New know-how protection standards in Europe

 

Protecting trade secrets plays a key role for companies of all sizes and throughout all industries. Corporate know-how can provide a crucial edge over competitors, give a time advantage and thus secure market shares. Know-how protection comes into play every time a company deliberately decides to keep information secret rather than have its IP rights, such as patents and designs, registered. On the other hand, keeping know-how confidential within the firm may also close gaps which intellectual property rights are unable to fill. This holds true especially for commercial knowledge, such as calculation bases, distribution channels and customer lists, which can only be shielded from unauthorised access by third parties by way of effective know-how protection.

By initiating its “Innovation Union 2020” programme, the European Union has started to tackle the issue of know-how protection, with the objective of harmonising the existing patchwork of diverging know-how protection regulations through a Europe-wide directive (“Know-how Directive”).

1. The new protection of secrets under the draft directive

The core element of the draft is the definition of the term “trade secret” in Article 2. Unlike current German legislation, the Directive provides that information will be protected as a trade secret only if the holder of the secret has taken reasonable non-disclosure action to protect its trade secret. In a future infringement litigation, the secret holder will therefore have to explain and, if necessary, prove the specific technical and legal protective action taken by it in order to successfully enforce its claims against infringers.

2. Effects on contract compliance

These amendments force companies already today to review and, if necessary, amend their contracts in order to be in the position in case of a later infringement to demonstrate before court that they have taken reasonable steps to protect their trade secrets. This applies to employment contracts, but also to any other individual types of contracts as well as to general business terms and conditions, regardless of the industry: next to the protection of undesired loss of know-how by leaving staff members, it is precisely also in company co-operations and in R&D contracts that the relevant clauses should be drafted very carefully. Just as the notorious “catch-all” clauses which impose upon employees the obligation to keep confidential everything concerning their professional activity are illegal and should therefore be avoided, it is advisable on a long term, even in individual contracts, to always have in mind the specific situation. This is the only way to precisely define which know-how is concerned, how long such know-how has to be kept in confidence and the return and destruction obligations the contract parties have to meet. Other important aspects to be considered in such contracts are the treatment of further developed know-how or of feedback.

3. Conclusion and outlook

With the EU legislation procedure being on-going and the implementation period for Member States still being unclear, companies should start already now to reconsider their contractual practice with a view to the specific amendments envisaged by the EU. Enforcing claims against infringers before court will be successful in future only if the trade secret has always been properly protected by the claimant.

Further information on the Know-how Directive and its effects on your firm’s contract compliance may also be found in the recently published contribution “Einheitlicher Geheimnisschutz in Europa” (Uniform Protection of Trade Secrets in Europe) by Sandra Sophia Redeker and Sascha Pres, together with Corin Gittinger, which appeared in the journal “WRP - Wettbewerb in Recht und Praxis”. We will also be happy to advise you on any current issues regarding protection and enforcement of your business and trade secrets.