EU moves to unify, strengthen protection of trade secrets

December 11, 2013
Categories: Counterfeit, Trade Secret Theft

The European Commission on Nov. 28 published draft rules designed to thwart the growing problem of trade secret theft, and improve the climate for investment, research and innovation across the EU’s 28 member states.

According to an explanation of the proposed rules, “the current diversity and fragmentation of the legal framework on the protection of trade secrets against their unlawful acquisition, use or disclosure is impairing cross-border R&D and the circulation of innovative knowledge by undermining the capacity of European companies to respond to dishonest attacks on their know-how.”

The proposal, which must be approved by the European Parliament and the EU Council to go into force, adopts the definition of trade secrets used under TRIPS, the Agreement on Trade Related Aspects of Intellectual Property Rights, as well using the same requirements for reasonable steps to keep the information secret.

Through an assessment process starting in mid-2012, the EC weighed the problem of trade secret theft in the EU, the impact on industry and input from member nations on potential solutions.

In a survey of EU companies, one in five reported suffering at least one attempted trade secret theft within the EU during the previous decade. Nearly two in five respondents stated that the risk of trade secret theft had increased during the same period. Two in three of the respondents indicated support for EU legislative action to address the problem.

As an example of the potential damages from trade secret theft, the proposal cites the European chemical industry, which is heavily dependent on process innovation — competitive information that is not covered by patents, copyrights and other IP formulations where ownership is exclusive. According to the proposal, the industry “estimates that misappropriation of a trade secret could often entail a turnover reduction of up to 30%.”

The proposed directive is the most comprehensive of the approaches that were considered by the EC, aiming to bring about “convergence of national criminal law in addition to civil law convergence… including rules on minimum criminal penalties,” for the misappropriation of competitive information.

The proposal lays out what constitutes an infringing act, potential remedies, a method of calculating damages in trade secret misappropriation cases, and ways to protect trade secrets during litigation. It would create criminal laws to address trade secret protection in some countries where none currently exist.

The initiative is part of a wider “Europe 2020 strategy,” which undertakes to create an Innovation Union by the end of the decade.

“This proposal aims to boost the confidence of businesses, creators, researchers and innovators in collaborative innovation across the internal market,” said Commissioner for Internal Market and Services Michel Barnier. “They will no longer be dissuaded from investing in new knowledge by the threat of having their trade secrets stolen. It is a further step in the Commission’s efforts to shape a legal framework that is conducive to innovation and smart growth.”