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Efficient trade secrets enforcement demands more than copy-pasting the Directive into national law

A priority issue concerning the Trade Secrets Directive

On May 27, 2016 the European Council unanimously adopted a Directive that seeks to simplify and harmonize the law on trade secrets throughout the European Union. This came as no surprise, as on April 14, 2016 the European Parliament had already approved the draft Directive with a vast majority. EU member states now have approximately two years to replace their current patchwork of trade secret law and implement the Directive into national law.

It is important to understand that the Trade Secrets Directive only sets minimum standards and does not seek to achieve complete harmonization throughout the EU. Individual EU Member States are still free to design how they apply the Directive in their respective territories. This implementation at Member State level will have to be more than a simple copy-paste exercise if the Directive is to achieve what can be seen as its true objective: "to ensure that there is a sufficient and consistent level of civil redress in the internal market in the event of unlawful acquisition, use or disclosure of a trade secret". (see paragraph 10 of the preamble). More specifically, the Directive is frequently criticized for not providing for any means to obtain evidence concerning the acts against which the Directive is supposed to provide redress.

When drafting the Directive, the European Commission apparently wanted to avoid a situation whereby measures such as are provided for by the IP Enforcement Directive (2004/48/EC) to preserve evidence of intellectual property infringement (counterfeit seizure, etc.) could be abused in the trade secrets context. Frequently invoked fears were intimidation of competitors, or even committing industrial espionage. However, this concern is outdated and mostly unjustified. More than a decade after the implementation of the IP Enforcement Directive by the Member States, the European judiciary has had plenty of experience with evidence gathering proceedings of this type, and offers sufficient safeguards to protect the lawful interests of parties that are subject to such measures. Despite this, the EU has nonetheless failed to provide a mechanism that is comparable to that provided for in the IP Enforcement Directive in its Trade Secrets Directive. It will therefore be up to the national legislators to ensure, as far as is possible, that the holder of a potentially misappropriated trade secret has access to proceedings comparable to counterfeit searches and seizures. It is already not easy to become aware of the misappropriation of a trade secret. Without access to pre-trial discovery proceedings it will be almost impossible to prove that misappropriation.

No convincing arguments to prevent access to pre-trial discovery

All the arguments against pre-trial discovery with regard to trade secrets , in particular the risk of 'fishing expeditions' or even industrial espionage as mentioned above, were invoked at the time such measures were proposed for the enforcement of intellectual property rights. If they did not then prevent the measures being included in the IP Enforcement Directive, there is no reason why they should now not be included in relation to the enforcement of trade secrets. As intangible assets, trade secrets and intellectual property rights are indeed closely related. When implementing the Directive, the national legislators could virtually copy-paste the rules existing in relation to the preservation of evidence concerning intellectual property infringements. In doing so, they would eliminate the risk that anyone claiming to have a trade secret would gain access to confidential information concerning the targeted party, or at least keep it on a level with the risk to a holder of intellectual property rights. The trade secret holder would indeed have to present reasonable evidence that he/she holds a valid "trade secret" as defined by the Directive. In addition thereto, similar evidence to support the claim that his/her trade secrets rights have been infringed or are about to be infringed should also be presented. If the trade secrets holder wants to execute these measures without the other party being heard (ex parte), he/she will in addition have to prove that the delay or loss of surprise effect resulting from an inter partes debate is likely to cause irreparable harm to the right holder or would cause the targeted party to destroy the evidence. It is correct that, unlike for holders of patents, trademarks, registered designs, etc. trade secrets holders will not have to submit a registration as proof of the existence of their right. But copyright holders are in exactly the same position. To have access to pre-trail discovery proceedings, a copyright holder has to convince the court that he/she holds the rights in relation to a creation, and that this creation is copyright protected. Why should the holder of a trade secret not be able to do exactly the same, in particular since one of the key provisions of the Directive is the uniform definition of a "trade secret". Once reasonable evidence has been submitted that there a "trade secret" exists, as defined in the Directive, the only thing one will have to prove is the ownership thereof and that it is likely being infringed.

Moreover, the national legislators could easily provide a counterweight to the trade secrets owner's access to pre-trail discovery proceedings. For instance, unlike what is currently the case in some EU member states, the trade secrets holder could be prevented from having direct access to information relating to the seized evidence. To this end, the actual seizing of the evidence could be carried out by an independent party appointed by the court. The seized evidence could first be sent to the court. Prior to releasing any information relating to the seized evidence, the court could organize a discussion between the parties (or their lawyers), for instance concerning access to confidential information. Finally, in order to prevent frivolous pre-trial discovery proceedings, the national legislators could provide for a solid liability mechanism. This could be accompanied by sufficiently severe sanctions, in order to dissuade any party from attempting to execute 'fishing expeditions' or abusing in any other way pre-trial discovery proceedings in relation to trade secrets.

Priority

There are many other challenges that will have to be met so as to make trade secrets proceedings attractive, workable and efficient, such as, for instance, the recovery of reasonable legal fees and costs by the prevailing party, the communication of confidential proof during proceedings, etc. However, what would be the point of tackling these challenges without first solving the problem of obtaining pre-trial access to evidence that a trade secret is being infringed. Access to such means of obtaining evidence is a pre-condition for efficient trade secrets enforcement and should therefore be an absolute priority for EU member state legislators.