The AmeriKat had flagged, highlighted and circled the trade secrets panel session on this year's Fordham programme so much that she ripped the page. She was so excited for the discussion on one her favorite areas during a year which sees the introduction and likely introduction of important trade secrets legislation in Europe and the US. As is often the way, the AmeriKat unfortunately missed the first part of the session where John Richards of (Ladas & Parry) introduced the panel and Paul Maier (Director, EU Observatory on Infringements of IP Rights, EUIPO) spoke on the impending European Trade Secrets Directive. The European Parliament plans to approve the new Directive this April and the provisions will have to be adopted by Member States in less than 3 years. Paul also pointed out that, as well as the US's proposed Defend Trade Secrets Act (DTSA) (on which see posts here), the EU Trade Secrets Directive expressly provides that trade secrets are not "intellectual property rights". This is where the AmeriKat picks up the tale...
The Trade Secrets King
On the first, the draft DTSA included language taken directly from the Uniform Trade Secrets Act, allowing judges to issue injunctions against “threatened” misappropriation. Opponents expressed concern that this might be used by federal courts to apply the so-called “inevitable disclosure doctrine” to prevent employees from moving to a competitive job simply because they knew too much. The ultimate solution to this concern was specific and narrow: in concluding the existence of a “threat,” courts had to have evidence of untrustworthy behavior and could not rely simply on what someone knows. The DTSA whistleblower provision is similarly specific and narrow, providing immunity to individuals who reveal confidential information about wrongdoing, but only for communication in confidence to law enforcement officials. The EU Trade Secrets Directive is of course a step forward in European harmonization of definitions and remedies, but it mostly re-states the language and standards already required by TRIPs. It does add provisions covering confidentiality of information in judicial proceedings, but there is a requirement that at least one party representative always be given access, so the common U.S. practice of “attorneys eyes only” protective orders appears to be unavailable under the EU Trade Secrets Directive. In addition, the Directive does not require countries to provide criminal remedies, and it fails to address the fundamental challenge of every trade secret case: how can the trade secret owner get access to information to prove the misappropriation? This probably reflects the tension between common law and civil law systems, but the need is real. James is even more concerned about the broad and undefined “exceptions” of the Directive, allowing the use or disclosure of information for “exercising the right to freedom of expression” or “for the purpose of protecting a legitimate interest recognized by Union or national law.” As for whistleblowers, the exception broadly applies to any disclosure to anyone, so long as this is done “for the purpose of protecting the general public interest.” What James concludes from all of this is that the U.S. remains the leading jurisdiction in meeting customer needs and expectations for the protection of trade secrets. With the EU Trade Secrets Directive, we will need to wait for rulings from the CJEU to see whether the exceptions will present serious problems for trade secret owners.
|James reminds us about|
the power of criminal
|Professor Mark Schultz explains recent|
dropped criminal trade secrets prosecutions
as examples of "when you have a hammer,
everything looks like a nail"
|Victoria Cundiff notes the power|
of publicity in cases
where trade secrets are
Jim responded that the constant focus on China is understandable, but it is also dangerous because hacking comes from many different directions and is very difficult to attribute to a particular source. Some of these cases have been brought a little too hurriedly and are examples of how prosecutors have to think a bit harder about the evidence. Trade secret owners may benefit from criminal prosecutions being free and fierce, but they lose control. Even if they want to settle the case, they cannot. Further, many things can and do happen during prosecution which you may not want to have happen. But, you are stuck.
Picking up on the issue of criminal liability, Mark Ridgway (A&O) noted that the margin between a defendant being subject to a criminal prosecution (potentially spending years in jail) and the defendant walking away without even a civil case being brought, can be very fine. These cases can turn on whether the would-be claimant finds any smoking gun evidence - with such evidence criminal prosecutions can occur (e.g. for computer misuse offences in the UK), but without it even a civil claim can be difficult to bring. Disclosure can therefore be an important tool in exposing the extent of any wrongdoing and it is a shame that the EU Trade Secretes Directive did not include disclosure provisions, particularly given that it contains numerous safeguards that serve to protect defendants' interests. If you really want to strengthen trade secret protection, Mark said, you need to provide for the possibility of disclosure in appropriate circumstances. Otherwise, absent the defendant doing something plainly wrong, claimants are potentially left without recourse.
Jim agreed, noting that if you do not provide some mechanism to find out basic facts of a transaction you won't have the ability to identify facts. In such a case, you will never get before a judge. Jim hopes that is an issue the EU will confront at some point and make the means of obtaining disclosure a fundamental predicate available to trade secret owners. Although Jim noted the lack of disclosure was a structural issue between common and civil law countries, it is what industry needs.
Paul Maier commented that trade secret cases are incredibly difficult. Much will depend on how the judges address the issues. If we want something that looks like a common EU approach to trade secrets, he stated, the only possible way of doing that is to make sure that the judges who deal with these cases get together and discuss the issues. However, unlike in other areas of IP such as patents and trade marks where those judges meet to discuss issues, it is incredibly difficult to identify the relevant judges who will hear trade secrets cases.
Victoria concluded the session by reminding the audience that trade secrets misappropriation sometimes occurs through hacking. However, not all hacking results in trade secrets misappropriation. Hacking may actually have the aim of obtaining other types of information such as personal data. Trade secret protection is only one aspect of information theft.