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13 June 2018

Beware: not only 25 May but also 9 June has passed

It seems not only companies but also many Member States were so busy preparing for the GDPR that they lost sight of the Trade Secrets Directive that should have been transposed into national laws by 9 June. That's regrettable, because it is important legislation between "privacy", unfair competition and IP, establishing a modern and for the first time EU-wide regime for the protection of trade secrets.

Relevance of the Directive

Being aware that confidential know-how and business information are among the most important assets of many companies, the EU has recognised that the protection in the Member States is inconsistent and often insufficient.

The Trade Secrets Directive (EU) 2016/943 contains a definition of trade secrets (which is new in Austria) and determines the scope of protection of the owner, who may prevent any unlawful acquisition, use or disclosure of a trade secret. Under certain conditions, the production, offering or placing on the market of infringing goods, including import, export or storage, will be considered unlawful and thus may be prevented. The directive not only requires Member States to provide a wide range of claims in case of infringements, but also to ensure that trade secrets are protected during court proceedings, which is an important but difficult task.

The harmonised legal definition of protectable "trade secrets" is one of the core elements of the Directive. According to this definition, the information shall not only be secret (meaning that it is not generally known or readily accessible) and of commercial value, but must also have been subject to reasonable protection measures. Companies are thus well advised to identify their valuable know-how and business information and to implement a protection/compliance system. Obviously, it would make sense to combine the implementation of such a system with the internal reviews and measures taken in relation to the GDPR, since information security and data protection are also compliance issues and have much in common.

9 June

Why should you care that 9 June has already passed? Because other Member States have recently adopted new laws or will do so soon. In any case, the courts will have to interpret their national laws in accordance with the Directive. As far as these laws contain broad general clauses (such as the Austrian Act Against Unfair Competition), the courts will have plenty of room to do so even if the Directive has not yet been transposed. However, Member States should also beware, as they may be held liable if an important trade secret is lost or cannot be enforced because the Directive was not (sufficiently) transposed. In this regard procedural rules also seem to be highly important. 

Status or implementation

Here is an overview of the implementation status in Schoenherr's EU jurisdictions:

  • Austria:
    While a separate act on trade secrets as an addition to the acts on IP rights would have been desirable, an amendment to the Act Against Unfair Competition is to be expected. A draft will be provided soon, but parliamentary procedure will probably not start before autumn. 
  • Bulgaria (input provided by Ventsislav Tomov):
    Bulgaria has yet to implement the Directive and by now not even a draft law has been presented. There is no information on the implementation date. Bulgaria likely will not get a separate codification of trade secrets provisions but only an amendment of the Act Against Unfair Competition (although the Commission on the protection of competition decided still in 2014 that trade secrets should be regulated by a new separate codification of private law, but not by an amendment of the Act Against Unfair Competition – being part of the public law).
  • Croatia (input provided by Dina Vlahov):
    The Directive has been implemented into Croatian law through the new Act on Protection of Undisclosed Information with Commercial Value, which came into force in early April 2018.
  • Czech Republic (input provided by Denisa Assefová & Libuše Dočekalová):
    The Directive will not be implemented by topic-specific independent legislation, but merely through a single amending act, amending the existing Trademark Act and the Act on the Enforcement of IP Rights. The changes to the trade secret protection regime introduced by this amending act (in respect of the protection of trade secrets) will be only minor, as it is generally perceived that 90 % of the Directive's provisions are already embedded in the existing legislation, namely the Civil Code and Code of Civil Procedure (although we doubt that this perception is correct). It is not yet foreseeable when the bill will be approved – probably in September or October 2018, unless any amendments are submitted during the legislative process.
  • Hungary (input provided by Márk Kovács):
    Hungary is adopting a new, separate act on trade secrets and know-how protection. Currently, this is regulated as part of the personality rights in the Hungarian Civil Code. The new act will depart from this concept and will ensure protection similar to intellectual property rights, especially in case of infringement. The bill was already at the Parliament for discussion, however, due to the elections in Hungary it was not accepted. According to the latest information minor amendments in the wording of the new act are planned and then the bill will be refiled to the Parliament. 
  • Poland (input provided by Paweł Halwa):
    Poland will implement the Directive through the amendment of the Act on Combating Unfair Competition. The government project of amending the act was directed to the Parliament of Poland on 11 May 2018. A week later the draft was directed to the first reading in the Parliament session.
  • Romania (input provided by Eduard Pavel):
    The Directive has not yet been implemented in Romania. According to publicly available information, a draft law should be issued by the Competition Council. However, no further information on this draft and its status is available now.
  • Slovakia (input provided by Michal Lučivjanský):
    The Directive has already been implemented into Slovak law by way of an amendment of the Slovak Commercial Code with effect as of 1 January 2018.
  • Slovenia (input provided by Urša Kranjc and Matej Črnilec):
    Slovenia has not implemented the Directive yet; however, a respective act – namely the Trade Secrets Act – is in preparation (as evident from the website of the Government Office for Legislation, reference no. 2017-2130-0032). It seems that the Government is still working on the proposal of the act, which will then be considered by the Parliament. In practice this means that the act is unlikely to be adopted in the very near future. 

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Further reading:

ECJ latest Facebook ruling makes waves: Impact under the GDPR?
Cybersecurity: Why it matters in M&A Transactions
Hungary: GDPR Considerations in M&A Transactions



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