The new EU Trade Secrets Directive unlocks an unknown yet powerful protection regime for innovative firms

Following approval by the European Parliament on 14 April 2016, the proposal for a directive on the protection of undisclosed know-how and business information (trade secrets) against unlawful acquisition, use and disclosure (the "Trade Secrets Directive") was adopted by the Council on 27 May 2016.

After publication of the directive in the Official Journal of the EU and its entry into force, member states will have a maximum of two years to incorporate the new provisions into domestic law.

The transposition of the Trade Secrets Directive into Belgian law will mean a significant improvement in the legal position of innovative companies doing business in Belgium.

The objective of the Trade Secrets Directive consists of achieving a smooth-functioning internal market through the establishment of a sufficient and comparable minimum level of redress across the internal market in case of unlawful acquisition, use or disclosure of a trade secret.

Key points of the EU Trade Secrets Directive

The EU Trade Secrets Directive strives to establish harmonised definitions of the notions "trade secret" and "unlawful acquisition, use or disclosure of trade secrets" and a common framework for measures, procedures and remedies against such unlawful acquisition, use or disclosure.

1. Definition of a trade secret

The definition of the notion "trade secret" stipulates that a "trade secret" is information which meets all of the following requirements:

  • is secret in the sense that it is not, as a body in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
  • has commercial value because it is secret; and
  • has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

Any type of information may thus qualify as a "trade secret"; there is no limitation to technical knowledge as clearly pointed out in the first recital of the Trade Secrets Directive as it covers "a diversified range of information, which extends beyond technological knowledge to commercial data such as information on customers and suppliers, business plans or market research and strategies."

2. Definitions of (un)lawful acquisition, use and disclosure of trade secrets: prohibition of both primary and secondary infringements

The Trade Secrets Directive prohibits both the unlawful acquisition of trade secrets and the unlawful use or disclosure of trade secrets which consists of:

  • Unlawful acquisition: acquisition without the consent of the trade secret holder carried out by unauthorised access, appropriation or copying, or any other conduct which is considered contrary to honest commercial practices.
  • Unlawful use or disclosure: use or disclosure without the consent of the trade secret holder when the trade secret was acquired unlawfully or is in breach of any contractual or other duty not to disclose or limiting the use of the trade secret.

Furthermore, the Trade Secrets Directive also targets secondary infringements, namely the acquisition, use or disclosure of a trade secret by a person who knew or should have known that the trade secret was obtained directly or indirectly from another person who was using or disclosing the trade secret unlawfully. The same holds true for the production, offering or placing on the market, import, export or storage of infringing goods for those purposes when the person carrying out such activities knew or should have known that the trade secret was used unlawfully.

Nonetheless, the Trade Secrets Directive equally defines when the acquisition of trade secret is considered to be lawful namely when obtained by:

(i)    independent discovery or creation;
(ii)   reverse engineering;
(iii) exercise of the right of workers or workers' representatives to information and consultation and/or
(iv)  any practice which, under the circumstances, is in conformity with honest commercial practices.

Furthermore, a number of exceptions are foreseen for, amongst others, exercising the right to freedom of expression and information and whistleblowing for the purpose of protecting the general public interest.

3.  Measures, remedies and procedures

The Trade Secrets Directive aims to harmonise the procedural rules governing trade secret litigation, in particular:

  • The availability of both interim measures and measures on the merits to (i) stop or prohibit the use or disclosure of a trade secret; (ii) prohibit to produce, offer, place on the market or use infringing goods, or import export or store infringing good for those purposes; (iii) seize or deliver up suspected infringing goods (interim measure); (iv) adopt appropriate corrective measures with regard to the infringing goods, including their recall, the deprivation of their infringing quality and their destruction or withdrawal from the market (measure on the merits) and/or (iv) destroy or deliver up of all or part of any document or object containing or implementing the trade secret (measure on the merits).
  • The possibility of the trade secret holder to claim and be awarded damages appropriate to the actual prejudice suffered as a result of the unlawful acquisition, use or disclosure of the trade secret whereby the national courts must take into account all appropriate factors (e.g. lost profits, unfair profits made by the infringer, moral prejudice, etc.). National courts may also instead set the damages as a lump sum on the basis of elements, such as, at a minimum, the amount of royalties or fees which would have been due if the infringer had requested authorisation to use the concerned trade secret.
  • The possibility of the national courts to order the publication of their decision thereby preserving the confidentiality of trade secrets and to impose sanctions including penalty payment in case of non-compliance with an ordered measure.
  • The availability of measures to act against abuse of trade secret litigation.
  • The introduction of limitation periods applicable to the substantive trade secret claims and actions, which should not exceed six years.
  • The preservation of confidentiality of trade secrets in the course of legal proceedings and after they have ended. Member States must specifically ensure that any person participating in the trade secret proceedings or who has access to documents forming part of such legal proceedings, shall not be permitted to use or disclose any (alleged) trade secret and that national courts can take specific measures to preserve their confidentiality. Access should however in any event be ensured towards at least one natural person from each party and the respective lawyers or other representatives of those parties to the proceedings.

4. No restrictions on the mobility of employees

The Trade Secrets Directive expressly mentions that it does not offer any mobility of employees restriction grounds and that an employee can use "the experience and skill honestly acquired in the normal course of their employment" without limitation. However, and equally explicitly determined in the Trade Secrets Directive, it does not intend to affect the possibility of employers and employees to conclude non-competition agreements. Provided that it will in practice be challenging to differentiate between an employer's trade secret and information that is part of the "experience and skills honestly acquired in the normal course of employment" by an employee, employers can and should ensure that adequate confidentiality and non-compete obligations are included in the employment contracts of employees dealing with company trade secrets.

What does the Trade Secrets Directive change for companies active in Belgium?

 The transposition of the Trade Secrets Directive will mean a significant improvement in the legal position of innovative companies doing business in Belgium:

  • A clear definition of a "trade secret" and the conditions of protection, whereas the current case law does not always interpret these in the same manner (especially when it comes to experience and knowledge acquired by an ex-employee when being employed by his/her former employer).
  • Currently, companies have few arms at their disposal to fight against the disclosure of their trade secrets. With regard to their employees, they can base an action on Article 17(3) of the Employment Contracts Act of 3 July 1978. If the trade secret in question is a manufacturing secret, companies can turn to Article 309 of the Criminal Code to take legal action against current or former employees. However, it should be noted that it is not easy to fulfil the conditions for application of this provision since the company must prove not only a trade secret but also that the secret was disclosed (use for one's own behalf is not sufficient) by a (current or former) employee and above all that disclosure was done with malicious or fraudulent intent.  It is easy to see that the new protection regime is broader and can also be raised against persons other than employees.
  • The principle of preservation of confidentiality of trade secrets in the course of legal proceedings enshrined in the Trade Secrets Directive does not exist as such in Belgian procedural law and will thus constitute a major improvement for the trade secret holder wanting to introduce an infringement claim.