3.4 - Trade Secrets

Undisclosed information. Trade secret protection concerns undisclosed, ideas, knowledge, information and data that has commercial value because it is secret. Article 39(2) TRIPs speaks of – shortly put – information, which (a) is secret, (b) has commercial value because it is secret, and (c) has been subject to reasonable steps to keep it secret. Trade secret protection therefore deals with the protection of information and thus concerns intellectual achievements.

Alternative for patent protection. In particular in case of methods for manufacturing products an “inventor” may have the possibility either (i) to opt for a process patent – which requires an enabling disclosure of the method in the patent – or (ii) to cherish the method as a trade secret. In that case the information will not be publicly available and the effective term of protection can be much longer than the maximum term of 20 years that patent law can offer.

Economic interest. It is a given fact that trade secrets may represent substantial economic interests. The archetypical example the Coca Cola recipe, which is cherished as a trade secret as from the end of the 19th century.

No absolute, exclusive right. Although trade secret protection is mandatory under article 39 TRIPs, trade secret protection does not amount to acknowledging an exclusive, absolute property right. Article 39 TRIPs makes that clear by requiring that member states shall protect undisclosed information in the course of ensuring effective protection against unfair competition as provided for in article 10bis of the Paris Convention. In this context one has to realize that the freedom of information and the freedom of technology are the default rules, warranted by the paramount importance of a well flourishing and ever-expanding public domain (see under 1.6). The only exception to the freedom of technology is patent law, but only on the condition that the technology is new and inventive and that the invention is disclosed in a manner sufficiently clear and complete for it to be carried out by a person skilled in the art, and thus enhances the public state of the art. These fundamental principles result in a strong preemptive effect for patent law. Granting an absolute, exclusive right on a particular technology, only because it is secret, is at odds with these principles. Trade secrets and know-how can therefore not be subject to exclusive, absolute exploitation rights comparable with a patent or other regular IP-right.

Respecting ‘the fence’. The fact that an absolute, exclusive right for trade secrets is not available does not mean that trade secrets are left ‘standing in the cold’.  Trade secret protection basically comes down to having to respect the legal fence that a trade secret proprietor must have put up to protect the confidentiality of the undisclosed information. Trade secret protection basically provides – as does all of unfair competition law – a behavioral norm   that third parties need to abide by. In order to be able to enjoy protection, a trade secret needs to be subject to – simply put – reasonable steps to keep it secret, such as confidentiality obligations for all parties that have access to the undisclosed information. Trade secret protection basically means that these legal ring-fencing measures that have been put into place by the trade secret proprietor need to be respected by third parties. Third parties that in effect try to climb over that fence of protective legal or technical measures by trying to acquire the information “in a manner contrary to honest commercial practices” are to be found to commit an act of unfair competition.  However, simply being in possession of somebody else’s trade secret, without having committed any dishonest business practice, will not constitute a violation of a trade secret.

EU Trade Secrets Law. The TRIPs prescribed trade secret protection has been harmonized with the Trade Secrets Directive of 8 June 2016 (2016/943), which was implemented on 9 June 2018 (article).

Trade Secrets Directive 2016. The directive grants trade secret protection to any rightful “holder” of a trade secret, being “any natural or legal person lawfully controlling a trade secret” (article 2). Next, an “infringer” is “any natural or legal person who has unlawfully acquired, used or disclosed a trade secret” and “infringing goods” are any “goods, the design, characteristics, functioning, production process or marketing of which significantly benefits from trade secrets unlawfully acquired, used or disclosed” (article 2).

Lawful acquisition. Crucial is the answer to the question whether the acquisition of the trade secret was lawful or not. Any rightful trade secret holder – a person lawfully controlling a trade secret – enjoys protection and can act against a third party who has unlawfully acquired the trade secret. Article 3 learns that the “the acquisition” of a trade secret shall be considered as lawful when it is obtained (a) by independent discovery or creation; (b) by  observation, study, disassembly or testing of a product or object that has been made available to the public or that is lawfully in the possession of the acquirer of the information who is free from any legally valid duty to limit the acquisition of the trade secret; (c) by exercise of the right of workers or workers' representatives to information and consultation in accordance with Union law and national laws and practices; (d) by any other practice which, under the circumstances, is in conformity with honest commercial practices. Section 2 of article 3 adds that the acquisition, use or disclosure of a trade secret shall be considered lawful to the extent that such acquisition, use or disclosure is required or allowed by Union or national law.

Infringement: unlawful acquisition, use or disclosure. Article 4 of the directive then indicates what qualifies as an infringement. That is, first of all, any “acquisition” of a trade secret without the consent of the trade secret holder, when that acquisition is carried out (a) by unauthorized access to, appropriation of, or copying 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, or (b) by any other conduct which, under the circumstances, is considered contrary to honest commercial practices (article 4(1)). Second, “use” or “disclosure” of a trade secret shall be considered unlawful whenever carried out, without the consent of the trade secret holder, by a person who is found to (a) having acquired the trade secret unlawfully; (b) being in breach of a confidentiality agreement or any other duty not to disclose the trade secret; (c) being in breach of a contractual or any other duty to limit the use of the trade secret (article 4(3)). In addition, the acquisition, use or disclosure shall also be considered unlawful whenever a person, at the time of the acquisition, use or disclosure knew or ought, under the circumstances, to have known that the trade secret had been obtained directly or indirectly from another person who was using or disclosing the trade secret unlawfully (article 4(4)). Unlawful use is also the matter in case of “the production, offering or placing on the market of infringing goods, or the importation, export or storage of infringing goods for those purposes” […]where the person carrying out such activities knew, or ought, under the circumstances, to have known that the trade secret was used unlawfully” (article 4(5)).