How Safe Are Your Secrets? Directive (EU) 2016/943 "EU Trade Secrets Directive"
![]()
Almost three years after its initial proposal, the EU "Trade Secrets Directive" was formally adopted by the European Council and published in the Official Journal on 15 June 2016. Ireland now has a two year window, running from 5 July 2016, to transpose the Directive into national law.
With one in four European companies falling
victim to at least one case of information theft in 2013, compared to 18% in
2012, Directive (EU)
2016/943 on the protection of undisclosed know-how and business information
(trade secrets) against their unlawful acquisition, use and
disclosure (the "Directive") is a
welcome step towards harmonised EU protection for sensitive business
information. Prior to the enactment of the Directive, the lack of European
guidance led to a fragmented and uncertain regulatory framework in Europe where
trade secrets, unlike in the US, were not treated as intellectual property
rights (IPR) in themselves.
Protection of "trade
secrets"
The Directive prohibits the unlawful
acquisition, use and disclosure of trade secrets.
The acquisition, use or disclosure of a trade
secret will also be considered unlawful where the person knew or ought, under
the circumstances, to have known that the trade secret had been obtained
directly or indirectly from another person who unlawfully used or disclosed the
trade secret.
What type of information constitutes a
'trade secret'?
Article 2(1) defines a ‘trade secret’ as
information which meets the following criteria:
- 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
- It has commercial value because it is
secret
- 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 from
the World Trade Organisation's Art.39 (2) of the Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPS). Despite the seemingly
all-encompassing definition, it remains unclear whether protection is extended
to information such as client lists or pricing structures that are commercially
valuable but freely available to large numbers of staff within an organisation.
Prior to the Directive, Ireland has
followed the approach of UK Court of Appeal case in Faccenda Chicken Ltd v
Fowler ("Faccenda Chicken") when adjudicating on cases concerning the
level of protection for confidential business information. In Faccenda Chicken,
sales information pertaining to suppliers, contractors, distributors and
pricing structures were not deemed to be trade secrets. The Court found that
such information was 'readily accessible' to large numbers of company staff
including sales managers and administrative staff dealing with the financial
accounts and as such the employer had not taken sufficient steps to guarantee
the confidentiality of the information in question.
Court procedure
The Directive also includes provisions to
preserve the confidentiality of trade secrets in the course of legal
proceedings. For instance the court can restrict access of any trade secret
document or access to the hearing to a limited number of persons. This will
offer some comfort to companies who may have been deterred in the past from
enforcing their legal rights in court in case this in turn led to the trade
secrets being disclosed to more people.
Effect of the
Directive
In Ireland, companies and individuals already
have recourse to the court to protect their confidential information under the
law of equity. Accordingly, it is unlikely that the Directive will have
significant 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 the
protection of the Directive must bear in mind the requirements to be fulfilled
before a document will be classified as a trade secret and are advised to
consider their options with regard to taking 'reasonable steps' to ensure their
secrets remain secret even within the four walls of the business.
Follow us on Twitter @WFIDEA
Contributed by Colette Brady
Back to Legal News