On June, 8, 2016 the European Parliament and the European Council have adopted the directive 2004/48/EG on the protection of undisclosed know-how and business information (trade secrets). This directive must be implemented in the national laws of the member states by June, 9, 2018.
Art. 39 of the TRIPS agreement, entered into between the WTO members (including all E.U. member states), already obliges the member states to protect undisclosed business information. Still, the protection of trade secrets in the national laws of most member states is patchy at best. Many of them do not even have a legal definition of what trade secrets are. Sweden would be the only country that has a specific trade secrets protection act. There are also major differences in the levels of protection offered by the member states and of the enforcement remedies that are available to the trade secret owners.
This diversity contrasts with the situation in the U.S., where since 1979 most of the states, with the notable exceptions of Texas and New-York, have adopted the Uniform Trade Secrets Act.
The directive 2004/48/EG obliges the member states to protect trade secrets against unlawful acquisition, use and disclosure. It aims at a comprehensive harmonization, making the protection of trade secrets in the laws of the member states much more similar in the near future. However, the directive allows the member states to provide for farther reaching enforcement remedies subject to the respect of the rules that protect third party rights.
The directive defines trade secrets as information : (1) that is not generally know; (2) that therefore has commercial value; and (3) for which the controller of the information has taken reasonable steps to keep it secret (art. 2).
The member states are instructed to introduce in their national laws the possibility for the trade secrets owners to obtain cessation orders as well as indemnities.
The directive 2016/943 also orders the member states to include in their court proceedings measures for the protection of trade secrets that are the subject of these proceedings.
It is important to note that trade secrets are explicitly not deemed to be intellectual property rights. Trade secrets are hence not available for exclusive appropriation (and cannot be the subject of rights in rem ). Anyone can develop the same trade secret as long as it is developed lawfully.
The directive 2004/48/EG on the enforcement of intellectual property rights has not been made directly applicable to trade secrets. However, the new directive does contain a certain number of provisions that are inspired by the enforcement directive. As mentioned, member states can opt for a more extensive protection of trade secrets.
THE KEY PROVISIONS OF THE DIRECTIVE
Art. 2: definition of trade secrets
For information to be protected as trade secrets, the following conditions have to be met:
(1) the information must be secret in the sense that it is not generally known among or readily accessible to persons within the interested circles;
(2) it has commercial value because it is secret;
(3) it has been subject to reasonable steps by the person lawfully in control to keep it secret.
Art. 3: reverse engineering authorised
The acquisition of a trade secret by observation, study, disassembly or testing of a product that has been made available to the public shall be considered lawful. Straightforward reverse engineering is not forbidden by the directive.
Art. 4: unlawful acquisition, use and disclosure
The following is considered unlawful :
- The acquisition of the trade secret without the consent of the trade secret holder through unauthorized access or other conduct contrary to honest commercial practices;
- The use or disclosure of a trade secret without the consent of the trade secret holder by a person who has acquired the trade secret unlawfully or in breach of a confidentiality agreement or another (contractual) obligation to limit the use of the trade secret;
- The acquisition, use or disclosure of the trade secret whenever a person knew or ought to have known that the trade secret had been obtained directly or indirectly from a person who was using or disclosing the trade secret unlawfully.
Art. 7 : abuse of process
The member states shall ensure that the judicial authorities shall apply appropriate measures against trade secret proceedings that are initiated abusively or in bad faith.
Art. 8 : limitation period
It is left to the member states to decide on the limitation periods applicable to the claims and actions provided for in the directive. The duration of the limitation period shall not exceed 6 years.
Art. 9 : preservation of confidentiality of trade secrets in the course of legal proceedings
Parties to proceedings related to the unlawful acquisition, use or disclosure of a trade secret are not permitted to use or disclose any trade secrets they know of as a result of their participation in these proceedings if the courts, on reasoned request of a party, have identified such information as confidential.
The courts can restrict the access to the trade secrets to a limited number of persons with a minimum of one natural person for each party and their respective lawyers or other representatives.
Art. 10/12 : provisional and precautionary measures
Member states shall provide for following precautionary measures against the alleged infringer: (1) the cessation or the prohibition of the use or disclosure of trade secrets, (2) the prohibition of the production or sales of the infringing goods, (3) the seizure or delivery of the infringing goods. The granting of these measures is conditional on the provisioning of reasonable evidence by the applicant.
Art. 12/13: injunctions and corrective measures
When a court decision on the merits of the case finds that there has been unlawful acquisition, use or disclosure of trade secrets, the court must have the possibility to order l measures such as the cessation of the disclosure or use of the trade secret or the recall of the infringing goods. When deciding these measures, the courts will take into account the value or other specific features of the trade secret, the impact of the unlawful use or disclosure of the trade secret or the legitimate interests of third parties. These measures can be revoked, e.g., if the information no longer meets the requirements for trade secrets for reasons that cannot be attributed to the defendant. These measures can also be replaced with financial compensation to the injured party. In the absence of specific circumstances these measures shall be at the expense of the infringer.
Art. 14: compensation
National transposition laws must include the possibility to order the infringer who knowingly has been engaging in the unlawful acquisition, use or disclosure of trade secrets to pay the trade secret holder appropriate damages. The member states can limit the liability for damages due by employees to their employers when they have acted without intent. The damages can be set as a lump sum that is equal to the royalties or fees that would have been due had the infringer requested authorization to use the trade secret.
PROGRESS MADE ON TRANSPOSITION IN BELGIAN LAW
A first draft of the Belgian transposition law has been prepared and has been submitted to the Council for Intellectual Property, and advisory body instructed by the ministry of economics. As far as known the draft itself has not been published.
From the advice of the Council for Intellectual Property it appears that the directive will be transposed into Belgian law through the insertion of a new title 8/1 and 9/1 in Book XI of the Code of Economic Law that will be called “Intellectual property and trade secrets”. There will also be a few changes to the Judiciary Code.
The most important comments of the Council concern matters of enforcement. The Council recommends allowing cessation orders for the future acquisition of a trade secret but is opposed to cessation orders against intermediaries (as is possible for the enforcement of intellectual property rights).
The standard used for awarding damages would be the standard for extra-contractual liability.
The council also advises against increased liability and sanctioning in case of bad faith such as provided for in Book XI, art. 335 (Code of Economic Law) for infringement of intellectual property rights.