• Trade Secrets: Both EU and U.S. Work on Codification of Law on Trade Secrets
  • March 4, 2016 | Authors: Tommas Balducci; John Richards
  • Law Firm: Ladas & Parry LLP - New York Office
  • The Commission of the European Union issued a proposal for a Directive on harmonization of the law on trade secrets in EU member states in 2013. In December 2013, the Council and parliament reached a provisional political agreement on the proposal and so it stands a good chance of being enacted in 2016. Basic provisions of the proposal are to prohibit “unlawful acquisition, use or disclosure of a trade secret”.

    “Trade secrets” are defined as “information which is (1) secret (not generally known among or readily accessible to persons within the circles that normally deal with that kind of information), (2) has commercial value because it is secret and (3) has been subject to reasonable steps to keep it secret.”

    “Unlawful acquisition” is defined as: (a) unauthorized access to, appropriation of, or copy of any documents, objects, materials, substances or electronic files, lawfully under the control of the trade secret holder, containing the trade secret or from which the trade secret can be deduced; (f) any other conduct which, under the circumstances, is considered contrary to honest commercial practices.

    Some aspects of the proposed legislation were controversial especially having regard to employees changing jobs and possible penalization of “whistle blowers”.

    In this context, the proposed Directive specifically states “Nothing in this Directive shall be understood to offer any ground for restricting the mobility of employees” and a controversial provision allows employees changing jobs to take the experience and skills honestly acquired in the normal course of their employment” to a new job. There are fears that this may provide too broad a loop-hole for employees of, for example financial institutions to use techniques learned in one firm in their new place of employment.

    In order to protect whistle blowers, the Directive excludes from the definition of misuse of a trade secret any disclosure “for revealing a misconduct, wrongdoing or illegal activity, provided that the respondent acted for the purpose of protecting the general public interest”. It also includes provisions for sanctioning anyone who institutes proceedings for misuse of a trade secret in bad faith.

    It is currently expected that final adoption of the Directive will occur in the spring of 2016.

    In the United States, on January 28, 2016, the Senate Judiciary Committee approved the Defend Trade Secrets Act (S1890) , a new legislation designed to supplement the current state laws by providing federal relief for trade secrets claims. If enacted, a civil action will be able to be brought in federal courts with respect to misappropriation of a trade secret which is related to a product or service used in, or intended for use in, interstate or foreign commerce.

    It is expected that the full senate will vote on the bill later this year.

    A parallel bill, HR 3326, is pending in the House of Representatives where it is under consideration by the Subcommittee on Courts, Intellectual Property, and the Internet.