Whether or not the UK adopts the new Trade Secrets Directive post-Brexit is unclear, but it provides a useful guide that small firms would be well advised to follow.
Smart business owners know what gives their business its competitive edge, and take the right practical and legal steps to protect their trade secrets and other vital confidential information.
Employees, suppliers and business partners all pose a risk to long-term competitiveness.
Each EU member state takes a different approach to the definition and protection of confidential information, so companies doing business in Europe have to consider their business strategies carefully, as they can’t be sure how trade secrets will be protected.
The new Trade Secrets Directive that comes into force on 9 June 2018 aims to introduce a minimum standard for protection across the EU.
However, this is an EU directive and not a regulation (which carries more legal weight). With Brexit, it remains unclear to what extent the UK will adopt this directive, if at all. But it seems likely, as the directive gives clear guidance on the definition of a trade secret and the remedies available in the event of a breach, which will benefit not only right-holders but also third parties.
What are the options currently when a trade secret has been misappropriated? Commercial information may be protected under the law of confidence. It’s based on the principle that information obtained in confidence cannot be used in a way that will prejudice the owner without obtaining their consent.
The disclosure of confidential information in the following circumstances usually gives rise to an obligation of confidence:
A contractual obligation – for example, non-disclosure agreements.
An obligation implied because of the circumstances of disclosure – whether a reasonable person standing in the shoes of the recipient of the information would have realised that the information was being given to him or her in confidence.
An obligation implied by way of a special relationship between the parties concerned, most commonly employer/employee relationships.
How does the proposed directive define a trade secret? It’s information that is not generally known, has commercial value because it’s secret, and the owner would have taken reasonable steps to secure the information.
The directive provides for legal remedies to be enforced through the court system, including the use of injunctions, destruction of the infringing goods and compensation for damages as a result of the unlawful use or disclosure of the trade secret.
A few exceptions offer a defence for disclosure, which include exercising the right of freedom of information, revealing misconduct, wrongdoing or illegal activity in the general public interest, and disclosures by workers to their representatives in the context of that relationship (i.e. whistleblowing).
Disappointingly, the directive leaves a grey area when it comes to an employer’s trade secret and an employee’s knowledge gained through employment.
Our advice is that well-drafted and carefully considered restrictive covenants and confidentiality agreements should continue to be used. You should also identify your secret information and implement steps to protect that information.
Practical steps may include restricting access to the confidential information on a need-to-know basis, using passport protection on files and implementing techniques to prevent USB keys being used with company computers, and ensuring there are appropriate policies in place to deal with the use of personal devices.