The EU Commission proposes new whistle-blowing rules: should IP and trade secret holders tremble?

Secretive Kats

Trade secrets and protection of whistle-blowers: how to set the balance right? The IPKat is pleased to host the following analysis by Katfriend David Serras Pereira (SPAutores) on the very recent EU proposal regarding protection of whistle-blowers.

Here’s what David writes:

“A new set of rules!! (aww… just a Directive?)

Whether you are practising at a law firm, as a solo practitioner or in-house counsel, the news released on 23 April last will have, surely, some impact on you. 

Following theEuropean Parliament resolution of 24 October 2017 (here) and pressured by the recent scandals of Cambridge Analytica, Panama Papers and many (?) others, the Commission has decided to put an end to all of this (or shall we rather call it a “new beginning”?) and propose a new set of EU-wide rules intended to protect whistle-blowers while gaining a new partner (well, most of the companies) in spy work necessary to enforce EU legislation. 

For now the Commission tells us that the set of rules will appear as a Directive and will be applicable to the following sectors:

• public procurement
• financial services, anti-money laundering and counter terrorist financing
• product safety
• transport safety
•  environmental protection
• nuclear safety
• public health
• food and feed safety, animal health and welfare
• consumer protection
• protection of privacy and personal data, and security of network and information systems (GDPR, GDPR, this will be a “show me where the GDPR sanctions money is!” legal framework)

Balance with IP rights and trade secrets? What’s the definition of 'public interest'?

The new set of proposed rules leave us to wonder a lot about the possible issues that will be caused by the inevitable clash between disclosure of information, protection of the concerned whistle-blower, and the protection IP rights and trade secrets.

How will this broader (maybe) scope adapt to Directive 2016/943 aka Trade Secret Directive? This could be so in particular with regard to Recital 20’s narrow view that “The measures, procedures and remedies provided for in this Directive should not restrict whistleblowing activity. Therefore, the protection of trade secrets should not extend to cases in which disclosure of a trade secret serves the public interest, insofar as directly relevant misconduct, wrongdoing or illegal activity is revealed.”

Kat whistle

The problem is that, even if the new rules grant protection just in cases of public interest, whether the definition of public interest given or the interpretation by courts could open up a minefield for rights owners and jeopardize IP and trade secret protection? That remains to be seen see … but I can give you the clue that the Q&A (here) seem a little broader than the notion of ’public interest’ in the Trade Secrets Directive: “The effective protection of whistleblowers against retaliation is essential to safeguard the public interest, protect freedom of expression and media freedom” or “However, in cases where internal and/or external channels do not function or could not reasonably be expected to function properly, (for instance when it is reasonable to suspect a collusion between the perpetrator of the crime and the state authorities responsible for prosecuting them or in cases of urgent or grave danger for the public interest, , or risk of irreversible damage, persons making a public disclosure (including to the media) will also be protected under the new law”. Confusing?

Both the press release and FAQs released by the Commission are not yet clear enough on how the balance of rights is to be carried on. Fingers crossed for what’s coming, but for now, we only know that whistle-blowers, as a general principle, will not be liable for disclosures meaning not being considered infringing any restriction on disclosure of information imposed by contract or by law and will not be held liable for disclosing information.

An “you’re in or you’re in” legislation

This legislation (GDPR-style) will apply to all companies with more than 50 employees or with an annual turnover of over €10 million. These will have to set up an internal procedure to handle whistle-blowers’ reports. Also states, regional administrations and municipalities with over 10,000 inhabitants will be covered by the new legislation.

Good for us practitioners, now used to handle the panicking symptoms of implementing the GDPR: we will have to know a lot about this rules since almost (or at least) 50% of EU companies will be possible clients (sounds like a GDPR bell?).

The main goals and the protection “keep whistlin’ whistlin’”!

The Commission is trying to impose two types of general obligations (and we will find the sub-ones and the sub-sub ones and…):

• Obligation for public and private sector to establish internal channels and procedures for reporting and following up of reports (a new DPO style guy here? “They also need to designate a person or a department responsible for receiving and following up on the reports and to provide clear and accessible information about those procedures and the conditions under which reports can be made externally to national or EU competent authorities.”
• Obligation for competent national authorities to establish external reporting channels and to follow up on reports

And the protection measures for whistle-blowers are intended to be: 

• Free legal advice, ie access to comprehensive and independent information and advice, free of charge, on available procedures and remedies
• Remedial measures against retaliation, such as interim relief to halt ongoing retaliation and reversal of the burden of proof
• No liability for disclosure of information prevented by contract or by law 
• Protection in judicial proceedings if legal actions are taken against them.

As soon as we have access to the proposed body of rules we will whistle you about that. In the meantime you can satisfy your remaining curiosity by reading all the FAQs here”