May Your Secrets Be Kept Secret – In May and Beyond

05 May 2016

The protection of trade secrets and confidential information is important to businesses, particularly for non-patentable technologies. Trade secrets can, to a limited extent, function as a support to, and on occasion replacement for, patent protection. Changes are underway this month in both Europe and the USA that should improve such protection.

In Europe

There has been disquiet for some time concerning the different standards applied in different countries to protecting confidential information and trade secrets, and the different remedies that were available. (For example, at present, in several EU countries, to enforce a trade secret requires disclosing that trade secret in open court, so losing the very secrecy relied upon).

A directive governing “the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure” (in the following the “Trade Secrets Directive”) is expected to be adopted during May 2016 and to be implemented nationally over the following two years.

The Trade Secrets Directive will provide harmonised definitions of what constitute trade secrets, the remedies available, and the measures a Court can apply to prevent the disclosure of trade secrets during legal proceedings.

Once the Trade Secrets Directive is approved, EU countries will have two years to implement it into national law, so there is no immediate effect, but this will lead to growing confidence that misappropriation of trade secrets can be challenged.

In the USA

The “Defend Trade Secrets Act” (DTSA) amends existing trade secret legislation and is expected to come into force shortly.

Until now civil action to protect trade secrets in the USA has been under state law rather than federal law. Most states followed the Uniform Trade Secrets Act that is, in effect, a model law aimed at harmonisation on a state level. Although most states have adopted this model law there are variations in practice and procedure that can be complex. The DTSA will provide a parallel federal law in circumstances where “the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce”.

What does this mean to patents?

Once a secret is public it is no longer a secret, and so this change does not materially affect the consideration of whether or not to file a patent, other than providing some limited reassurance should the decision be not to patent. The remedies for unauthorised use of a trade secret often cannot compensate for the financial loss to the affected business.

Nevertheless, improved trade secret protection in both Europe and the USA is welcome news, since there are technical fields where restrictions on what constitutes patentable subject matter have led to difficulties in obtaining patent protection. This consideration is particularly significant in the USA where recent decisions have cut back on what is considered patentable subject matter, bringing the US into closer (but by no means exact) alignment with the position in Europe.

How do you keep a trade secret?

The clue is in the name – a trade secret has to be secret. In addition, it has to have some economic value. Both the European Trade Secret Directive and the DTSA require that reasonable steps have been taken to keep the secret, secret. What constitutes reasonable steps is assessed in the light of circumstances.

It has always been advisable for a business to identify and record not only what it considers secret, but also the measures taken to preserve secrecy. Such measures may for instance include technical measures, contractual measures, physical measures or a mixture thereof. What is important is the ability to show that something has been done to keep the matter secret.

Conclusions

While by no means harmonised, the provisions relating to the protection of trade secrets in the USA and in Europe will move closer together, providing improved predictability concerning the protection available.

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