The European lawmaker’s work on the draft Trade Secrets Directive, intended to create a uniform legal basis for the protection of trade secrets in the European Union, has entered the finishing straight. The proposal has been and still is subject to much debate at the highest policy and lawmaking level. There are indeed still quite some obstacles to overcome before the Trade Secrets Directive can become a reality rather than merely a draft. In this contribution I will discuss some of the frequently heard arguments for not going through with this project. In my opinion these arguments do not hold good and should not convince the members of the European Parliament to vote against the draft Trade Secrets Directive.

[via Flickr user Thijs ter Haar]

In the past many authors/speakers, including yours truly, have identified several issues and weaknesses in the initial text proposed by the European Commission and even in the text that was proposed by the European Council (despite significant improvements). My criticism has predominantly focused on the shortcomings of the draft Trade Secrets Directive in relation to enforcing the rights granted by the directive. For example: 

  • The draft does not contain any provisions with respect to pre-trial discovery or other means of finding and preserving evidence of trade secrets theft/misappropriation.
  • Despite the European Commission’s ambition to provide SMEs, often struggling to develop and in particular enforce a patent portfolio, a means to protect themselves, there is no provision dealing with the recovery of legal fees and costs for the party prevailing in trade secrets litigation.
  • Recovery of legal fees and costs would also offer protection to any party that is unlawfully subjected to trade secrets proceedings.
  • What will be the cross-border effect of a decision finding infringement in one EU member state? Wouldn’t reversing the burden of proof in that event be an efficient way to avoid a multiplication of court proceedings in different EU member states?

Apparently, my criticism did not go unnoticed. Unfortunately, it was misunderstood. Indeed, several stakeholders urged me to take a more positive view and not to add fuel to the fire started by the lobbyists and interests groups that are trying to convince the European Parliament that it should vote against this initiative. I was quite surprised by this reaction. Wouldn’t any person of sound mind agree that even the slightest improvement to the current patchwork of trade secrets regimes in the European Union is, by definition, something that should be welcomed? Apparently this is not the case: many specialists on the subject find that the current proposal is larded with so many flaws and uncertainties, that it simply cannot serve as a basis for a pan-European attempt at harmonizing the protection and enforcement of trade secrets. I do not share that view, in spite of the criticism I have expressed.

One of the arguments used to support a vote against the current proposal is that it is too vague. It would grant the national lawmakers too much space for supplementing the directive with different national rules, so that in the end there would still be significant differences between all the member states. In other words, the patchwork would continue to exist. This argument is invalid. First of all, the European Commission has opted for a specific type of legal ‘vessel’: a European directive, which is not a regulation and by definition allows member states to adopt more strict rules than those set out in the directive. The argument that the European Commission should have opted for a regulation in the first place in my view also does not hold. The process for approving a regulation is far more complicated and time consuming than that for a directive. One should not forget that there is currently an interesting momentum where the vast majority of International, European and national policymakers are of the opinion that Europe’s deadline for improving its trade secrets rules and regulations has long passed. In those circumstances the choice for a directive is only logical; in particular if that directive were to already offer a solid, uniform minimum level of protection to trade secrets owners. Such protection currently does not exist across Europe and therefore the Trade Secrets Directive can only be an improvement. An additional reason why the choice for a directive rather than for a regulation is perfectly justifiable is the result achieved on the basis of the IP Enforcement Directive. Nobody will argue that, despite the IP Enforcement Directive, enforcing intellectual property rights in Europe still differs from one member state to another. However, nobody will also argue that the current means of enforcement offered throughout Europe are far better than those existing prior to the IP Enforcement Directive. A uniform legal basis, preferably as large and solid, is a good thing (infra).

In times where freedom of speech, transparency and access to information seem to have become obvious rights, it is not surprising that certain activist groups argue that the Trade Secrets Directive would excessively limit these fundamental rights. In my opinion these are just old arguments being passed off as new ones. Whenever fundamental rights clash, in particular when freedom of speech and information are involved, the interests of all the stakeholders have to be considered. The European judiciary, at all levels, is very familiar with these types of conflicts. I do not see how, in the framework of a trade secrets dispute, these same judges would all of a sudden struggle with this balancing exercise.

Other comments relate to the fact that it is not clear how this directive fits in with other sets of existing rules covering trade secrets. For instance, if the limitation period for bringing a trade secrets claim under the trade secrets directive has passed, would one then still be able to bring it under other legal provisions such as general civil liability, unfair market practices, etc.? In the event that an intellectual property right can be invoked together with a trade secret, which rules would then apply: would the IP Enforcement Directive be fully applicable? This is a well-founded criticism, but not a reason to abolish the entire project. It is correct that there are still many aspects of the draft that can be improved and clarified. Much of this work can, however, still be done before the text is voted on in the European Parliament. Moreover, as backup, the national lawmakers can still correct some of the mistakes in the directive that may have been overlooked by the European Parliament. It is true that some of the likely ‘mistakes’ will require quite some lawmaking ambition at national level (for instance creating pre-trial discovery proceedings for trade secrets holders). However, those lawmakers can rely on their experience, for example with respect to the implementation of the IP Enforcement Directive, and, ideally, can enter into a dialogue with the other member states so as to come up with solutions that are as harmonized as possible.

One should also not forget that when the Trade Secrets Directive enters into effect, its rules will still not be cast in stone. It would not be the first time that the European lawmaker revised its rules after having seen how those rules worked out in practice in the member states. In this regard, some have argued that the ambition of a lawmaker should not be to make provisional rules. Rather than “provisional”, I would refer to the Trade Secrets Directive as “intermediate” rules. One should indeed be realistic. Even were no political compromises necessary for the approval of the Trade Secrets Directive, changing the current state of play in Europe so as to establish the perfect legal framework for trade secrets protection with a single directive is simply impossible; in particular if this has to be achieved within a reasonable time frame. In the United States for instance, the Uniform Trade Secrets Act dates back to 1979. Today, only 47 of the 50 states have adopted the act; moreover not in a uniform manner. In other words, if the current draft directive were to be approved, a situation comparable to the one in the United States would exist in Europe. Notably, the United States is generally considered as one of the countries in the world offering the best protection for trade secrets (see for example OECD Trade Policy Paper No. 162). One could say that the United States scores so well because trade secrets misappropriation and theft are taken seriously and prosecuted, right up to the highest level. Although this is correct, it has nothing to do with the quality of the legal framework in the United States; rather, it reflects the quality of the enforcement. Nothing prevents parties, public prosecutors and judges from taking a similar attitude in Europe. As a final argument, one often hears that there is no guarantee that in some years the currently existing political momentum will still be present and that amending the trade Secrets Directive might take much longer than one might expect. That is a valid point, but no valid reason to allow the existing disparate system to continue instead of approving the Trade Secrets Directive and thereby providing at least some uniformity and basic guarantees.

For every other criticism against the draft Trade Secrets Directive, there are probably as many, if not more, good reasons for the European Parliament to approve it. The bottom line is that the existing legal situation in Europe becomes increasingly untenable. Therefore something has to be and is being done. It is, however, a known fact that setting unachievable goals always leads to frustration. This does not mean that the European lawmaker should rest on his laurels. The current proposal should be made clearer, more efficient and more complete. Enough has been said and written to provide the European lawmaker with sufficient inspiration, not to achieve perfect trade secrets protection (this is simply not possible) but a workable system that provides sufficient guarantees for all stakeholders.