At the end of 2013, the European Commission presented a draft directive on the legal protection of trade secrets.

After more than two years' negotiations between the European Commission, the European Parliament and the Member States, political agreement was reached on a final draft shortly before Christmas. The revised directive was finally adopted by the Council on 26 May 2016.

The political procedure led to changes in the European Commission's original directive. These changes are especially a result of concern as to whether the European Commission's original directive took into consideration to a sufficient extent the employee's possibility of staying within his/her industry when changing job, and whether the press risked infringing the legal protection of trade secrets when writing about companies.

The supporters of the directive ended up being nervous because the European Parliament had to vote on the directive and thereby on a strengthening of the right to secrecy in the middle of all the attention concerning the "Panama Papers".

Background

The reason for the European Commission's initiative was a survey from 2012 showing that the member states' rules on protection of trade secrets differed substantially. This is especially important to small and medium-sized enterprises as these differences may prevent innovation across Europe according to the European Commission.

The European Commission did in fact point at the lacking harmonisation in the area as an explanation why the European Union is doing worse when it comes to innovation than the USA and parts of Asia.

The adopted directive

The adopted directive implies that all member states must soon introduce minimum protection of trade secrets. The member states can keep or perhaps introduce a more far-reaching legal protection of trade secrets.

However, a novelty in relation to the directive is that the legal protection of trade secrets is not to apply to "whistleblowing". Consequently, the member states may not adopt stricter rules preventing "whistleblowing".

Further, the directive contains a harmonised definition of a trade secret. The processing of the employees' skills in relation to what constitutes a trade secret has been an important element in the political discussions of the directive. The result is the following comment in article 1(3)(a) of the final directive that "the employees’ use of the experience and skills honestly acquired in the normal course of their employment" is not covered by the directive.

In addition, the directive introduces harmonised rules on the enforcement of the protection of trade secrets and claims for compensation in the event of infringement. In relation to enforcement, it is interesting that the directive contains a provision introducing a limitation period of maximum six years, which will apparently prevent enforcement after the expiry of the time limit.

Today, the Danish rules on calculation of compensation for abuse of trade secrets are not the same as for infringement of intellectual property rights. But the directive settles this difference as it contains a provision that all relevant factors must be considered when calculation compensation for infringement of legal protection of trade secrets, including the infringing party's unjustified profit and non-financial damage. This corresponds to the rules on calculation of compensation in connection with infringement of intellectual property rights.

Perspectives

The directive comes into force on 5 July 2016, and the member states then have two years to implement the directive.

It will be interesting to see how the Danish government will implement for instance the definition of the concept trade secrets into Danish legislation. There may also be several ways to construe the above provisions on "whistleblowing" and the employees' skills.

Altogether, the scene is set for the many interested parties - for instance trade organisations, unions, academics, companies and advocates of freedom of expression and information - still influencing how the state of law should be in Denmark. Due to the general wording of the regulation of the directive, it cannot be avoided that a number of prejudicial questions will be presented to the European Court of Justice in the years following the adoption and implementation of the directive.

We are very interested in this subject as it is our experience that the possibilities of legally protecting trade secrets and not least enforcing these rights become more and more important to our clients. We will therefore continue to follow the implementation of the directive.

For more information on the directive:
THE EUROPEAN PARLIAMENT'S AND THE COUNCIL'S DIRECTIVE