Trade Secrets - added protection in force

The Trade Secrets (Enforcement, etc.) Regulations 2018 (the "Regulations") came into force on 9 June 2018 and transpose Directive (EU) 2016/943 (the "Directive") into UK law.

Summary:

• The aim of the Directive is to create a level playing field by harmonising this area of law across the EU.
• The UK already has well-developed legal protection for trade secrets governed by common law breach of confidence and by contract law.
• A trade secret holder may now apply for remedies under breach of confidence in addition to or as an alternative to remedies under the Regulations.
• Changes mainly concern limitation periods, procedural issues for the courts when hearing cases in relation to trade secrets and certain remedies.

Business Impact:

Businesses should continue to take steps to ensure that trade secrets are kept confidential and with limited access. This should be reflected in company policies, procedures and contractual provisions.

A New Definition

The Regulations introduce a definition of a trade secret. Regulation 2 provides that "Trade Secret" means information which is secret, has a commercial value because it is secret, and has been subject to reasonable steps to keep it secret.

The Regulations are arguably different to current UK law, where proof of the steps taken to keep the trade secret confidential would be an evidential matter to substantiate that there is a protectable trade secret which is not in the public domain.

Wider Protection

Regulation 3 provides that the acquisition, use or disclosure of a trade secret is unlawful, if it constitutes a breach of confidence in confidential information. A trade secret holder may apply for an action for breach of confidence, in addition or as an alternative to the Regulations, where it provides wider protection than under the Regulations. It leaves the odd position of parallel regimes of common law and statutory protection.

Time Limits

Regulation 5 provides that the limitation period is 6 years and the prescriptive period is 5 years beginning on the latter of:

• The day on which the unlawful acquisition/use/disclosure ceases; and
• The day of knowledge of the trade secret holder

There are exceptions where the trade secret holder is under a disability (an infant or mentally incapacitated) during the whole or part of the limitation period.

Interim Measures

Regulation 11(3) provides that where a court makes an order for an interim measure, it may also set a reasonable period within which a trade secret holder must bring proceedings for a decision on the merits of the case before a court. Where no period is set, proceedings must be brought within a period not exceeding 20 working days or 31 calendar days after the day on which the interim order is made, whichever is longer (Reg. 11(4)).

Injunctions

Regulation 14 sets out the following remedies that can be applied for where it has been found that there has been a breach of confidence in relation to a trade secret:

• stop the disclosure or use of the trade secret;
• infringing goods be withdrawn and recalled from market;
• infringing goods be modified so they no longer infringe; or
• anything embodying the trade secret to be destroyed or delivered up.

Regulation 16 provides that the infringer may apply to the court to pay compensation in lieu of complying with Regulation 14 provided they did not know, or ought to have known, that the secret was being disclosed in breach of confidence, the order would cause disproportionate harm and it is reasonably satisfactory to pay compensation.

Damages

Regulation 17 provides that damages awarded to the trade secret holder must be appropriate to the actual prejudice suffered and that the following should be taken into account:

• The negative economic consequences suffered by the trade secrets holder and any unfair profits made by the infringer
• Non-economic factors such as moral prejudice caused to the trade secrets holder by the breach in confidence
• Any royalties or fees which would have been due had the infringer obtained a licence for the trade secrets.

Regulation 17 brings the law in relation to trade secrets in line with that of the Intellectual Property (Enforcement etc.) Regulations 2006.

Note there is no provision in the Regulations to limit the liability for damages of employees who act without intent.

Practical Tips

• Identify trade secrets as such by labelling documents as confidential
• Protect trade secrets by ensuring that they are only disclosed under conditions of confidentiality and ensuring appropriate terms in employment and other contracts
• Educate ensure appropriate in-house IP, Confidentiality and Security policies and appropriate guidance/training to the business
• Secure trade secrets by encrypting files or making them password protected
• Restrict access by limiting email distribution lists or only making available in hard copy.