EU ministers back time limit extension for trade secrets infringement claims

Out-Law News | 29 May 2014 | 5:19 pm | 3 min. read

Businesses could have six years to bring claims before a court that their trade secrets have been unlawfully acquired, used or disclosed under plans backed by EU ministers.

The Council of Ministers approved extending the maximum limitation period for initiating legal action over the infringement of trade secrets that EU member states could set as one of a number of amendments it has said should be made to European Commission plans for a new Trade Secrets Directive.

The Commission had proposed that businesses should be barred from launching a legal case against alleged infringers if those claims were lodged more than two years after the offence had allegedly taken place.

"Member states shall lay down the rules applicable to limitation periods for substantive claims or bringing actions for the application of the measures, procedures and remedies provided for in this Directive," text backed by the Council of Ministers' Competitiveness Council said. "Those rules shall determine when the limitation period begins to run, the duration of the limitation period and the circumstances under which the limitation period is interrupted or suspended. The duration of the limitation period shall not exceed six years."

In November last year the Commission published a draft Trade Secrets Directive which would introduce new protections for confidential business know-how and other trade secrets.

The Commission's proposals have been broadly supported by the Council of Ministers, which is one of the two law making bodies that must agree on the wording of new EU rules before those laws can take effect. The European Parliament has yet to reach a consensus on the plans.

Under the Commission proposals, which have also been backed by the Council, information would have to be secret, have commercial value because of its secrecy and been the subject of "reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret" to qualify for protection. Information would be said to be 'secret' if "it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question".

However, the Council has given support to amendments which simplify the rules on when trade secrets would be said to be unlawfully acquired, used or disclosed.

Acquiring a trade secret without consent of the trade secret owner would be considered unlawful if "carried out by: unauthorised access to, copying or appropriation of any documents, objects, materials, substances or electronic files, lawfully under the control of the trade secret holder, containing the trade secret or from which the trade secret can be deduced", according to the proposals.

Unlawful acquisition of a trade secret would also be said to have occurred if it is achieved using "any other conduct which, under the circumstances, is considered contrary to honest commercial practices".

Using or disclosing a trade secret without the permission of its owner would be deemed unlawful if they have " acquired the trade secret unlawfully", are "in breach of a confidentiality agreement or any other duty to not disclose the trade secret" or are "in breach of a contractual or any other duty to limit the use of the trade secret".

The Council's proposals would also make it an offence to acquire, use or disclose a trade secret if the acquirer, user or discloser knew or ought to have known that "the trade secret was obtained directly or indirectly from another person who was using or disclosing the trade secret unlawfully".

In addition, "the production, offering or placing on the market of infringing goods, or import, export or storage of infringing goods for those purposes" would also be an unlawful activity under the Directive if "the person carrying out such activities knew, or should, under the circumstances, have known that the trade secret was used unlawfully".

Paris-based intellectual property law expert Emmanuel Gougé of Pinsent Masons, the law firm behind Out-Law.com, said: “Some of the provisions of the draft Directive still remain controversial. For example, the proposals would not prohibit reverse engineering."

"The rules, as currently drafted, consider the acquisition of trade secrets to be lawful if that acquisition occurred as a result of ‘observation, study, disassembly or test of a product or object that has been made available to the public or that it is lawfully in the possession of the acquirer of the information who is free from any legally valid duty to limit the acquisition of the trade secret’. A number of industry bodies are heavily lobbying against that provision," he said.

The Council said that the penalties able to be levied against infringers under the Directive should be for civil infringements, but its proposals leave it open to member states to determine whether to make trade secret infringements a criminal offence. Among the possible penalties infringers could be such to include the destruction of their infringing goods and an order to pay damages to trade secret owners.

Notis Mitarachi, president of the Competitiveness Council, said: "This decision will promote innovative companies, ensure fair and honest competition and create a secure environment conducting to innovation, the exchange of valuable know-how and cross-border commercial activities within the internal market. This will empower companies to continue investing with more confidence in research and innovation in Europe."