On June 9, 2018, the new Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use, and disclosure (the “Directive”) went into effect. The Directive harmonizes the legislation of the EU Member States against the unlawful acquisition, disclosure, and use of trade secrets, and considerably strengthens the protection of valuable business information throughout the European Union. Companies active in the food and beverage sector will benefit from the new regulatory regime, since it not only provides stronger protections for confidential business information such as recipes, manufacturing processes, and business models, but also enables companies to protect business information that was previously ineligible for such protection.
What is protected as “trade secret”?
The Directive protects know-how and business information that are economically valuable because they are undisclosed and unavailable to competitors. Such confidential business information may include new manufacturing processes, improved recipes, or supplier and distribution information, that may be valuable for decades (for example, a recipe or a chemical compound), or ephemeral (for example, the results of a marketing study, the price offered in a bidding procedure, or the name, price, and launch date of a new product).
The Directive protects such information as a trade secret, where the information (i) is secret in the sense that it is not, as a body on the precise configuration and assembly of its components, generally known among or readily accessible to persons who normally deal with this kind of information; (ii) has commercial value because it is secret; and (iii) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret. The Directive also defines the relevant forms of misappropriation and clarifies that reverse engineering and parallel innovation must be permitted, given that trade secrets are not a form of exclusive intellectual property right.
Nevertheless, the Directive also acknowledges that in cases of overriding legitimate interests, it may be necessary to disclose a trade secret (for example, whistleblower reporting, or when following national laws or rules requiring disclosure).
What are the opportunities under the new laws?
The new legal regime improves protections for confidential business information. The Directive’s protection of know-how as a trade secret is significant since many types of entrepreneurial performance currently do not fall under any of the established intellectual property rights such as patents or registered designs, as it is the case for example for recipes, scientific data, preparations, manufacturing processes, or customer data. With the new Trade Secrets Directive such know-how may be protected as trade secret. The expanded protection of trade secrets is also relevant where an innovation is still in its development phase and must be new at registration (such as with patents, utility models and registered designs), or where such innovation is not registered for time and cost reasons.
Also, since the Directive introduces a consistent legal regime throughout the European Union, companies will be able to effectively protect their confidential business information in cross-border activities.
Implementation into national law
EU countries were obliged to bring into effect laws and administrative provisions necessary to comply with the Directive by June 9, 2018. With this new legal regime, EU Member States have had to adopt new legislation in order to comply with the obligations of the Directive. Germany, for example, will introduce a new law on the protection of trade secrets. Although it appears that most EU Member States have initiated legislative procedures, so far only a few EU Member States have already adopted the necessary national provisions. Until legislative procedures have been concluded in the respective EU Member States, the individual national laws on the protection of trade secrets will remain in force.
What are the next steps for companies?
Although the new national laws are not yet in force in most EU Member States, companies should begin preparing for the new legal landscape. Since business information is only protected as a trade secret when reasonable steps have been taken to maintain its secrecy, companies should begin identifying all potential confidential trade secrets and putting appropriate safeguards in place to protect such information from disclosure. Such measures may include, in particular, entering into proper confidentiality agreements with employees, suppliers, customers, and consultants to limit the scope of use of trade secrets shared with third parties, and protecting trade secrets against unauthorized access.
