European Union Adopts New Directive on Trade Secrets

On May 27, 2016, the Council of the European Union (EU) adopted a Directive which sets out rules for the protection of trade secrets and confidential information owned by EU companies. Member states have two years to incorporate the Directive into domestic law. The US enacted similar legislation earlier this year in order to extend federal jurisdiction over the theft of trade secrets, known as the Defend Trade Secrets Act of 2016.

The Directive defines “trade secret” as information which meets the following requirements:

1. it is secret in the sense that 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;
2. it has commercial value because it is secret; and
3. it has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

The Directive requires member states to adopt this uniform definition, and to provide for the availability of civil damages for the unlawful disclosure of trade secrets. However, there are exceptions to the unlawful disclosure provisions which allow whistle-blowers to disclose trade secrets when acting in the public interest. The exceptions also allow workers to disclose information to their union representatives as part of a legitimate exercise of the representatives’ functions.

Some commentators have criticized these exceptions, arguing that they do not sufficiently protect whistle-blowers and unions from civil action. These commentators argue that the exceptions are insufficient because employers and employees sometimes disagree about what constitutes a trade secret (commentary), and because the whistle-blowers bear the burden of proving that a disclosure is in the public interest (commentary).