EU TRADE SECRETS
DIRECTIVE Andrew Deutsche, Partner Nicholas Fitzpatrick, Partner Jonathan Exten-Wright, Partner Duncan Calow, Partner 18 October 2018 Elliott Park, Associate
www.dlapiper.com UDR 29131676 18 October 2018 0 Jonathan Exten-Wright Partner T: +44 207 796 6619 Agenda jonathan.exten- [email protected]
1 EU Trade Secrets Directive Duncan Calow Background Partner T: +44 20 7796 6473 Objectives duncan.calow@dlapiper. com 2 What is a Trade Secret? 3 Position across EU & UK prior to Directive Comparative regime in the US Andrew Deutsch 4 Partner T: +1 212 335 4880 5 How to establish a trade secret Andrew.deutsch@dlapiper. com Definitions
Practical considerations
Interaction with copyright law 6 Elliott Park Associate 7 Restrictive covenants T: +44 207 796 6327 [email protected] 8 Recommended action
www.dlapiper.com UDR 29131676 18 October 2018 1 Trade Secrets Directive
Background EU aspiration to become a global leader in science and innovation Historic policy of protecting innovation through IP rights Aim of improving protection for innovative business activity
Objective Sets common framework for minimum standards of protection Designed to create common platform given disparate laws on trade secrets But still not standardised protection – only minimum level
So what does this mean in practice? What impact does it have on trade secrets? www.dlapiper.com UDR 29131676 18 October 2018 2
What is a trade secret?
Valuable confidential information that gives a business a competitive advantage Potential examples – Business plans and models – Financial or statistical information – Customer lists and databases – Plans, sketched and technical drawings – Research and analysis data
Examples Game-show format: 'Pop Idol’, ‘Big Brother’, ‘Deal or No Deal’ (worldwide franchise) Unpublished books – Possible protection under copyright & trade secrets – Ashdown diaries, Thatcher diaries, Harry Potter books Protection of newspaper sources
www.dlapiper.com UDR 29131676 18 October 2018 3 Trade Secrets protection in the EU: UK
Until introduction of Directive, UK relied on – Common law breach of confidence – Breach of contract Trade secret protection also exists via World Trade Organisation Agreement on Trade-Related Aspects of IP 9 June 2018 – Trade Secrets (Enforcement, etc.) Regulations came into force
www.dlapiper.com UDR 29131676 18 October 2018 4 Trade Secrets legislation in the EU: France
Until introduction of Directive, no specific trade secret protection. Instead, reliance on: – Tort law (claim for unfair competition) – Breach of contract Directive transposed into French law on 30 July 2018 Effect of Directive: Now clear definition and criteria for a trade secret (though not necessarily wider than previously)
www.dlapiper.com UDR 29131676 18 October 2018 5 Trade Secrets legislation in the EU: Germany
Until Directive introduced, reliance on unfair competition provisions to protect trade secrets (similar to France) Directive now provides additional clarity about how companies can establish and protect their trade secrets, i.e. by measuring against the three criteria in the Directive Not yet transposed into German law (expected by the end of 2018), but expected to closely mirror the Directive
www.dlapiper.com UDR 29131676 18 October 2018 6 Trade Secrets Directive – US equivalent
US Defend Trade Secrets Act (DTSA) – in force since 11 May 2016 Provides a federal private right of action for trade secret protection DTSA requirements 1. Reasonable measures to keep such information secret 2. Information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the another person who can obtain economic value from the disclosure or use of the information. Similarities with EU Directive – Intention to create a convergent basic platform to protect innovators – What qualifies as a trade secret – keep confidential, economic value in being kept confidential Trend of increased litigation since introduction of new legislation www.dlapiper.com UDR 29131676 18 October 2018 7 How to establish a "Trade Secret"
Trade Secrets Directive, Regulation 2: ‘Trade secret’ means information which meets all of the following requirements a. is secret in the sense that it is not, as a body or 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; b. has commercial value because it is secret; c. has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.
