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Employment Law

Legal guidance - compliance - software

13 JUN 2016

European Council adopts Trade Secret Directive

European Council adopts Trade Secret Directive
Nick Murrell
Solicitor, Veale Wasbrough Vizards

On the 27 May 2016, the European Council formally adopted a new directive setting out rules for the protection of trade secrets and confidential information of EU companies.

The Directive introduces an EU-wide definition of 'trade-secret', meaning information which;

  • is secret in the sense that it is not 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;
  • has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.
Therefore, in order for information to be a trade secret, the trade secret holder must have taken reasonable steps to keep it secret.

The Directive also identifies what is considered to be the lawful and unlawful acquisition, use and disclosure of trade secrets and sets out provisions, precautionary and corrective measures and injunctions that judicial authorities can order against alleged infringers.

Whistleblowers, ie persons who disclose trade secrets when revealing misconduct, wrongdoing or illegal activity, will also receive protection under the Directive, provided they were acting for the purpose of protecting the general public interest.

The European Council argues that Direction 'will bring legal clarity and a level playing field to all European companies' and, now that it has been adopted, it will enter into force after 20 days. Member states will have two years from the date of adoption to implement legislation to comply with it. In the UK of course, this may become a moot point depending upon the outcome of the EU referendum on 23 June 2016.

Best practice

The extent to which the Directive will impact upon the existing protection of trade secrets under UK law will depend upon the content of the implementing legislation. The House of Commons European Scrutiny Committee has stated that existing protections are already consistent with the Directive and as such it is possible that very little will change.

Nevertheless, employers should consider the EU-wide definition of 'trade secret' and, as a matter of best practice, ensure that they are clear as to the information that they consider to be their trade secrets and take reasonable steps to protect them.

Employers should ensure that contracts of employment contain clauses which impose sufficient obligations on employees not to acquire, use or disclose trade secrets or confidential information, either during their employment (except in relation to the duties of their role) or after their employment has terminated.
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