Hannah Edmonds, a trainee associate in Covington’s London office, contributed to this post.
Currently, legal regimes governing protection of trade secrets and confidential information across the EU are fairly disparate. A study published by the European Commission in July (http://ec.europa.eu/internal_market/iprenforcement/docs/20130711/final-study_en.pdf) has identified a ‘widespread appetite for a harmonized approach’ across the region. Harmonisation of the rules could be of significant financial and practical benefit to life sciences companies.
Ensuring that sensitive information (such as customer supply lists, R & D data and process know how and technology) is legally protected from misuse by employees, consultants, competitors and other third parties is a key concern in the life sciences sector. ‘Trade secrets’ often form the bedrock of a company’s assets. 75% of the 537 EU firms who responded to the Commission’s preparatory survey (some of which were SMEs in the life science sector) indicated that trade secrets were of significant strategic importance to their company’s growth, competitiveness and innovative performance.
To date, companies have to go to (often costly) lengths to ensure that information is adequately protected under the individual, legal regimes of each country from which they operate. The recent Commission study identified inconsistencies in the ‘existing fragmented scenario’:
- Lack of a uniform definition of ‘trade secret’
There is no uniform definition of what is considered a ‘trade secret’ and consequently eligibility standards (as to what information is ‘protectable’ against misuse by employees and others) vary. Defining a ‘trade secret’ is no easy task for legislators. A glance at the life sciences sector reveals that each company has a unique bundle of different types of scientific, technical and commercial information, complex products combining trade secrets, patents and other IP.
In some countries, statutory definitions are set out in Civil Codes, unfair competition or IP legislation. In others, the notion has evolved through case law. Grey areas are rife. For example in the UK, the distinction between ‘trade secrets’ and ‘mere confidential information’, (only the former generally attracting protection after employment ends) is a blurred one. Businesses are left trying to jump through multiple hoops in different jurisdictions to ensure their sensitive information qualifies for protection as a ‘trade secret’.
- Lack of uniform rules for the protection of trade secrets and confidential information
Inconsistencies about what constitutes a ‘trade secret’ aside, most countries rely on general laws of their system (for example unfair competition rules) to provide legal rights and remedies in the event trade secrets are misused. Sweden is the only country to have introduced specific, ad hoc legislation on trade secrets.
Actions and remedies available vary drastically across borders. In some countries (for example Austria, Denmark, the Czech Republic and Germany), an action can be brought against anyone who obtained the information even if in good faith. In other systems, owners of trade secrets are only able to take legal action where contractual obligations have been breached. Many systems have introduced specific criminal provisions on trade secrets infringement, but others (the UK included) do not and apply general offences, such as those against theft.
The Commission’s study recognised that discrepancies make it difficult and costly for companies within the EU to ensure comprehensive protection across the different regimes. There was also a suggestion that this patchwork legal regime to some extent hinders innovation by EU companies.
The study indicates there is strong support for a legislative proposal to harmonise trade secret protection across the EU. We will watch this space and keep you posted of further developments in this area.