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Directive (EU) 2016/943 ‘EU Trade Secrets Directive’

With one in four European companies falling victim to at least one case of information theft in 2013, compared to 18% in 2012, Directive (EU) 2016/943 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (the Directive) is a welcome step towards harmonised EU protection for sensitive business information.

Prior to the enactment of the Directive, the lack of European guidance led to a fragmented and uncertain regulatory framework in Europe where trade secrets, unlike in the US, were not treated as intellectual property rights (IPR) in themselves.

Protection of trade secrets

The Directive prohibits the unlawful acquisition, use and disclosure of trade secrets.

The acquisition, use or disclosure of a trade secret will also be considered unlawful where the person knew or ought, under the circumstances, to have known that the trade secret had been obtained directly or indirectly from another person who unlawfully used or disclosed the trade secret.

What constitutes a 'trade secret'?

Article 2(1) defines a trade secret as information which meets the following criteria:

  1. It is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question
  2. It has commercial value because it is secret
  3. It has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

The trade secret definition is derived from the World Trade Organisation's Art.39 (2) of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Despite the seemingly all-encompassing definition, it remains unclear whether protection is extended to information such as client lists or pricing structures that are commercially valuable but freely available to large numbers of staff within an organisation.

Prior to the Directive, Ireland has followed the approach of UK Court of Appeal case in Faccenda Chicken Ltd v Fowler (Faccenda Chicken) when adjudicating on cases concerning the level of protection for confidential business information. In Faccenda Chicken, sales information pertaining to suppliers, contractors, distributors and pricing structures were not deemed to be trade secrets. The Court found that such information was 'readily accessible' to large numbers of company staff including sales managers and administrative staff dealing with the financial accounts and as such the employer had not taken sufficient steps to guarantee the confidentiality of the information in question.

Court procedure

The Directive also includes provisions to preserve the confidentiality of trade secrets in the course of legal proceedings. For instance, the court can restrict access to any trade secret document or access to the hearing to a limited number of persons. This will offer some comfort to companies who may have been deterred in the past from enforcing their legal rights in court in case this in turn led to the trade secrets being disclosed to more people.

Effect of the Directive

In Ireland, companies and individuals already have recourse to the court to protect their confidential information under the law of equity. Accordingly, it is unlikely that the Directive will have significant impact on the protection of trade secrets in Ireland. Nevertheless, the new Directive is to be welcomed for the following reasons:

  • The current law on confidential information has no statutory footing
  • There is little harmonisation with respect to the law of confidential information
  • The Directive does for the first time offer a de minimis degree of protection for trade secrets across the entire EU

However, businesses wishing to avail of the protection of the Directive must bear in mind the requirements to be fulfilled before a document will be classified as a trade secret and are advised to consider their options with regard to taking 'reasonable steps' to ensure their secrets remain secret even within the four walls of the business.