Lexpert magazine features articles and columns on developments in legal practice management, deals and lawsuits of interest in Canada, the law and business issues of interest to legal professionals and businesses that purchase legal services.
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62 LEXPERT MAGAZINE | MARCH 2016 EU streamlines trade secret approach AT PRESS TIME, the European Parlia- ment was poised to approve the compro- mise dra of the controversial EU Trade Se- crets Directive submitted by the European Council in December. e Directive seeks to create a minimum standard for trade se- cret protection across the EU. "e European Commission regards the absence of a uniform approach to the pro- tection of trade secrets within the EU as a route to the 'fragmentation of the internal market' and a weakening of the 'overall de- terrent effect of the rules'," says Huw Evans of Norton Rose Fulbright LLP in London. e upshot is that companies doing busi- ness in the EU will be able to operate with more certainty than currently exists. By way of example, several jurisdictions in the EU do not provide for the maintenance of confidentiality in the course of a proceed- ing involving a trade secret. Others, like the UK, use in camera hearings or other devices to protect confidentiality. "Having a mechanism for preserving confidentiality during legal proceedings is clearly paramount," Evans says. "Otherwise litigating for breach of confidence could defeat the purpose where information has been leaked to a limited number of people." Still, the Directive does not mandate in camera or similar proceedings. "Preserving confidentiality during legal proceedings is subject to a 'duly reasoned' application and is not the default posi- tion," Evans explains. "We will need to see what changes will be made in jurisdictions which are not used to hearing proceedings in secret, what kind of threshold they will set and logistically, how proceedings will be run." On the other hand, the Directive does in- troduce a definition of a trade secret. Infor- mation will be considered a trade secret if it is not generally known to persons who tend to deal with this kind of information; has commercial value because it is secret; and has been subject to reasonable steps to keep it secret by the person lawfully in control of the information. From the perspective of foreign com- panies exporting goods to Europe, the most important provision may be the one prohibiting dealing in "infringing goods" whose design, manufacture or marketing has derived a "significant benefit" from an unlawfully acquired trade secret. "e Directive, then, provides remedies not only for the unlawful acquisition, dis- closure or use of a trade secret, but also for dealing in goods derived from a trade se- cret," Evans says. Whether the prohibition will realize its potential, however, remains to be seen. "is could be a powerful provision for innovative manufacturers of goods," Evans says. "How powerful will depend on the level of 'significant benefit' required to fall within the provision." In terms of remedies, courts are empow- ered to grant injunctive relief restraining the use and disclosure of confidential in- formation and dealing in infringing goods. Judges can also award damages and order an accounting of profits. But public interest advocates say that the Directive is a direct encroachment of free- dom of speech and expression. "e Directive has wide implications that have not been taken into account," says Anne Friel, a Brussels-based lawyer with ClientEarth, an organization of activ- ist environmental lawyers. "In particular, it threatens public access to information by giving industry the means to sue and receive compensatory damages from public authorities, journalists and whistleblowers who reveal business-related information in the public interest." Pressure from ClientEarth and like- minded groups did result in some protec- tive amendments. e Directive now con- tains a reference to the Aarhus Convention on Access to Environmental Information, which requires public authorities to dis- close business secrets concerning emissions. "is is an important modification that will help public authorities stand up to in- dustry pressure to withhold all business in- formation from public scrutiny," Friel says. "Nevertheless, the draing of this provi- sion is vaguer than we would have wished, leaving room for industry pressure to sup- press information that should be in the public domain." e Directive now also protects whistle- blowers who can show that they acted in the public interest to reveal misconduct: the earlier dras required them to demon- strate that acquiring and revealing the busi- ness secret was necessary to achieve this. Still, Friel points out that the Directive has no general protection for information revealed in the public interest, and that there is still are significant legal uncertain- ty about when investigative journalists and their sources can be sued. "e EU could have avoided this situa- tion with a simple amendment stating that only information revealed with a commer- cial motive can be protected as a trade se- cret," Friel says. European Parliament Directive aims to create more certainty for business BY JULIUS MELNITZER | TRADE SECRETS | THE BORDER PHOTO: SHUTTERSTOCK