It’s up to the new European Parliament to decideWe all know how important is the trade secrets protection for each business and how vulnerable they are because of the employee “bad intentions” but moreover because of the existence of Internet exchange and the nasty USB sticks.
So, our trade secrets need to be well protected.
Incoming new European Directive.
In this moment it exists only as a draft and in the next months the brand new Parliament has to decide the destiny of the trade secrets.
There are two possible lines of protection according to the European Commission which is the author of the Directive and the Council of the EU, on the other hand, which proposed important changes of it and which is already negotiating with the EU Parliament.
While the definition of trade secret is the same in the two drafts there are some main points regarding the trade secrets protection about which the Commission and the Council have different points of view and here below we are going to exam them.
1. Harmonization – extended or minimal?
The Council’s approach appears to be for the “minimal harmonization”, suggesting that a wider degree of freedom should be left to Member States in the transposition of the Directive. The Council takes the position that Member States should be allowed to provide for a higher level of protection than that requested by the Directive, providing that the basic principles contained in it are safeguarded.
2. When there is a violation – in each case of infringement or it requires subjective elements?
The Commission and the Council both agree that the trade secret holder should be able to prevent or obtain redress for “the unlawful acquisition, use or disclosure of their trade secret”.
The difference comes from the definition of what is “unlawful”.
According to the Commission the acquisition, use or disclosure of a trade secret is “unlawful” when there is “intention” or at least “gross negligence”. So we talk about violation when there is the subjective element “guiltiness”.
The Council simply proposes that “unlawful” is any “dishonest behavior”, any acquisition, use or disclosure “which, under the circumstances, is considered contrary to honest commercial practices”.
It’s obvious that the Council eliminating the subjective elements guarantees a wider protection for the trade secrets and an easier life for trade secret holders, who would no longer have to demonstrate an infringer’s subjective status in order to secure protection and it reflects better the commercial and business law characteristics.
The Council according its view for a minimal harmonization adds that “The acquisition, use and disclosure of trade secrets shall be considered lawful to the extent that such acquisition, use or disclosure is required or allowed by Union or national law”.
3. Enforcement and injunctions conditions
The Draft of the Commission imposes a mandatory examination of some elements such as the value of the trade secret, the impact of the unlawful use or disclosure of the trade secret, the legitimate interests of the parties, the legitimate interests of third parties, the public interest and the safeguard of fundamental rights, etc. when “deciding on the granting or rejecting of the application and assessing its proportionality” or “considering a request for the adoption of the injunctions and corrective measures”.
The Council’s correction offers more flexibility requiring the competent national judicial authorities “to take into account the specific circumstances of the case”, while national Courts are free to consider the mandatory elements listed above only “where appropriate”. According to the Council in order to promote fair competitiveness and an innovative business environment restrictions to the use of trade secrets are justified in cases where the relevant know-how of information has been obtained from the trade secret holder against its will through dishonest means. The assessment of whether and to what extent such restrictions are necessary is subject, on a case-by-case basis, to judicial control.
4. Does the Directive provide criminal protection?
The Council specify that the Draft Directive will not in any way interfere with national prerogatives regarding criminal law.
It is not so clear in the Draft of the Commission which not only doesn’t specify if it provides criminal protection but also uses a terminology common for the criminal law like “theft” and “bribery” to define the unlawful acquisition for example.
5. Regime for employees’ liability for damages
The Council Draft guarantees a favorable regime to employees in what concerns their liability for damages in case of violation of a trade secret if acting without intent.
6. Trade secrets confidentiality - absolute or relative obligation?
While the Draft of the Commission provides a general obligation not to use or disclose trade secrets or alleged trade secrets disclosed in legal proceedings upon all those who obtained access or became aware of them as a result of participation to the same proceedings, the Council searches a balance between legitimate secrecy expectations of the trade secret holder and the right of defense of other parties involved in possible proceedings, providing that a secrecy regime might only be established towards information that the competent authorities have “identified as confidential” further to “a duly reasoned application by the interested party”.
In the Council’s proposal it is for the trade secret holder to submit a reasoned claim for confidentiality regime upon specific information and to provide reasons supporting such request.
7. Prescription for bringing an infringement – short or extended limitation period?
According to the Commission the actions related to trade secret violation might be bought “at least one year but not more than two years after the date on which the applicant became aware, or had reason to become aware, of the last fact giving rise to the action”. The Council, on the other hand, decides to left Member States opt for a limitation period up to six years, leaving them free to define the moment from which such period starts running and possible reasons for its suspension.
It now remains to be seen what will be the decision of the European Parliament in the next months, how we should seek protection of our trade secrets and in which way will be transported the new Directive prescriptions in the national legislation
Sabina Popova
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