Legal protection is vital for businesses who risk financial and commercial losses if their trade secrets are shared with competitors.
Corporate and commercial specialist Liz Appleyard, a Partner at leading regional law firm Tollers, warns businesses to review their procedures.
UNDER English law for confidential information to be protected it must be confidential in nature and the recipient must have agreed or know that the information is confidential. A trade secret is information of a sufficiently high degree of confidentiality which, if disclosed to a competitor, would cause real or significant harm to the owner.
From a European perspective, the Trade Secrets Directive (the Directive) came into force in July 2016 and must be implemented into UK Law by 9 June 2018. This is before the UK will leave the EU. The UK’s implementing legislation will not automatically be repealed by the Great Repeal Bill.
The Directive has three requirements in order for a piece of information to be categorised as a trade secret:
1. The information must be 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
2. Have a commercial value because it is a secret
3. Have been subject to reasonable steps to preserve its secrecy.
This is not dissimilar to the English common law test.
Under the Directive it will be possible to act against persons dealing in goods made using information that has been unlawfully acquired. It will be sufficient to show that the persons dealing in those goods ought to have known about use of a trade secret. One way of proving this is will be by sending the infringers a detailed letter before action.
The remedies available to trade secret holders under the Directive include:
– Interim and final injunctions to prevent further use.
– Damages may also be awarded for loss of profits on diverted sales and will reflect the actual prejudice suffered because of the unlawful use of the trade secret.
In addition, the Directive adopts the UK’s current procedures to safeguard trade secrets during litigation such as: limiting the disclosure of sensitive information; holding hearings in private and giving redacted public judgments.
A business can protect itself from misuse of trade secrets and confidential information by:
1. Training staff so that they know how to identify information that could cause significant harm to the business if it were taken.
2. Put in place procedures that classify valuable information
3. Put in place measures to secure and protect information – both physical and technical
4. Make sure information is only shared with staff that need to know
5. Remind outgoing employees of their confidentiality obligations.
6. Ask third parties to sign a non-disclosure agreement before any information is released to them.
For more information about protecting your confidential information and trade secrets talk to Tollers on 01908 396230 and ask to speak to Liz Appleyard or Ayesha Chandegra in the commercial contracts team.
