The new European Trade Secrets Directive
by Rachel Bradley

The deadline for Member States to implement the Trade Secrets Directive (the Directive) is 9 June 2018. The Directive is designed to harmonise protection of trade secrets throughout the EU and aims to encourage business to turn their ideas into growth and jobs.

This article is a brief summary of the current legal position in the UK and how the Directive can complement the UK regime.

What is the law in the UK?

A trade secret is information that is treated as confidential and gives businesses a competitive advantage or edge, such as a formula or a process.

Trade secrets are protected under the common law of confidence in the UK. (There is currently no legislation which protects trade secrets in the UK). The law of confidence protects confidential information, where there is an obligation of confidence, from unauthorised disclosure.

Information must have the ‘necessary quality of confidence’ to be protected by the law of confidence. An obligation of confidence can be express or implied, such as under a contract of employment or implied from the circumstances.

What will the Directive protect?

The Directive introduces a uniform definition of a trade secret, which must meet all of the below criteria:

1. is secret in the sense that it is not generally known or readily accessible;
2. has commercial value; and
3. the controller of the information has taken reasonable steps to keep the information secret.
   
   

The Directive prohibits the unlawful acquisition, use and disclosure of trade secrets which fit the definition above, including where the subsequent user knew or ought to have known that the trade secret was acquired unlawfully.

However, the Directive expressly states that independent discovery or creation, study and observation are lawful uses and provides exceptions for disclosure in cases of freedom of information and whistleblowing.

In fact, the majority of the substantive provisions of the Directive are already covered in the UK under the law of confidence. However, the UK government still plans to introduce some changes to ensure that the UK will be in line with the requirements of the new Directive (pursuant to the draft Trade Secret (Enforcement) Regulations 2018).

What does this mean for organisations?

Although the UK already protects trade secrets, the advantage of the new Directive is that there will now be a codified and consistent Europe-wide definition and protection of trade secrets. This will be advantageous to businesses wanting to protect innovation through trade secrets (as opposed to intellectual property protection, for example). It will also create a ‘level playing field’ for UK businesses to protect and enforce trade secrets in other EU countries.

However, businesses should keep in mind the Directive’s requirement to take reasonable steps to keep the information secret. Without this, the information will not fall within the scope of the Directive. Measures and processes should be reviewed, and greater physical protection should be considered, such as encryption, to ensure all reasonable steps have been taken. No Trade Secrets should be disclosed other than pursuant to obligations of confidentiality, and those obligations should continue indefinitely (and not be limited in time) to ensure continued protection of the information for as long as it remains a trade secret.