A strong reminder of the importance for a startup to protect its trade secrets. The new EU Directive on the Protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure will be implemented into national law at the latest by June 9, 2018. This Directive will contribute to the creation of a single market in the EU for Intellectual Property Rights. As every IPR—whether copyright, patent, trademark or design—arises from a company that had trade secrets early on, these early stages are equally important to protect.
(Author: Emmanuelle Ragot, Wildgen Partners in Law / Image Credit: Taylor Nicole)
The Directive will have an impact on corporate groups as well as startups, as it aims to strengthen the rights of trade secret holders (i.e. in the course of litigation).
In order to be defined as a trade secret, the information must meet three cumulative criteria. It must: be secret, have a commercial value, and have been protected by reasonable steps under the circumstances by the person lawfully in control of the information.
What are the expected reasonable steps to keep information secret? Even though each country will have to elaborate on the definition, do not expect that simply labeling the information as a trade secret will suffice. It will be necessary to show evidence of having implemented true protective steps; otherwise the trade secret will not be protected.
Some tips for companies
An understanding of trade secrets and their protection, and of how to move forward from trade secrets to intellectual property, is of real value for a startup. As a matter of fact, having protected trade secrets is helpful for startups seeking funding and increases the chances of success for the venture. Protection of trade secrets also prevents competitors from using proprietary information without prior authorization.
Tips for how to go about protecting trade secrets:
a) Within an organization
It is important to implement reasonable protection and confidentiality restrictions for the most secret and key business information of an organization, since this information may constitute a trade secret.
There is no need to file for protection of trade secrets to exist, but the trade secrets need to be adequately safeguarded, otherwise they can be lost, and once lost, the owner will also lose certain associated legal rights and remedies.
Sensible precautions can include:
- identifying and tracing of trade secrets and confidential information and ensuring efficiency and reliability of this identification;
- evaluating the value of a trade secret;
- developing a protection policy;
- ensuring employees adhere to honest commercial practices and safeguarding the company against those who do not;
- reviewing your training procedures;
- ensuring precautionary measures are in place to reduce liability when hiring employees from a competitor;
- restraining access to only those persons having a need to know the information;
- physically isolating and protecting trade secrets and excluding trade secrets and confidential information from some files;
- locking trade secret materials away after business hours and restricting public access to facilities;
- maintaining computer security; and
- reviewing employment contracts and ensuring they sufficiently cover trade secrets
b) In the course of commercial relationships
Provisions such as the duration of the utilization of the trade secret, the obligation to discontinue the use of the trade secret, etc. have to be specified in contracts with commercial partners.
c) In case of litigation
An arbitration clause seems to be necessary in order to preserve the confidentiality of the litigation and of the trade secrets themselves in such cases.
However, the Directive becomes very valuable when litigation arises in front of an ordinary court. If an infringer steals a company’s trade secrets, the company will have the right to stand before a court in a hearing against the infringer.
The company may obtain:
- provisional and precautionary measures such as requesting a preliminary injunction in order to obtain the cessation of the use of the trade secret on an interim basis, during the proceeding;
- protection and preservation of confidentiality of trade secrets in the course of legal proceedings in order to keep them secret even though the procedure is public;
- after the decision, on the merits of the case, the cessation or the prohibition of the use or disclosure of the trade secret and the adoption of the appropriate corrective measures with regard to the infringing goods, such as the recall of the infringing goods from the market.
All this confirms the need to strengthen the protection of confidential information that has high value and patent it if possible in the next stage of business development.
Sharing of trade secrets between startups within the EU and/or the U.S., due to a closer alignment of EU legislation towards recent U.S. legislation, should enable exploitation and sharing of the know-how with privileged business partners across borders. It is easier for companies to grow and seek funding when they can depend on the adequate legal protection of their trade secrets.
All of the new opportunities and increased potential for legal protection makes it necessary that corporate entities assess the impact of the new Directive on their businesses as soon as possible.
This article was first published in SILICON