Transposing the Trade Secrets Directive into English Law: The Trade Secrets (Enforcement etc) Regulations

Jane Lambert

Art 19 (1) of Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure ("the trade secrets directive") requires each and every member state of the EU (including the UK for the time being) to bring into force the laws, regulations and administrative provisions necessary to comply with that directive by 9 June 2018. Accordingly, Mr Sam Gyimah MP, Minister of State at the Department for Business, Energy and Industrial Strategy, has signed The Trade Secrets (Enforcement, etc.) Regulations SI 2018 No 597 ("the regulations") which will come into force on that day.

Overview of the Regulations
The regulations so not purport to transpose the whole directive into English law. The statutory instrument consists of 19 regulations most of which relate to time limits, court procedures and remedies.  In the Consultation on draft regulations concerning trade secrets, the government expressed the view that the UK already has a robust and well established legal framework that allows for the effective enforcement of trade secrets and that directive does not require substantial changes to be made to the existing law. Only a few changes needed to be made to ensure that this country complies with its obligations in a transparent manner.  As was the case with the enforcement directive (Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights (OJ L 157, 30.4.2004)) it will be necessary to have regard to the trade secrets directive not only when applying the regulations but also when considering and applying the existing law.

 The General Obligation
Art 6 (1) of the directive requires member states to "provide for the measures, procedures and remedies necessary to ensure the availability of civil redress against the unlawful acquisition, use and disclosure of trade secrets."

Both the directive and the regulations define a "trade secret" as "information which meets all of the following requirements:
(a)  it is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
(b) it has commercial value because it is secret; 
(c) it has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret."
Reg 3 (1) of the regulations states that "the acquisition, use or disclosure of a trade secret is unlawful where the acquisition, use or disclosure constitutes a breach of confidence in confidential information" which is substantially briefer that the provisions on unlawful acquisition, use and disclosure in art 4 of the directive. A breach of confidence would certainly fall within art 4 but reg 3 (1) does not say that it is the only circumstance that would do so and it is not hard to think of others that also might. An obvious one that springs to mind is breach of contract and there may be others such as unauthorized access to and processing of personal data. It is perhaps significant that the possibility that conduct other than a breach of confidence may give rise to an action for unauthorized acquisition, use or disclosure of a trade secret is tacitly acknowledged by reg 3 (2) and (3) in that they enable trade secret holders to seek measures, procedures, and remedies that are available for a breach of confidence in addition to, or instead of, those available under the regulations where the former provide wider protection.

Unlawful Acquisition
Art 4 (2) provides:

"The acquisition of a trade secret without the consent of the trade secret holder shall be considered unlawful, whenever carried out by:
(a) 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;
(b) any other conduct which, under the circumstances, is considered contrary to honest commercial practices."

Art 4 (4) adds that the acquisition of a trade secret shall also be considered unlawful whenever a person, at the time of the acquisition 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.

On the other hand, art 3 (1) lists 4 means whereby the acquisition of a trade secret shall be considered lawful
(a) independent discovery or creation;
(b) observation, study, disassembly or testing of a product or object that has been made available to the public or that is lawfully in the possession of the acquirer of the information who is free from any legally valid duty to limit the acquisition of the trade secret;
(c) exercise of the right of workers or workers' representatives to information and consultation in accordance with Union law and national laws and practices; and
(d) any other practice which, under the circumstances, is in conformity with honest commercial practices.

Unlawful Disclosure or Use

Art 4 (3) provides:

"The use or disclosure of a trade secret shall be 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:
(a) having acquired the trade secret unlawfully
(b) being in breach of a confidentiality agreement or any other duty not to disclose the trade secret;
(c) being in breach of a contractual or any other duty to limit the use of the trade secret."

The use or disclosure of a trade secret is also to be considered unlawful under art 4 (4) whenever a person, at the time of such 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. Unlawful use also includes the production, offering or placing on the market of goods the design, characteristics, functioning, production process or marketing of which significantly benefits from trade secrets unlawfully acquired, used or disclosed under art 4 (5). Similarly, the importation, export or storage of such goods for those purposes, shall also be considered an unlawful use of a trade secret where the person carrying out such activities knew, or ought, under the circumstances, to have known that the trade secret was being or had been used unlawfully.

