Harmonising Europe’s Trade Secrets – New Directive Approved

The European Union’s Directive on the protection of trade secrets has finally reached the finish line with the new provisions being approved by the European Council on 27 May 2016. Previously, there has been no EU-level regulation on the protection of trade secrets. The goal of the directive is to improve the quality and scope of the protection of trade secrets in the EU’s territory.

The new directive will bring the adoption of a shared definition of trade secrets across the EU. In short, trade secrets are secret information that the holder of the information takes steps to keep secret and that has commercial value because it is secret.

Lawful vs Unlawful – Drawing a Line

The directive defines when the acquisition, disclosure or use of trade secrets is unlawful, and when such actions are lawful from the perspective of the protection of trade secrets.

Independent discovery or creation is always lawful, as is, for example, the acquisition of trade secrets through observation, study, disassembly or testing of a product or object that has been made available to the public (reverse engineering).

The acquisition of trade secrets is considered to be unlawful, for example, when information on a trade secret has been disclosed in breach of a confidentiality agreement or the person receiving the trade secret knew or ought to have known that the trade secret had been obtained without the consent of the holder of the trade secret.

The directive also obligates Member States to enact civil law remedies against infringements of trade secrets. For example, courts can limit the number of persons entitled to participate in hearings during a trial.

The directive also provides for the precautionary and corrective measures available to courts as well as on the courts’ right to award damages.

National Law Drafting Can Begin – An Opportunity to Unify Fragmented Regulation

In Finland, the provisions on trade secrets are currently spread across several acts.

  • The Unfair Business Practices Act prohibits the wrongful acquisition, use or disclosure of information on trade secrets in general. The Market Court can prohibit an entrepreneur from continuing or repeating an infringement.
  • The Employment Contracts Act provides for the prohibition of employees from using their employer’s professional or trade secrets.
  • Chapter 30 of the Criminal Code criminalises business espionage, violation of a business secret and misuse of a business secret.
  • Protections of business secrets have also been enacted in the Act on the Openness of Government Activities and theAct on Mediation in Labour Disputes.

Finland has two years from the publication of the new directive to adopt it, in other words, until the end of 2018. Given how fragmented the Finnish provisions currently are, now would be a good time to follow Sweden’s example and enact an entirely new act on the protection of trade secrets rather than just bringing our current legislation into line with the directive.

A new act would probably also make it easier to unify the legal concept of trade secrets. As things currently stand, the different acts use different concepts, which are trade secrets, business or professional secrets, and business secrets. Case law has, as a general rule, held the material contents of these concepts to be the same.

Despite this fragmentation, the level of protection enjoyed by trade secrets in Finland is reasonably good. The courts mainly hear infringements of trade secrets as criminal matters, which enables the authorities to efficiently gather evidence of infringements during the preliminary investigation. It is vital that the transposition of the directive not even indirectly weaken the protection afforded by the Criminal Code.

Predicting the Protection of Trade Secrets Abroad Made Easier

There is not much in the way of international legislation on trade secrets. This being the case, the provisions of the new directive will likely benefit Finnish companies that operate abroad.

With the harmonisation of the concept and level of protection for trade secrets in the EU, companies will be better able to predict the legal remedies available to them in different Member States in the event their trade secrets are infringed.

Johanna Lähde

Juttu on alun perin julkaistu Castrén & Snellmanin blogissa.