified as a trade secret and are advised toconsider their options with regard to taking ‘reasonable steps’ to ensure theirsecrets remain secret even within the four walls of the business.

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Contributed by Colette Brady

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