Trade secrets are the hidden gems of the business world. They encompass a wide range of confidential information, from secret formulas and processes to customer lists and marketing strategies. These pieces of information provide companies with a unique edge over their competitors. By keeping these details under wraps, businesses can maintain a significant advantage in their respective markets.
What is a trade secret
Legally, trade secrets are a form of intellectual property (IP) that consist of information, such as formulas, practices, processes, designs, instruments, patterns, or compilations of information, which is not generally known or reasonably ascertainable (1). By maintaining secrecy, businesses can obtain a significant competitive advantage (2). This advantage is contingent on the information remaining secret, with reasonable efforts (3) made to ensure its confidentiality. Consequently, these three requirements are needed for the information to be considered ‘trade secret’ according to the European Union Trade Secrets Directive (Directive (EU) 2016/943).
Protection of trade secrets in different regions
In the United States, trade secrets are safeguarded under both state and federal laws. The Defend Trade Secrets Act (DTSA) of 2016 enables trade secret owners to sue for misappropriation in federal court, a crucial legislation that underscores the necessity of secrecy and economic value in trade secrets*.
The United Kingdom aligns its protection of trade secrets with the EU’s Trade Secrets Directive through the Trade Secrets (Enforcement, etc.) Regulations 2018. These regulations provide a statutory basis for action, offering remedies like injunctions and damages, building upon the common law framework of breach of confidence.
The European Union Trade Secrets Directive (Directive (EU) 2016/943) harmonises the protection across member states, establishing a uniform definition and legal framework for trade secrets. This ensures that trade secret holders have access to consistent legal remedies across the EU to combat misappropriation.
Insights into trade secrets litigation
Recent analysis of trade secrets litigation reveals substantial activity across the EU, with 695 proceedings identified between January 1, 2017, and October 31, 2022**.
This litigation primarily takes place in specialised IP courts (26%), appeal courts (25%), and general civil courts (24%), highlighting the diverse legal arenas involved. Civil proceedings predominate, comprising 89% of cases, and an appeal rate of 46% indicates a robust engagement with the legal process post-trial. However, the success rate for infringement claims stands at about 27%, underscoring the complexities and challenges involved in trade secrets litigation.
Litigation is prevalent across various sectors but is notably dominant in manufacturing. The most commonly enforced trade secrets involve downstream commercial information such as distribution methods and customer lists. The frequent nature of confidentiality or NDA breach claims points to the critical role of contractual agreements in trade secret protection.
Role of the European Union Intellectual Property office (EUIPO) in protecting trade secrets
While the EUIPO does not directly handle trade secrets, it plays a crucial role in promoting IP rights awareness and education across the EU. The office facilitates discussions and provides guidelines on best practices for protecting intellectual property including trade secrets, essential for maintaining the integrity of these non-registered rights. As trade secrets do not require registration, the emphasis lies on strategic information management to prevent unauthorised disclosure, limit access, training and awareness raising of employees and legal protection against misappropriation as confidentiality agreements, supported by national enforcement of the unified EU directive may be some of the physical, administrative and legal measures which can be taken into account in an enumerative manner.
** Trade Secrets Litigation Trends in the EU, © European Union Intellectual Property Office, 2023