Long-awaited new EU legislation on Trade Secrets finally passed through the European Parliament last Thursday. The proposed Directive “on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure” first appeared form the European Commission in 2013. French centre-right politician Constance Le Grip (EPP, France) reported for the Parliament and the Commission draft came in for serious modification from the Parliamentarians, before the final agreement between the Council of Ministers which resulted in Thursday’s Parliament endorsement of the deal by 503 votes to 131, with 18 abstentions.
The future rules are intended to enable companies to protect their know-how and commercially valuable information against unlawful acquisition and to help them obtain legal redress against theft of misuse of their trade secrets. The new Directive harmonises the definition of trade secrets and the civil means through which victims of trade secret misappropriation can seek protection.
Trade secrets protection is complementary to other intellectual property rights. Unlike patents, trade secrets rely on confidentiality agreements between parties. Trade secrets are only legally protected in instances where someone has obtained the confidential information by illegitimate means (e.g. through spying, theft or bribery). If trade secrets are discovered legitimately by means such as reverse engineering or independent research, then the right is unenforceable. Trade secret protection is also used for commercially valuable information for which there is no IPR protection, but for which investment and/or research are nevertheless required and which are important to innovation.
The key elements of the agreed proposal include a clear definition, minimum harmonisation of existing national legal regimes, whilst allowing Member States to apply stricter rules, a maximum limitation period of 6 years for claims (a big increase form the Commission’s initial proposal of one to two years), the preservation of confidentiality in the course of legal proceedings and the possibility for Member States to establish a more favourable regime to employees in what concerns their liability for damages in case of violation of a trade secret if acting without intent.
In response to vigorous campaigning by several groups such as journalists and several NGOs, the institutions have revised the proposal to give some safeguards to whistleblowers (acting “in the public interest”). Activities that “exercise of the right to freedom of expression and information (including media freedom)” also fall outside the scope of the Directive, as does the autonomy of the social partners, and also their right to enter into collective agreements. Moreover, the Directive states that its provisions do not offer any ground for restricting the mobility of employees.
The agreement has come in the face of vigorous opposition from a number of quarters: A June 2015 online petition calling for rejection of the proposal collected 59000 signatures and a further petition just before the vote collected over 250,000 signatures in just two weeks (prompted, to some extent, by the “Panama Papers” leak, which again demonstrate d the role for whistleblowers in the public benefit. Nevertheless both the rapporteur Le Grip and business (through the Trade Secrets and Innovation Coalition) welcomed the vote, as “a balanced text protecting at the same time our companies… but also civil liberties, the work of journalists and whistle-blowing activities” (Constance le Grip).
The Directive will now need to be endorsed by the Council EU Ministers before entering into force.