www.dlapiper.com UDR 29131676 18 October 2018 8 How to establish a "Trade Secret" (2)
a) Information which is "secret in the sense that it is not, as a body or 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"
Considerations What about information that can be pieced together from the public domain, e.g. customer lists? 'Circles' of expertise in market: if all experts in a given market know about it, is it really a trade secret? Purely public information can still be confidential if something is created with "skill and ingenuity" Simply marking a document as 'Confidential' will not help
www.dlapiper.com UDR 29131676 18 October 2018 9 How to establish a "Trade Secret" (3)
b) Information which "has commercial value because it is secret"
Considerations In a media context, will this protect secrecy of private life? How to establish 'commercial value': – Expert testimony? Inclusion in company accounts? – Case law on defining 'value’ – Directive (preamble): Commercial value where unauthorised use likely to harm interests of person controlling it Merit in establishing, and constantly evaluating, a Trade Secrets inventory – use in proving value of information to the business
www.dlapiper.com UDR 29131676 18 October 2018 10 How to establish a "Trade Secret" (4)
c) Information which "has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret"
Considerations Intent is not enough. You must have appropriate checks and balances to stop data being leaked/stolen What is a "reasonable step"? – We will look later in this session at factors for determining what is likely to be considered reasonable Does it prevent employees from taking knowledge and experience to their next employer?
www.dlapiper.com UDR 29131676 18 October 2018 11 Protecting the parts other rights can't reach?
Copyright Protects the expression of an idea, not the idea itself Limited application to formats and concepts Database Right "No proven impact on the overall production of databases" Limited protection for self generated data Trade Mark Right Formalities of registered protection Limitations of unregistered protection Patents Industrial application excluding software and business methods
www.dlapiper.com UDR 29131676 18 October 2018 12 Use against the media
From Prince Albert v Strange to Trafigura Article 8 European Convention on Human Rights Defamation Data Protection Trade Secrets Directive
www.dlapiper.com UDR 29131676 18 October 2018 13 Restrictive covenants
Restrictive covenants are one important means of protection Pros – No need to show misuse of trade secrets – Can be an effective deterrent against breach Cons – Must be no wider than necessary to protect legitimate business interest – In many civil jurisdictions, businesses must pay for RCs – Still need to prove the information is confidential and has been misused
www.dlapiper.com UDR 29131676 18 October 2018 14 Recommended action
What should you do to prepare your business? Map process of creation and how to identify trade secrets Undertake a gap analysis of your legal protections, for example: Audit of employment contracts – Are current confidentiality provisions and post-termination restrictive covenants sufficient? – How to manage the variation of contracts / roll-out of new contracts Audit of template non-disclosure agreements – maximise likelihood of enforceability Audit any relevant policy applicable trade secrets – identify protective measures and rules in the policy Assess any employee monitoring programme – what is permitted? Address from a cross-border perspective: Consistent processes across the EU and beyond www.dlapiper.com UDR 29131676 18 October 2018 15 Recommended action (2)
"Reasonable steps" – Create a legally robust process to protect protect trade secrets – steps can and might include: 1. Identify the trade secret and mark it as such – Proof of value as a trade secret 2. Keep an inventory of trade secrets and their usage – Ensure it is updated regularly 3. Train workforce on how to protect trade secrets and their duty of confidentiality – Label documents as 'Confidential' – Control circulation of material 4. Physical and technological security to protect secrets – Passwords, firewalls, automated intrusion detection systems – Require visitors to sign in 5. Legal measures to protect secrets – Strict confidentiality provisions agreements with third parties 6. Establish a procedure if trade secret is leaked – (1) Assess, (2) report, (3) investigate, (4) remedies 7. Regular audit of the above process www.dlapiper.com UDR 29131676 18 October 2018 16 ANY QUESTIONS?
www.dlapiper.com UDR 29131676 18 October 2018 17
www.dlapiper.com UDR 29131676 18 October 2018 18