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Don't keep it a secret! New protection for trade secrets is nearly here

Heidi Hurdle
24/05/2018
Member states have until 9 June 2018 to implement the Trade Secrets Directive. The UK is now ready to do so, with the Trade Secrets (Enforcement, etc.) Regulations 2018 having been laid before Parliament last week. In this blog we take a brief look at these regulations.

Member states have until 9 June 2018 to implement the Trade Secrets Directive (2016/943/EU) (the Directive). The UK is now ready to do so with the Trade Secrets (Enforcement, etc.) Regulations 2018 (SI 2018/597) (the Regulations) having been laid before Parliament last week. In this blog we take a brief look at these regulations.

Trade Secrets Directive

At present the protection of trade secrets varies considerably amongst member states making it often difficult and costly to enforce them across the EU. The aim of the Directive is to harmonise the existing patchwork protection and to provide a common framework for minimum standards that member states must provide for the protection of trade secrets. It introduces a common definition of trade secrets and rules on the unlawful acquisition, use and disclosure of trade secrets. It also provides a minimum standard for the form of remedies and procedures, and includes rules for the preservation of trade secrets during court proceedings.

The Directive is not intended to affect the application of existing intellectual property rights, or contract law. However, where there is a conflict between the Directive and the Intellectual Property Enforcement Directive (2004/48/EC), the Trade Secrets Directive will take precedence.

(For further background about the Directive see our earlier blog here, and our earlier publication here, which includes information on trade secrets in general.)

Implementation in the UK

As the substance of the Directive is broadly reflected in existing UK law on confidential information (developed largely through case law), the general perception amongst the legal community was that its implementation was unlikely to require any real changes in UK law. The Regulations are therefore designed to plug any gaps and seek to provide additional clarification. They do not transpose the provisions from the Directive dealing with acquisition, use or disclosure of trade secrets and focus on procedural issues and remedies.

Specific provisions in the Regulations include the following:

  • Regulation 3 confirms that the existing UK law on confidential information will run in parallel with the rights conferred under the Directive. The remedies available at common law will therefore also be available to a trade secret holder who has brought proceedings under the Regulations. (This regulation was added to the final version of the draft regulations following concerns raised during the consultation process.) 
  • The Regulations follow the Directive and provide for a six year limitation period. (At one stage this was only going to be two years in the Directive.) The Regulations set out in detail how to calculate the start of this period.
  • Regulation 11 includes a range of interim remedies available to a trade secret holder. (The original draft only dealt with orders for delivery up.) There is a time limit of 20 working days (or another "reasonable" period set by the court) within which a claim needs to be brought after an interim order has been made. 
  • The Regulations also provide for a range of final remedies in addition to an injunction, including the adoption of corrective measures in relation to the infringing goods (regulation 14). Regulation 16 enables a court to order compensation as an alternative remedy under certain conditions; a trade secret holder may not be particularly keen on this option which seems designed to protect what can be describe as "innocent" infringers. 
  • There is a separate provision dealing with the assessment of damages, which also interesting includes moral prejudice, a concept which is not normally associated with trade secrets in the UK (regulation 17). 
  • Finally, there are detailed provisions dealing with the preservation of the confidentiality of trade secrets during the course of court proceedings and the publication of court decisions (regulations 10 and 18, respectively.) The former is particularly prescriptive providing (among other things) that an individual from each party should be part of any "confidentiality club", which may not always be desirable.

Comment

At one stage it was uncertain whether the UK would implement this Directive by the implementation date of 9 June 2018, which falls within the two-year period of the Brexit withdrawal. The government has stuck to its expressed intentions and has ensured that this has happened in time.

Although the UK has a "robust and well established legal framework that allows for the effective enforcement of trade secrets" (as was acknowledged by the Intellectual Property Office during the consultation period), the implementation of this Directive through the Regulations does provide for some potential changes in the future.

It is quite possible, given that there are some differences between the scope of the Directive and the existing UK law of confidence, that the two will run in parallel, giving businesses the widest possible range of protection. For example, if there is any doubt as to whether a trade secret falls within the definition under the Directive (which is potentially narrower than current UK law), businesses should consider bringing an alternative claim under the common law.

We will continue to monitor the practical consequences of the implementation of the Directive to businesses.

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