How to protect your trade secrets?
Trade secrets, such as know-how and confidential business information, are important in the innovation process within the manufacturing industry. However, the misappropriation of trade secrets is on the rise. Small and large international companies, spin-offs and universities are sooner or later confronted with issues related to this topic. Flanders Make and lawyers from Crowell & Moring organised a webinar where the strategic and legal aspects of trade secrets where explained and how they can be protected.
The EU Trade Secrets Directive, implemented in the Belgian Trade Secrets Act in 2018, offers a framework and harmonisation to defend trade secrets in the EU.
In the legal definition a trade secret needs to meet 3 conditions:
This way a trade secret differentiates from e.g. a patent, the latter requires a publication of the invention leading to the disclosure of information. It’s also broader than just confidential technological information (know-how) as some examples of trade secrets include company offers, production flows, business strategies, customer and price lists, …
The EU Trade Secrets Directive includes a ‘white list’ with lawful acts and a ‘black list’ of unlawful acts . We will not cover them all but point out some interesting topics related to the industry.
If you want to view the complete presentation, please register below and watch the full webinar.
The ‘white list’ includes acts like independent discovery, meaning you have the right, and if you can prove it, to develop a trade secret independent from another trade secret.
A special lawful act is reverse engineering. In the EU, reverse engineering, through observation, study, disassembly or testing of a product , is not legally prohibited and allowed when a product is made available to the public. That said, under the EU directive, one can protect trade secrets from reverse engineering by prohibiting this in the terms and conditions.
On the ‘black list’, the most common unlawful act is a breach of contractual obligations, for instance a confidentiality agreement. Misappropriation of trade secrets is mostly not the result of hacking or competitor theft. In most cases it derives from contractual agreements with
(ex-)employees or contracting parties, meaning close relationships.
The ‘2nd degree’ acquisition of a trade secret requires some special attention as a company can be held liable when 3th party information was acquired and the company knew or ought to knew this was a secret. For example, a new R&D employee, coming from a competitor, brings in sensitive information from his former employer. It’s of crucial importance to have this documented in a contractual agreement that 3th party confidential information (such as trade secrets) can under no circumstances be used by the new employee.
Finally, an interesting exception to unlawful disclosure is the whistle-blower. One can make company information public to reveal misconduct, or to protect the general public interest.
The legislator has foreseen a condition to guarantee the confidentiality during and after the legal proceedings. So called ‘confidentiality clubs’ limit the number of people at court, it preserves the right to a fair trial and keeps company secrets safe.
An important limitation of the EU directive is the lack of harmonisation in the limitation period within the European Union. In Belgium it is 5 years starting from the day following the day claimant becomes aware of the unlawful act and of the identity of the infringer, with a maximum of 20 years from the day of the unlawful acquisition. However, this can differ in other member states. This complicates the cross-border aspect which is often the case with trade secret infringement.
A few tips to take reasonable step to protect trade secrets.
This blog and webinar were co-created by Gunther Meyer and Jurgen Figys, lawyers at Crowell & Moring LLP. We would very much like to thank them for their contributions!
Wouter Hanoulle - Communication Officer
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