In the coming weeks, the European Parliament will debate and is expected to pass a trade secret directive for European Union (EU) Member States that aims to harmonize and strengthen trade secret law throughout the EU, a significant development for U.S. companies doing business internationally. Once the directive has been adopted by the EU, Member States will have to implement it in their national laws within two years.
The directive was developed in response to the European Commission’s study, which revealed inconsistencies in trade secret regulation and inadequate trade secret protection throughout the EU. The directive aims to provide consistency in three primary areas:
- The Directive Will Clarify What Constitutes a “Trade Secret”
- The Directive Provides New Remedies to Enforce Trade Secret Rights
- The Directive Will Provide Protection for Trade Secrets During Legal Proceedings
The Directive Will Clarify What Constitutes a “Trade Secret”
The directive provides that for information to qualify as a trade secret: “(i) the information must be confidential; (ii) it should have commercial value because of its confidentiality; and (iii) the trade secret holder should have made reasonable efforts to keep it confidential.”
This definition is similar to the definition provided by the Uniform Trade Secrets Act (UTSA), which has been adopted by most states in the United States.
The Directive Provides New Remedies to Enforce Trade Secret Rights
The directive establishes robust remedies to enforce trade secret rights, including injunctions, seizure and destruction of goods which result from misappropriation of trade secrets, product recall, and compensatory damages. The directive does not provide for punitive damages or criminal penalties.
The Directive Will Provide Protection for Trade Secrets During Legal Proceedings
The Commission noted that the possibility that trade secrets would be disclosed to the public during legal proceedings discouraged parties from enforcing their trade secret rights. The directive establishes that parties who have access to the alleged trade secrets as a part of the litigation process are not permitted to use or disclose the trade secrets, and allows judicial authorities to take specific measures to preserve the confidentiality of the alleged trade secret.
By bringing the definition of a trade secret closely into line with U.S. law, and providing clear and meaningful remedies for misappropriation of trade secrets, the anticipated change will provide predictability and protection to efforts to protect trade secret information in global markets.