On May 27, 2016, the EU Council approved the Directive of the European Parliament and of the Council on the protection of undisclosed know -how and business information (Hereafter referred to as the EU-TSD). The aim of the EU-TSD is to harmonize at the EU level the definition of trade secret (or know- how) and what behaviors must be considered as unlawful acquisition, use and disclosure of these trade secrets.
Member states must transpose this Directive by June 2018 in their national order and must also guarantee that there is sufficient level of civil redress against unlawful acquisition, use and disclosure.
Without launching in a full scale analysis, the EU-TSD does not provide for any specific intellectual property right for trade secrets. Moreover, the EU-TSD considers that virtually any information may be considered as a trade secret as long as it fulfills a number of criterions which requires proactive action from the business.
The categories of information which may be considered as trade secrets under the EU-TSD are virtually unlimited.
A trade secret may potentially refer to any formula, any practice, any process, any design, any instrument, any pattern, any commercial method or any compilation of information whatsoever as long as this information complies with the three following criterions :
- The information is not generally known to the relevant business circles or to the public. The information should also not be readily accessible.
- The information confers some sort of economic benefit on its owner. This benefit must derive specifically from the fact that it is not generally known, and not just from the value of the information itself. It must have commercial value because it is a secret.
- The information must have been subject to reasonable steps by the rightful holder of the information to keep it secret. What is reasonable can vary depending on the specific circumstances.
Consequently in order to be able to protect their know-how (trade secrets) against wrongful acquisition, use or disclosure, businesses cannot depend on any specific intellectual property right which would apply de facto to their trade secrets nor expect that vaguely formulated non-disclosure or confidentiality clauses will automatically cover all information they regard as trade secrets.
Instead, it flows from the wording of the EU-TDS that businesses that intend to protect their know-how should adopt a certain number of proactive actions in order to identify and protect the information they wish to grant protection against unlawful acquisition, use and disclosure.
The steps that are needed and which may require an internal audit procedure are threefold:
- Identify your trade secrets,
- Prove that the information you consider to be trade secrets is not readily accessible by professionals in your area of expertise or the public and also justify how this information confers an economic advantage to the owner if it is revealed
- Take reasonable steps to protect the information (legal and physical).
STEP 1: Identify which information or category of information you consider to be know-how or trade secret.
It often happens that companies may find themselves in situations where important assets are being overlooked or taken for granted. The danger of this attitude is the risk to lose important assets through sheer misinformation. At the same time, companies may sometimes find themselves exposed to potential liability when they inadvertently obtain others’ trade secrets.
In order to ascertain whether any information could be protected by the EU-TSD, the first step is thus to identify all information which you think should be considered as a trade secret in your company. (A complementary measure would be organize internal trainings to raise awareness about the new legislation).
In order to determine what information they wish to protect, companies may be advised to ask themselves the following questions:
- What does the management think its trade secrets are?
- Does the company have trade secrets that it did not know existed?
- What do the company’s employees, customers, suppliers, and innovators think that the company’s trade secrets are?
STEP 2: Conduct adequate research to ascertain whether the information is generally known to the relevant business circle or the public and if its acquisition would confer an economic benefit to its owner.
Once you have established what type of information you consider as trade secrets, you may then conduct a documented research (which should be updated at regular intervals) for each specific information or each category of information in order to verify whether this information is already readily accessible to businesses in your area of expertise or to the public.
If the outcome of this first research is negative (the information is not known or easily accessible) you may then conduct a second documented research where you will have to explain and prove that if the information was revealed it would confer an economic advantage to its owner.
For both researches it is the responsibility of your company to document both researches as much as possible and update them regularly so that you will not have to waste resources protecting an information which is already accessible or incur the risk to lose a legal procedure launched against a competitor accused of unlawful acquisition, use and disclosure because the aforementioned criterions are not met.
STEP 3: Establish reasonable steps to keep this information secret (legal, physical protection of the identified information)
Finally, and this is where some help of legal or IT professionals should come in handy, the EU-TSD requires businesses to take “reasonable steps” to keep the information secret.
It is unclear what “reasonable steps” means in this context. A trade secret holder will thus need to sufficiently document all steps taken to keep trade secrets confidential in order to establish that the TSD’s protections should apply.
Examples of such steps may be comprehensive non-disclosure measures (for example clauses which explicitly and extensively refer to all the information or categories or information which should be considered as trade secrets in all the relevant contracts with employees or partners), the adoption of internal policies around the creation, access and safekeeping of trade secrets, setting up electronic or physical safeguards. (For example, antivirus, secured databases, locked storage areas, special access etc).
More information on the protection of trade secrets?
Contact Bart Van den Brande or Mathieu Desmet via mail (email@example.com) or 02/721 13 00