The Trade Secrets (Enforcement, etc.) Regulations 2018

Jamie Fraser | June 2018

The UK Trade Secrets (Enforcement, etc.) Regulation 2018 (“Regulation”) entered into force in the UK on 9 June 2018.  The Regulation implements the EU Trade Secrets Directive (EU) 2016/943 (“EU Directive”), which was intended to set minimum standards for measures, procedures and remedies for trade secret holders to rely on in the event of unlawful acquisition, use or disclosure of their trade secrets in the EU. 

In most cases, the minimum standard set out in the Regulation was met or exceeded by the position already established by UK common law, which the UK government sought to maintain.  Therefore, the Regulation codifies some, but not all, of the existing UK common law position with regard to trade secrets, and in most circumstances allows the UK Courts to provide wider protection to the trade secret holder than the Regulation itself sets out.  As such, it would seem unlikely that the Regulation will significantly alter the manner in which trade secrets are currently handled by the UK Courts in principle.

Trade Secrets in the UK prior to the Regulation

Prior to the Regulation coming into force, trade secrets in the UK were protected either by contract law or under the common law in an action for breach of confidence. 

Under contract law, disclosure of a trade secret in violation of a contractual obligation (e.g. non-disclosure or confidentiality clause) could be actioned in the courts under a breach of contract.  As an alternate claim, or where there was no contract, a trade secret holder could bring a claim in breach of confidence against a party that misused or disclosed the trade secret (where that secret falls within the definition of confidential information).  The criteria for successfully bringing a claim in breach of confidence were set out in Coco v A N Clark (Engineers) Limited (1968) and remain the guiding factors for such claims:

  • the information must itself have the “necessary quality of confidence” about it (i.e. it must be important and of value to someone, of limited public availability and distinguishable from any generally available information);
  • the information must have been imparted in circumstances importing an obligation of confidence; and
  • there must be unauthorised use of that information to the detriment of the trade secret holder.

The remedies available for breach of confidence include damages, delivery up and destruction of infringing materials, account of profits, and injunctive relief (where the information has not yet been divulged but it is likely that an unauthorised disclosure will occur).

EU Trade Secrets Directive (EU) 2016/943

The EU Commission recognised that, despite the provisions in the TRIPS Agreement that deal with trade secrets (specifically Article 39 of the TRIPS Agreement), there were still significant differences in the Member States’ legislation as regards the protection of trade secrets against their unlawful acquisition, use or disclosure by other persons.  The Commission therefore sought to harmonise the legal situation with regard to trade secrets across the bloc, hence the EU Directive.

Article (2)(1) of the EU Directive defines a trade secret as meaning information that meets the following requirements:

  • it is secret in the sense that it is not… generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
  • it has commercial value because it is secret; and
  • it has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

This definition is generally in line with the “necessary quality of confidence” requirement as set out in Coco v A N Clark

Article 4 of the EU Directive sets out what constitutes unlawful acquisition, use and disclosure of trade secrets.  In particular, Article 4(2) states that the acquisition of a trade secret, without the consent of the trade secret holder, is considered unlawful whenever carried out by:

  • unauthorised access to, appropriation of, or copying of any documents, objects, materials, substances or electronic files, lawfully under the control of the trade secret holder, containing the trade secret or from which the trade secret can be deduced;
  • any other conduct which, under the circumstances, is considered contrary to honest commercial practices

Similarly, Article 4(3) states that the use or disclosure of a trade secret is considered unlawful whenever carried out, without the consent of the trade secret holder, by a person who is found to meet any of the following conditions:

  • having acquired the trade secret unlawfully;
  • being in breach of a confidentiality agreement or any other duty not to disclose the trade secret;
  • being in breach of a contractual or any other duty to limit the use of the trade secret.

Article 4(4) expands upon this, noting that the acquisition, use or disclosure of a trade secret will also be considered unlawful whenever a person, at the time of the acquisition, use or disclosure, knew or ought, under the circumstances, to have known that the trade secret had been obtained directly or indirectly from another person who was using or disclosing the trade secret unlawfully.  This provision would seem to have been included in order to prevent third parties from circumventing the law simply by using an intermediary to obtain the confidential information/trade secret.  Again, these provisions are largely in line with the pre-Regulation common law position in the UK.

The EU Directive sets out a number of additional requirements that Member States must adhere to, such as:

  • applying a limitation period for bringing a claim for misuse etc. of trade secrets (Article 8);
  • preserving confidentiality of trade secrets in the course of legal proceedings (Article 9);
  • providing for provisional measures, such as interim injunctions and seizure of infringing materials prior to entry onto the market (Articles 10 and 11);
  • providing remedies for infringement of trade secrets, including delivery up and destruction of infringing materials, injunctive relief and damages (Articles 12-14).

The pre-Regulation common law position in the UK made at least some provision for all of the above, and there would appear to be no major change to UK law in this regard, though in many cases the codification will make a procedural difference to litigants, and provide greater clarity.  The remaining provisions in the EU Directive (Articles 15-21) relate to administrative procedures which do not require any discussion in this article.

Conclusion

As noted above, the common law position in the UK was such that it already provided more than the required minimum standards for trade secret protection as set out in the EU Directive.  Accordingly, the Regulation would appear to do little more than codify aspects of the UK common law position with regard to trade secrets.

It seems unlikely that the Regulation will significantly alter the manner in which Trade Secrets are currently handled by the UK Courts.