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01 February 2021

I show you mine you show me yours!

How to adapt trade secrets protection in patent litigation

Last year saw the implementation of the EU Trade Secrets Directive (Directive (EU) 2016/943; "TSD") into national law, including in Austria, where the new regime on the protection of trade secrets was included into the Austrian Unfair Competition Act (Gesetz gegen den unlauteren Wettbewerb; "UWG"). The new provision (Section 26a – 26j UWG) deals with defining trade secrets (as the subject of protection), the prerequisites for protection and procedural aspects to be considered when litigating over trade secrets.

Lose the secret or lose the case?

The new procedural provisions take aim at the old dilemma that litigating over trade secrets in public court proceedings bears the imminent risk that the trade secret will become known to the other party (particularly as such proceedings typically involve competitors allegedly misusing such trade secrets) or even third parties (due to the public character of Austrian court hearings). As disclosure of the trade secret in evidentiary proceedings is often very relevant for arguing the entire case, both for the claimant (arguing that the defendant misused a trade secret) and the defendant (arguing it has found other secret means for coming to the same or similar solution), parties were often forced to ask themselves: "Lose the secret or lose the case?".

What measures?

The new trade secret protection regime now allows the court to take certain measures to safeguard the secrecy of relevant confidential information, for example:

  • In the phase before the court decides on whether any specific measures for safeguarding secrecy will be taken in the proceedings, the parties are not obliged to disclose trade secrets in detail in the proceedings.
  • Exclusion of public access to hearings and of third-party access to court files.
  • Limitation of the parties' rights to access certain parts of the court file ("In camera" proceedings, in which only the judge and court-appointed experts are to review certain confidential evidence).
  • Redaction of court decisions and confidentiality obligations binding all persons involved in the proceedings (particularly parties and their representatives).

Do these measures apply to patent infringement proceedings?

Discussion arose about the extent to which the rules on protection of trade secrets in court proceedings are also applicable to proceedings in which trade secrets are merely introduced into the proceedings (e.g. for evidentiary purposes) without themselves being the main subject. This may occur in patent infringement proceedings, when it has to be clarified whether the defendant uses a patented method or a (still secret) alternative method developed by the defendant itself (which would have to be disclosed in the proceedings or would be described by way of preservation of evidence). The question of the scope of application of the provisions on trade secret protection has given rise to an academic dispute in Austria. While some assume that the protection under the Directive only applies in proceedings that involve a violation of a trade secret, others argue that the protection is applicable to all civil proceedings. Clarification by the courts will be necessary.

The TSD requires that the procedural security measures which it foresees at least apply to legal proceedings directly involving the unlawful acquisition, use or disclosure of a trade secret, and to legal proceedings relating to the unlawful acquisition or the unlawful use or disclosure of a trade secret. Strictly speaking, patent infringement proceedings (aiming at the question of whether a patent has been infringed or not) usually do not meet these requirements and thus the trade secret introduced in such proceedings, e.g. in defence against patent infringement claims, would not be subject to the specific procedural protection. This result seems to somewhat contradict the TSD's intended purpose of achieving a high level of protection for trade secrets.

What about preliminary measures to seize evidence (house searches)?

The most invasive way to introduce possible trade secrets into patent proceedings is by means of a house search (preliminary measures to seize evidence). The legal basis for such measures is Section 151b (1) of the Austrian Patent Act ("PatG"), which implements Art 7 (1) EU Enforcement Directive ("ED"). In such proceedings, the defendant is deprived of the opportunity to voluntarily decide whether its previously secret alternative procedure should be disclosed (to allow for a better defence) or whether it would even prefer to accept the risk of losing the proceedings by not disclosing its secret technology. The dilemma of "losing the case or losing the secret" does not even arise in this situation.

If one adheres to the view that the procedural protection of trade secrets is also directly applicable to other types of proceedings (i.e. to patent infringement proceedings), the court would have to take this into account when granting preliminary measures to seize evidence (and of course in further proceedings to exploit the evidence seized) and to take the protective measures provided by law. Trade secrets seized in a procedure for the preservation of evidence, such as house searches, would therefore be subject to the legal regime provided for this purpose. If, on the other hand, one believes that the specific procedural protection mechanisms for trade secrets should not apply directly to patent infringement proceedings, it is worthwhile to take a look at the EU Enforcement Directive.

Art 7 (1) ED expressly requires that the protection of confidential information must be guaranteed when securing evidence. In this sense, Art 3 (2) ED also provides that measures and procedures shall be proportionate and applied in such a way as to avoid the creation of barriers to legitimate trade and to ensure that they are not abused. Also, according to Recital 22 of the ED, preliminary measures must be taken while respecting the proportionality of the interim measure with regard to the special circumstances of the case.
Thus, the requirement to protect confidential information is to be considered in proceedings concerning preliminary measures for the seizure of evidence, although which precautions are specifically required in order to maintain proportionality remains an open question. When determining the measures to guarantee confidentiality, it therefore seems expedient to be guided by the provisions of the TSD, since the EU legislator obviously considers these to be appropriate and sufficient safeguarding measures.

As regards the general principle of proportionality in the ED, preliminary measures to secure evidence might even be disproportionate if it is not ensured in the proceedings that trade secrets secured would be sufficiently protected (again, likely in the sense and according to the standard of the new procedural provisions on the protection of trade secrets).

What does this mean for upcoming patent litigation?

Despite the lack of clear rules in Austrian law, it seems that at the latest with the implementation of the Trade Secret Directive, there is hardly any way to avoid observing the defendant's secrecy interests when approving and enforcing preliminary measures to secure evidence under patent law and, generally, in patent infringement proceedings. The courts will have to adapt and determine which measures appear appropriate and whether deviations from the well-balanced trade secret protection regime are permissible or even required.

author: Michael Woller


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