From 9 June 2018, there is new EU legislation coming into force called the Trade Secrets Directive. Here we outline what it means and how your business could be affected.
The purpose of the Trade Secrets Directive
Trade secrets can take many forms and include everything from algorithms through to chemical formulas, processes, business plans, and customer lists. One of the most well-known is the Coca-Cola® recipe which has been kept secret since 1886.
The aim of the Directive is to set out a minimum standard to protect trade secrets, which is harmonised across the EU. It will also bring the UK law closer to the position in other key territories such as the United States and China.
What is changing?
Currently, trade secrets are not actually defined under UK law but protected under the common law of confidence. This will change when the new Directive comes into force; to be defined as a trade secret, information would have to meet three requirements:
- it is secret in the sense that it is not generally known among, or readily accessible to people, within the circles that normally deal with the kind of information in question
- it has a commercial value
- it has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret
Otherwise the main changes are procedural – how you enforce unauthorised use of trade secrets.
Nothing in the Directive changes our laws on the contractual protection and enforcement of NDAs. Rather, the Directive provides a clear definition and EU wide protection mechanisms that enable trade secrets to be enforced independently of NDAs.
Protecting your trade secrets in the UK following implementation of the Trade Secret Directive
The Trade Secrets Directive will not materially change the UK legal position that has been established over many years through case law. However, the new definition of trade secrets suggests that owners should take certain steps to ring fence and maintain them which would include:
- Maintaining a database, or other centralised repository, containing details of all trade secrets
- Restricting access to trade secrets exclusively to individuals that need access to them
- Establishing a trade secrets policy
- Requiring employees to sign a document confirming that they have read and agree to the trade secrets policy
- Requiring exiting employees to sign a document confirming that they have returned all copies of trade secrets in their possession and that they will not use or disclose any company trade secrets following exit from the business.
What happens after Brexit
The European Union (Withdrawal) Bill that was published in July 2017 provides that any EU-derived domestic legislation in force in the UK before exit day will remain in force. As the Trade Secrets Directive will be implemented into domestic legislation on 9 June 2018 by the Trade Secrets (Enforcement, etc.) Regulations 2018, Brexit is not expected to have any direct impact on the new provisions on trade secrets (although of course Parliament can alter them in future if it sees fit to do so).
Will trade secrets replace patents?
No – both patents and trade secrets should form part of a balanced IP strategy. Patents are inevitably published and only last for a maximum of 20 years.
Trade secrets should be used to protect information that can be kept secret and cannot be worked out from reviewing publicly available products, processes or literature, or where publication of information is undesirable.
Patents should be considered to protect assets that require disclosure, could be reverse engineered or where the life span of a product or process is limited.
In many cases your new innovations should be protected by a variety of intellectual property rights including not only patents and trade secrets but also trade marks for brand names and logos, copyright for literary or artistic works and design rights for the appearance of products.
How to deal with unauthorised use of trade secrets
To make a claim for unauthorised use of trade secrets the owner would need to show that:
- a trade secret exists
- the applicant is the trade secret holder
- the trade secret has been acquired unlawfully, is being unlawfully used or disclosed, or unlawful acquisition, use or disclosure of the trade secret is imminent. A common example is where an employee takes company information following termination of employment and then uses that information in a new role without permission.
Evidence should be kept relating to unauthorised access, opportunity and usage, as this will form the basis of your claim.
If your claim is successful, the court may order an injunction against continued use of your trade secrets and certain corrective measures such as recall or destruction of infringing goods. The court may also award damages.
Any claim should be made as soon as possible after you become aware of unauthorised use of trade secrets otherwise a court may refuse to order an injunction.