Limitation
Art 8 (1) of the trade secrets directive requires member states to lay down rules on the limitation periods applicable to actions for unauthorized acquisition, use or disclosure of trade secrets. Such rules must determine when the limitation period begins to run, the duration of the limitation period and the circumstances under which the limitation period is interrupted or suspended. Art 8 (2) adds that such limitation period may not exceed 6 years.

The limitation period for actions in tort is 6 years by virtue of s.2 of the Limitation Act 1980 but that period may not apply to actions for breach of confidence as the obligation of confidence is an equitable doctrine. S.36 (1) (a) of that Act provides that the time limit for actions in tort under s.2 shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief with a number of exceptions.

Reg 4 (3) of the regulations makes clear that s.36 of the Limitation Act 1980 does not apply to claims for unlawful acquisition, use or disclosure of trade secrets. The limitation period is 6 years from the day on which the unlawful acquisition, use or disclosure that is the subject of the claim ceases or the day on which the trade secret holder first knows or could reasonably be expected to know of the infringer's activity, that the activity constitutes an unlawful acquisition, use or disclosure of a trade secret, and the infringer's identity (see regs 4 (1) (a) and (2), 5 (1) and (3) and 6 (1) and (2))). If the trade secret holder is under a disability the limitation period begins on the day on which he or she ceases to be under such a disability or his or her death (see reg 7 (1)).

S.35 (3) of the Limitation Act 1980 allows a claim involving a new cause of action or the addition or substitution of a new party to proceed after the expiry of the limitation period. That section applies to claims for unauthorized acquisition, use or disclosure of trade secrets by virtue of reg 9 (a) of the regulations.

Preservation of Confidentiality in the Course of Proceedings
Art 9 of the trade secrets directive requires trade secrets to remain confidential during and after legal proceedings and sets out the measures that a court may take to preserve such confidentiality for as long as may be necessary. Although the English courts already have such powers it is by no means clear that the Scottish courts do. For that reason, the regulations transpose the directive almost verbatim. Reg 10 (1) forbids any and everybody who takes part in trade secret proceedings (that is to say, parties, lawyers, other representatives, court officials, witnesses, experts and others) from using or disclosing a trade secret or information that is alleged to be a trade secret. Such prohibition subsists until the court finds that the information was not in fact a trade secret or where it enters the public domain (reg 10 (3)). The court may also restrict access to a document or hearing or redact its judgment under reg 10 (5). It may take those steps on the application of a party or upon its own initiative (reg 10 (4)),

Remedies
Arts 10 to 15 of the trade secrets directive prescribed the remedies that the courts may grant to prevent or compensate unauthorized acquisition, use or disclosure of trade secrets. They include interim and pre-action remedies such as injunctions and orders for delivery up, the conditions upon which they can be made and safeguards against abuse as well as final injunctions, damages and orders for the publication of judicial decisions. Although the English courts have such powers and apply such remedies regularly it is by no means certain that the Scottish courts do. For the avoidance of doubt regs. 11 to 18 transpose arts 10 to 15 into English and Welsh, Scottish and Northern Irish law.

Proceedings to which the Regulations apply
Reg 19 (a) makes clear that the regulations apply only to proceedings that are brought before a court after 9 June 2018.

Conclusion
This is the fourth of my articles on the trade secrets directive.   The others are:

7 Aug 2016	Trade Secrets Directive	NIPC Law
5 Feb 2018	Transposing the Trade Secrets Directive into English Law: Confidentiality Agreements	NIPC Law
20 Feb 2018	The Trade Secrets (Enforcement, etc.) Regulations 2018 Consultation	NIPC News

Anyone wishing to discuss this article, the trade secrets directive or the law of confidence generally should call me during office hours or send me a message through my contact form.