A Critical Evaluation of the Proposed EU Trade Secrets Directive

Abstract

The European Commission issued a proposed Trade Secrets Directive on 28 November 2013, with the aim of tackling the legal fragmentation in the protection of trade secrets that currently exists in the European Union. Key divergences between Member States include: the legal mechanism used to regulate trade secrets (criminal or civil law and within civil law, whether unfair competition, tort, contract or labour law); the definition of trade secrets; whether trade secrets are classified as intellectual property (thus affecting the application of the Enforcement Directive); criminal penalties and the procedural mechanisms for protecting the confidentiality of trade secrets during litigation. Such legal fragmentation is seen as problematic, because it apparently makes enforcement opaque and expensive and also leads to sub-optimal investment in cross-border innovation activities within the EU. This paper undertakes an evaluation of the proposed Directive, along with the 'General Approach' put forward by the General Secretariat of the European Council to the Council on 26 May 2014. It argues that we should be skeptical of claims that harmonization will bring substantial economic gains and that only a modest amount of harmonization is likely to ensue from implementation of this Directive, should it be adopted. This is because several of the obligations contain uncertainties and Member States will have the freedom to implement these obligations according to whichever mechanisms they prefer. As a result, we are likely to see a patchwork of laws continuing to regulate the protection of trade secrets in the EU and a series of references to the European Court of Justice for many years to come.

Keywords: trade secrets, EU proposed Directive, definition, unlawful and lawful acquisition, use or disclosure, third parties, employees and ex-employees, infringing goods, preservation of confidentiality, limitation periods, remedies and enforcement