A trade secret is a valuable piece of information for an enterprise that is treated as confidential and that gives that enterprise a competitive advantage. European companies are increasingly exposed to the misappropriation of trade secrets. Following a proposal from the European Commission, the European Parliament and the Council have standardised the existing diverging national laws on the protection against the misappropriation of trade secrets. This will enable companies to exploit and share their trade secrets with privileged business partners across the Internal Market, turning their innovative ideas into growth and jobs.
The importance of trade secrets
Whether through laborious and costly research, decades of experience, or a sudden burst of creativity, companies constantly develop information which can help them to perform better, faster or at lower cost. Such knowledge can include new manufacturing processes, improved recipes, or information on whom to buy from and whom to sell to. Information protected through a trade secret can be strategic for decades (for example, a recipe or a chemical compound), or ephemeral (for example, the results of a marketing study, the name, price and launch date of a new product, or the price offered in a bidding procedure).
Information, knowledge, inventiveness and creativity are the raw materials of the new economy, and trade secrets are important for companies both large or small, in all economic sectors. However, while large companies have the resources to manage a large portfolio of intellectual property rights, such as patents, smaller companies often cannot afford to do this – therefore their reliance on trade secrets is greater.
On 8 June 2016 following a proposal from the European Commission, the European Parliament and the Council adopted DIRECTIVE (EU) 2016/943 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (“Directive”). The Directive aims to standardise the national laws in EU countries against the unlawful acquisition, disclosure and use of trade secrets.
The Directive harmonises the definition of trade secrets in accordance with existing internationally binding standards. It also defines the relevant forms of misappropriation and clarifies that reverse engineering and parallel innovation must be guaranteed, given that trade secrets are not a form of exclusive intellectual property right.
Without establishing criminal sanctions, the proposal harmonises the civil means through which victims of trade secret misappropriation can seek protection, such as:
- stopping the unlawful use and further disclosure of misappropriated trade secrets
- the removal from the market of goods that have been manufactured on the basis of a trade secret that has been illegally acquired
- the right to compensation for the damages caused by the unlawful use or disclosure of the misappropriated trade secret.
EU countries must bring into force the laws and administrative provisions necessary to comply with the Directive by 9 June 2018.
What will change?
Companies, inventors, researchers and creators will be put on equal footing throughout the Internal Market, and the EU will have a common, clear and balanced legal framework which will discourage unfair competition, and facilitate collaborative innovation and the sharing of valuable know-how to make the EU a stronger and more competitive economic region.