European Commission proposes rules for the protection of trade secrets

03 December 2013

On November 28th, 2013 the European Commission published a proposal for the harmonisation of trade secrets protection in the European Union.

The "Proposal for a Directive of the European Parliament and of the Council on the protection of undisclosed know-how and business information (trade secrets)" (COM(2013) 813 final) was published only seven months after the release of the comprehensive "Study on Trade Secrets and Confidential Business Information in the Internal Market" (MARKT/2011/128/D). This study identified the great importance of trade secrets to small and medium-sized enterprises as well as start-ups, but an uneven level of their protection across the EU. The proposed Directive therefore lays the foundation for an equal scope of protection, common remedies and measures to ensure the confidentiality of trade secrets during civil proceedings.

Although economists all over the EU agree that trade secrets have an enormous importance for competitiveness and capacity for innovation, the existing legal framework for the protection against their unlawful acquisition, use or disclosure is diverse. Only a few Member States specifically address trade secrets misappropriation in their civil and criminal laws, while most of them rely on their general unfair competition or tort law, and some criminal provisions. These differences can hinder cross-border R&D and the circulation of innovative knowledge within the EU – a possible competitive disadvantage in comparison to companies located in the USA or Japan.

To ensure a common and adequate level of protection in all Member States and effective remedies if trade secrets are stolen or misused, the proposed Directive includes homogenous definitions of a trade secret and of relevant unlawful acquisition, use or disclosure that entail several possible remedies such as cessation or destruction as well as pecuniary compensation or damages. The draft also proposes a two year-limitation period and measures to preserve the confidentiality of trade secrets in the course of legal proceedings.

It is therefore an ambitious step towards the more effective protection of trade secrets and could provide improvements in legal certainty, not only in cross-border cases. However, the fact that the European Commission has not proposed rules to facilitate the gathering of evidence of unlawful acquisitions, uses or disclosures in court proceedings is disappointing. In the past, the difficulty of proving an alleged violation of trade secrets in court has been an insuperable obstacle for many companies to enforce their claims. This difficulty will persist, even if the proposal is to be implemented.

The proposed Directive will now be transmitted to the Council of Ministers and the European Parliament for adoption. If approved, it could enter into force by the end of 2014.