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Europe Introduces Landmark Trade Secrets Law Reform

28 November 2013

LONDON, 28 November 2013 - This morning the European Commission adopted a proposal for a Directive to protect trade secrets and confidential business information against misuse by third parties.   The Directive will dramatically reform the law of trade secrets across the European Union.  It is designed to harmonise the law and how it is enforced across all 28 Member States. 

Sarah Turner, partner at Hogan Lovells and co-author of a 2012 study on trade secrets for the Commission, commented:

"Harmonisation of the law on trade secrets has been a long time coming - the law across Europe as it currently stands is a patchwork and is often inadequate.  The proposal is definitely a step in the right direction although there are still some noticeable gaps.  For example, trade secret holders often face considerable difficulties in obtaining evidence of misuse and damage.  If the necessary evidence cannot be obtained then legal action may not get off the ground.  The current proposal does not introduce procedures to address this issue.  For example, it does not include means to compel defendants to provide information or documents or for a claimant to seek "search and seize" orders without notice to the defendant in order to preserve evidence if there are serious grounds to believe the defendant would otherwise destroy it.

"Nonetheless these proposed changes are very welcome and appear to support the Commission's general desire to ensure respect for intellectual property and related rights.    The differences in trade secrets protection until now have meant that businesses trading in Europe have been in danger of losing significant revenue to their competitors and opportunists.  Investors, particularly those interested in innovation and technology, are more willing to invest in countries where they believe that their secrets are adequately protected from misuse.  Hopefully this attempt to harmonise the law will mean that Europe is in a better place to compete with countries such as the US where trade secrets are recognised as an important business asset and protected by the law accordingly."

The proposal is the result of several years of evaluation of this area of the law by the Commission.  In 2011, Hogan Lovells was commissioned to produce a study for the Commission which analyzed how trade secrets were protected under the national laws of each of the then 27 Member States. The study, published in January 2012 and referred to in today's proposal, was the first of its kind.  It revealed major differences across the EU in what can be protected and what the courts can and will do to enforce rights as well as highlighting best practice. 

The main changes proposed by the draft Directive are:

  1. Introduction of a uniform definition of a "trade secret".  Currently the term is not defined in most countries' law.
  2. A two year limitation period in which to bring claims, running from the date on which the claimant became aware (or should have been aware) of the last fact giving rise to the action.  This is a much shorter period than is currently enjoyed in many Member States.
  3. Introduction of a common set of remedies for trade secret misuse including:
    • interim and permanent injunctions;
    • seizure of suspected infringing goods and their destruction if trade secret misuse is proved; and
    • compensatory (but not punitive) damages which reflect the actual loss suffered.
  4. Introduction of procedures to preserve the confidentiality of the secrets in dispute during legal proceedings.

The proposed Directive will now enter the normal legislative process involving the European Parliament and the Council before it is adopted.

On 3 December 2013 Hogan Lovells will be running a rapid response webinar on the impact of the proposal with views from lawyers from a number of different jurisdictions.  If you would like to join or would like further information on this area of our practice please contact Sarah Turner at Sarah.Turner@hoganlovells.com.  

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