A Piece in a Puzzle

Trade secrets must be protected to ensure a fair and well-functioning market.

In November 2013, the European Commission published its proposal for the Directive on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure. The proposed Directive aims to harmonise civil law framework in relation to trade secrets.

According to the Commission, one in five companies has been in a situation where its’ trade secrets have been disclosed without authorisation or there has been an attempt to do so. Though, the legislation itself does not prevent a theft, it should set out a clear message that undisclosed know-how and business information are valuable and using them without prior authorisation is not allowed. Furthermore, it is evident that trade secrets must be protected to ensure a fair and well-functioning market.

However, since the trade secrets seem to be fairly well protected within the Finnish legal framework, it is good to think over if we really need this new piece of legislation. While thinking over the matter, I had an opportunity to discuss about the Directive proposal with two experts from the Finnish business world, Ms Liisa Ewart from Tekes (the Finnish Funding Agency for Innovation) and Ms Minna Aalto-Setälä from the Finland Chamber of Commerce, whom both took a fairly positive view towards the Directive proposal.

As a general rule, harmonising the trade regulations in the common market makes cross-border business easier, and thus harmonisation is seen as a positive thing.

Aims of the Directive

To explain it in a simple manner, the Directive aims to harmonise the rules regarding the misuse of trade secrets in the EU. Currently, there are no common rules on this matter and, thus, there is no EU wide protection.

The lack of EU wide protection may discourage the cross-border co-operation and innovation. This in turn cannot have a positive outcome for the common market. To fix this situation the proposal has two especially important explanations that should make the cross-border co-operation smoother.

Firstly, a common definition of a ‘trade secret’ is set out in the proposal. This should be seen as a positive addition as for example the Finnish legislation is lacking the definition currently. The lack of definition is a problem, as what constitutes a trade secret might be unclear to companies under the present system. Secondly, the proposal defines what means the unlawful acquisition, use and disclosure of trade secrets. These two explanations are of the most importance in the Directive and those also add up to our national legislation.

Trade Secrets and IPR

Trade secrets do not form an intellectual property right as the holder of the trade secret does not have an exclusive right over its content. Trade secrets are only protected when their content has been acquired unlawfully.

Thus, it is more difficult to prove an unlawful use of a trade secret than a patent infringement. However, as the Directive proposal harmonises the rules concerning unlawful use of trade secrets, actions against unlawful use should be easier in the future.

Although, the proposal is part of the IPR Strategy that the Commission accepted in 2011, it is important to stress that trade secrets should only be complimentary to the IPR protection. In any case they should not replace the protection given by different forms of IPRs or lack of that protection if the business has failed to seek the correct form of protection.

Is the Harmonisation Necessary?

The Commission has stated that the protection of trade secrets varies significantly in the different Member States and some of the national legislation is outdated. This may clearly create a problem from the businesses perspective as it creates barriers to cross-border co-operation and, thus it can be argued that the Directive is needed. Altered rules in different Member States are not good from the business’ perspective and the harmonisation is then necessary.

However, the harmonisation should be done only in the level necessary respecting the subsidiarity principle. From this perspective the common definitions for a trade secret and its unlawful acquisition, use and disclosure are needed.

Everything that goes in too much detail must be carefully thought through and when appropriate left for Member States to decide. A useful piece of legislation is one that can be understood by those whom it concerns.

Altogether, the Directive is going to harmonise an important part of the common market, the part which relates to the new inventions and cross-border co-operation. It will not effect on the criminal sanctions used on Member States but naturally it might bring changes to the current legislation.

These changes are not negative ones when they bring more security to the functioning of the common market and more concrete results to the businesses. Thus, it can be said that this proposal is perhaps a small, but an important piece in a puzzle, the puzzle being the common market.

Tuuli Valkama
LL.M in European Law

The author worked as a trainee at the IPR University Center in spring 2014.