Protection of Trade Secrets Regulations now in force in Ireland
The European Union (Protection of Trade Secrets) Regulations 2018 (the Regulations) were implemented in Ireland on 9 June 2018. The Regulations implement EU Directive 2016 / 943 (the Directive) and provide for civil redress measures and remedies in the event that a trade secret is unlawfully acquired, used or disclosed. The Regulations also ensure the confidentiality of the trade secret during court proceedings by limiting access to the hearing and court documents containing the trade secret.
Trade secrets aim to protect undisclosed know how and business information of commercial value. Trade secrets can offer significant competitive advantage to the right holder and, unlike other forms of intellectual property rights, the monopoly rights over a trade secret can be maintained perpetually.
Article 2(1) of the Directive defines a trade secret as:
- Any information not readily known or accessible;
- Any information that has commercial value due to it being confidential; and
- Any information whereby reasonable steps are taken to preserve its secrecy.
The Coca Cola formulation is an example of a famous trade secret. Other common examples of trade secrets include manufacturing processes, supplier lists and market research. The disclosure of a trade secret often causes serious financial loss and detriment to a company and this was one of the main driving factors behind creating additional safeguards within the EU, as well as the encouragement of innovation, research and development.
Article 3 outlines the circumstances in which the acquisition of a protected trade secret shall be lawful. Acquisition is lawful if it occurs by way of: an independent or creative discovery, observation, study or disassembly of a publicly available product or one that is lawfully in the possession of the acquirer who is free from any legal duty to limit the acquisition of the trade secret; exercising the right of workers or workers’ representatives to information and consultation in accordance with EU and national law; or any other practice which is in line with honest commercial practices.
Article 4 clarifies the circumstances in which an acquisition of a trade secret shall be considered unlawful, i.e. if it is discovered via unauthorised access to documents, materials, electronic files, substances or objects under the control of the trade secret right holder. Any conduct which is considered to be contrary to honest commercial practice will also be considered an unlawful acquisition.
Any use of disclosure of a trade secret (i) without the consent of the trade secret holder or (ii) in breach of a confidentiality agreement or (iii) in the event of use of the trade secret beyond the scope of a contract will be considered unlawful use or disclosure.
In the event of an unlawful disclosure, the owner of a trade secret now has 6 years to take legal action. Similar to other intellectual property rights, powers have been conferred on the domestic courts to make orders. Such orders may include the destruction of infringing goods, injunctive measures and / or damages. In the event of failure of compliance with the punitive measures ordered by a court, the infringer may be subject to criminal sanctions, which include:
- A fine up to €5,000 or 6 months imprisonment upon summary conviction; or
- A fine up to €50,000 or imprisonment of up to 3 years if convicted upon indictment.
The Regulations include a somewhat controversial provision as they go further than the scope of the Directive and introduce an amendment to the Protected Disclosures Act 2014 (the 2014 Act). As originally drafted, the motivation for making a disclosure was irrelevant. Now, whistle-blowers who reveal a trade secret in the course of making a disclosure have a duty to prove that doing so was in the public interest. Interest groups for whistle-blowers have expressed concern that this will deter potential whistle-blowers as they could be subject to sanctions under the new Regulations.
Whilst the new trade secrets protections have been heralded as a significant addition to existing intellectual property rights, it should be noted that businesses must still take reasonable steps to protect their trade secrets. Therefore confidentiality and non-disclosure agreements will remain important precautions for trade secret right holders to implement.