Today, the European Parliament approved a Directive that seeks to simplify and harmonize the law on trade secrets throughout the European Union with a vast majority (503 in favor, 131 against and 18 abstentions). The Directive was first proposed in 2013. Although the initial proposal was deliberately kept ‘low profile,’ it was the subject of heated debates up until today’s vote. Certain members of parliament indeed invoked the ‘Panama Papers’ and requested that the vote be suspended until the European Commission would have prepared its proposal specifically dealing with whistleblowers. The vote now goes to the EU Council. As this typically is but a formality, it is likely that the Council will approve the Directive as it reads today. If it does, EU member states will have roughly two years to replace their current patchwork of trade secret law and implement the Directive into national law.
The Directive’s stated intent is to “enhance the competitiveness of European businesses and research bodies” and to “improve the conditions/framework for the development and exploitation of innovation and for knowledge transfer” within the EU. One of the ways it furthers that intent is to create a uniform definition of “trade secret” that is simple and easy to understand: a secret not generally known that has commercial value due to its secrecy and has been subject to reasonable steps to keep it secret. This definition is based on article 39 of the TRIPS Agreement and is therefore remarkably similar to the one used in the Uniform Trade Secrets Act adopted by many of the United States.
Apart from uniform definitions, though, there are several competing interests in trade secret law and the Directive appears to favor a more limited view of trade secret protection. Notably, the Directive seems to favor the free movement of employees over the trade secrets of employers. It explicitly states, “Nothing in this Directive shall be understood to offer any ground for restricting the mobility of employees,” including use of information not considered a trade secret or limiting use of experience and skills “honestly acquired in the normal course of their employment.” This is not all bad for employers, though. By omission, the Directive appears to prohibit information “dishonestly acquired” or acquired outside of the employee’s “normal course of their employment.” These mandates may affect the contract negotiating strategies of employers and potential employees. Regardless, this section is sure to be the topic of contentious litigation in the future. The Directive also comes down in favor of broad protection of whistleblowers and the media. Such parties have a defense where they acquire, use, or disclose a trade secret for reasons of “freedom and pluralism of the media” or for the purposes of “revealing a misconduct, wrongdoing or illegal activity.” Still, the latter defense is not unlimited. It requires that the party “acted for the purpose of protecting the general public interest.” This too will likely be the subject of much litigation in the years to come.
Many critical stakeholders therefore believe that this Directive only has symbolic value or is at the most an intermediate step. It is for instance the first legal text in the EU that explicitly provides for rules on whistleblowing. However, the Directive does contain major improvements for the enforcement of trade secrets. Here reference can be made to the fact that goods that were produced while unlawfully using trade secrets, even outside the EU, can be banned from the EU-market.
Finally, it is important to understand that the used legal instrument, a Directive, only sets minimum standards and does not aim at complete harmonization throughout the EU. Individual EU Member States are still free to design the exact application of the Directive such as the limitations period for bringing legal action against a trade secret misappropriator. The Directive only mandates that the time period not exceed six years. It is therefore to be expected that once the Directive enters the phase of conversion into national law, a new round of discussion among and lobbying by stakeholders on both side of the secrecy fence will take place.