11 Protection of trade secrets
| Committee's assessment |
Legally and politically important |
| Committee's decision | Cleared from scrutiny; drawn to the attention of the Business, Innovation and Skills Committee
|
| Document details | Draft Directive on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure
|
| Legal base | Article 114 TFEU; QMV; ordinary legislative procedure
|
| Department | Business, Innovation and Skills
|
| Document Numbers | (35623), 17392/13 + ADDs 1-3, COM(13) 813
|
Summary and Committee's conclusions
11.1 Trade secrets can cover a wide range of different types of
information, such as technical innovations, recipes, business
processes or customer information. Businesses use trade secrets
either alongside formal intellectual property (IP) rights or as
an alternative to them.
11.2 Unlike IP rights, the knowledge contained in
trade secrets is not exclusive to the trade secret holder. It
is possible independently to acquire and use the same knowledge,
including through taking a product apart to see how it works.
11.3 Provided it can be kept secret, a trade secret
can also be protected indefinitely, in contrast, for example,
to the 20-year term of patent protection. For industries with
long product life cycles, trade secrets can therefore be an important
part of a strategy to protect and exploit intangible assets.
11.4 Broadly this proposal would —
· establish
a common definition of a "trade secret";
· harmonise
the circumstances which the acquisition, use and disclosure of
a trade secret is unlawful; and
· harmonise
procedures for redress and the remedies that should be made available
to the holder of a trade secret.
11.5 On 7 May 2014 our predecessor Committee granted
a scrutiny waiver to enable the Government to agree the General
Approach which was adopted at the Competitiveness Council of 26
May that year. The Minister for Intellectual Property (Baroness
Neville-Rolfe) now writes to update the Committee on the outcome
of trilogue negotiations with the European Parliament and to inform
the Committee that it and the Council are likely to adopt the
text in April.
11.6 We thank the Minister for continuing to provide
full and helpful information on this proposal. Her letter, quoted
below, clearly identifies the compromises made to reach agreement.
We note that she assesses the resultant text to be "a balanced
one and will give businesses greater confidence in collaborating
in the Single Market".
11.7 We now clear this proposal and draw it to
the attention of the Business, Innovation and Skills Committee
as the final outcome of new legislation in the field of Intellectual
Property. In doing so we note that the Directive, once adopted,
would need to be transposed into UK law within two years; and
recall our Report of 7 May 2014 which recorded that only limited
amendment to UK law would be required to do so.
Full details of
the documents: Draft
Directive on the protection of undisclosed know-how and business
information (trade secrets) against their unlawful acquisition,
use and disclosure: (35623), 17392/13 + ADDs 1-3, COM(13) 813.
The Minister's letter of 29 January 2016
11.8 The Minister indicates that the proposal as
it has evolved will enable confidentiality of trade secrets to
be maintained during legal proceedings, as happens already in
the UK but in few other Member States.
11.9 She indicates the areas of compromise:
"The text also contains important safeguards
for protection of the media and whistleblowers. Together with
the impact on employees moving jobs, these were the key issues
for the EP. Concessions by the Council in these areas have resulted
in the EP provisionally moving on minimum harmonisation, limitation
periods and Government use of trade secrets."
11.10 She then provides details of the previously
sensitive issues:
· "Minimum
harmonisation. Harmonisation should not go beyond what is
necessary for the smooth functioning of the Internal Market. The
Council was firmly of the view that Member States should be able
to apply higher standards, provided that these did not undermine
the safeguards contained in the Directive, such as the one protecting
whistleblowers. The text now includes the language from the Council's
General Approach.
· Limitation
period. The EP had been pressing for a
shorter limitation period than the one applicable in the jurisdictions
of the UK (5 years in Scotland, 6 years in England and Wales and
Northern Ireland). The text now states that the limitation period
can be up to 6 years, which will mean that businesses will continue
to have enough time to develop a case that is worth pursuing in
court.
· Employees
changing jobs. Concern was expressed during
the EP debates that the protection of trade secrets could act
as a barrier to job moves. The agreed text states that the Directive
does not prevent employees from using information that is not
a trade secret or the experience and skills that he or she has
honestly acquired in the normal course of employment; nor does
it enable employers to impose any restrictions in employment contracts
beyond those permitted by national or EU law. This text clarifies
the position that the Government understood was implicit in the
Directive and would still enable employers to pursue a former
employee for unlawful acquisition, use or disclosure of a trade
secret.
· Freedom
of expression and the media. The UK pushed
back on the references to the Charter of Fundamental Rights within
the Articles of the Directive. The Government's view is that because
all EU legislation must respect the rights and observe the principles
of the Charter in any event, such language is redundant. The UK
succeeded in securing drafting changes to ensure greater legal
clarity so that the text directly cites the Charter. As these
references have no impact on the substance of the Directive, when
it came to offering compromises to the European Parliament, the
Council preferred to concede on this point in exchange for retaining
General Approach language on several substantive issues. The European
Parliament see these references as safeguards for the protection
of the media.
· Whistleblowing.
The Government's aim in this area has been to strike a balance
between the interests of trade secret holders and whistleblowers,
to enable disclosures to be made in the public interest but to
protect trade secrets that are not relevant to the misconduct,
wrongdoing or illegal activity. This is why the Commission text
and the General Approach required that the acquisition, use or
disclosure of the trade secret should be 'necessary' for revealing
the misconduct. The European Parliament was firm in its support
for its proposed text, which would provide an exception 'for revealing
a misconduct, wrongdoing or illegal activity, provided that the
respondent acted for the purpose of protecting the general public
interest'. The Government's view is that this text establishes
a sufficient link between the revelation of the misconduct, wrongdoing
or illegal activity, on the one hand, and the acquisition, use
and disclosure of the trade secret on the other. If the disclosure
of the trade secret is immaterial to the whistleblowing, then
the disclosure of the trade secret cannot be said to be carried
out 'for revealing a misconduct, wrongdoing or illegal activity'.
Furthermore, the provision will be interpreted in the light of
Recital 12a which makes clear that the whistleblower must have
'all the reasons to believe in good faith that his conduct met
the appropriate criteria set out in this Directive'. I am therefore
satisfied that the text gives the balance that was our objective.
· Government
use of trade secrets. The agreed text
preserves the additional language that the UK secured in the General
Approach, on a key issue for the Government, enabling Parliament
to legislate for the Government to acquire, use and/or disclose
trade secrets in specific circumstances.
· Criminal
law. The European Parliament accepted
the removal of the references to criminal law offences.
· Charitable
use of infringing goods. The European
Parliament had proposed that courts should be able to order infringing
goods to be delivered to a charitable organisation under conditions
aimed at ensuring that the goods do not re-enter the market. Such
a measure would have implications for the enforcement authorities
and the Government thought that this should remain an option for
Member States to implement if they wished. The text is now consistent
with this position."
Previous Committee Reports
Thirty-sixth Report HC 219-xxxv, chapter 4, (11 March
2015), Forty-eighth Report HC 83-xliii (2013-14), chapter 3 (7
May 2014), Thirty-sixth Report HC 83-xxxiii (2013-14), chapter
3 (12 February 2014).
| 
