The “secret” proposal to protect trade secrets?

9 January 2014

However much you think you have kept abreast of developments in your particular area of the law (in my case, employment), there always comes a time when one pops up to surprises you!

I was at a seminar hosted by Barristers at 11 Kings Bench Walk on Tuesday when they brought to our attention a proposal that had come out of Brussels before Christmas for a new EU Directive.  But it was not in one of the fields in which we would commonly expect them to be involved.  It concerned the protection of trade secrets.

As one would expect the title contains the usual euro speak “Directive of the European Parliament and of the Council on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure”.  However it touches and concerns an area of the law which most of us have always regarded as quintessentially a preserve of the common law.

For the protection of trade secrets, it is usual to first turn to the precise contractual provisions in the relevant Service Agreement, which are then considered in the context of the law in this area, usually going back to the (seminal) case of Faccenda Chicken in 1985!  Next, one considers relevant fiduciary duties.  I do not think high on anyone’s list would be any relevant Regulations introduced pursuant to a European Directive (although there are one or two, such as the Database Directive), but that may well change in the not too distant future.

Will a new Directive make any difference to the law?  It is frankly too early to tell.  However the clue may be in the explanatory memorandum that accompanies the proposal.  The proposal refers to the Commission’s view that research and development (R&D) within the EU is not sufficiently driven by business, when compared to some of our major trading partners, such as the US and Japan.  In the view of the Commission, “sub-optional” business investment in R&D adversely impacts on the introduction of new products, processes, services and know-how.  That is, one suspects, euro speak, for a desire to liberalise our laws so as to reduce the level of potential protection available to companies seeking to safeguard their trade secrets.

Certainly the EU will have to tread carefully.  As they themselves recognise, the regulation of intellectual property allows innovators and creators to benefit from their efforts.  So a knowledge “free for all” may not have the affect the EU desires.  They also recognise that trade secrets can be particularly important to small and medium sized enterprises (SME’s) and start-ups, specifically because such organisations can lack the specialised HR and financial resources to find it easy to protect their intellectual property rights.

This is going to be a very difficult area for the EU.  Member states have very different ways of protecting trade secrets and, arguably, not all will have as sophisticated and long standing a system of protection as the UK.  It is also not at all easy to see how any code derived from Europe will fit into our law. 

Nonetheless, given past history, it is plain that European Directives can and do change the legal landscape considerably, and those of us who deal with restrictive covenants, confidentiality and trade secrets will need to keep a very careful eye on these developments during the course of the next few years…

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