knowledge | 6 February 2019 |
Trade Secrets Regulations
The legal regime for the protection of commercial/trade secrets in Ireland has been bolstered by the entry into operation of the European Union (Protection of Trade Secrets) Regulations 2018 (the “Regulations”). These Regulations give effect to EU Trade Secrets Directive (EU 2016/943) (the “Directive”) and provide for civil redress measures in respect of the unlawful acquisition, use and disclosure of trade secrets.
Prior to the operation of the Regulations, trade secrets were protected under Irish law through either express or implied contractual obligations or the law on breach of confidence and misuse of confidential information (the “Pre-existing Protections”). Although the Pre-existing Protections will continue to apply and are in fact similar to the protection offered by the new regime, the addition of further statutory protections is a welcome development for businesses who wish to guard against unauthorised use or disclosure of their trade secrets.
The definition of a ‘trade secret’ is set out in Article 2(1) of the Directive and requires that the relevant information:
(a) is a secret, i.e. not generally known or readily accessible to persons within the circles that normally deal with the kind of information in question;
(b) has commercial value because it is a secret; and
(c) has been subject to reasonable steps, taken by the person lawfully in control of the information, to keep it secret.
Contrast with the Pre-existing Protections
The Directive’s definition of ‘trade secret’ is distinct from the equivalent term of art ‘trade secret’, which was originally developed against the background of the employment relationship and continues to apply in the context of the Pre-existing Protections. The term of art ‘trade secrets’ is generally understood in Ireland to include any confidential information which was gained by an individual in their role as an employee, and which cannot be considered to be part of the employee’s general acquired skill and knowledge. Such ‘trade secrets’ cannot be used by the employee once the employment relationship has been terminated.
The Directive’s definition of ‘trade secrets’ also differs somewhat from the law on breach of confidence which requires that each of the following elements be satisfied to successfully establish a claim in relation to confidential information:
(a) that the information in question has the necessary quality of confidence, i.e. is not in the public domain;
(b) that such information has been imparted in circumstances imposing an obligation of confidence; and
(c) that there has been misuse of such confidential information.
Lawful acquisition of a trade secret
Regulation 3 of the Regulations sets out the circumstances in which the acquisition of a trade secret is considered lawful, including:
- where the information is obtained by independent discovery or creation etc.;
- where the information is lawfully in the possession of the acquirer free from any duty to limit the acquisition of the trade secret;
- where the trade secret is obtained in accordance with any practice which is in conformity with honest commercial practices; or
- where the acquisition, use or disclosure is required or permitted under EU or Member State law. These exceptions are consistent with the Pre-existing Protections.
Unlawful acquisition, use and disclosure of a trade secret
Regulation 5 of the Regulations sets out the circumstances in which the acquisition of a trade secret, without the consent of the trade secret holder, is considered unlawful, including;
- by unauthorised access to, appropriation of, or copying of documents or materials etc. containing the trade secret (or from which the trade secret can be deduced) which are lawfully under the control of the trade secret holder;
- by any other conduct considered contrary to honest commercial practices; or
- by a person who is in breach of a confidentiality agreement, a duty of confidentiality or a duty to limit the use of the trade secret.
Measures, procedures and remedies available under the Regulations
Under Regulation 14 of the Regulations, where a court finds that there has been unlawful acquisition, use or disclosure of a trade secret, it may apply a number of corrective measures, including injunctive relief prohibiting the use or disclosure of the trade secret or the destruction of anything containing or embodying the trade secret.
These remedies are broadly similar to those that are available in respect of the Pre-existing Protections, including injunctive relief, damages, and orders for account of profits, delivery up or destruction.
A person who fails to comply with any measure ordered by the court commits an offence and can be liable on summary conviction to a Class A fine or imprisonment up to six months, or on conviction on indictment, a fine up to €50,0000 or imprisonment up to three years.
Other key provisions
- The Regulations provide an owner of a trade secret with six years to take legal action in the event of an unlawful disclosure. This is the same limitation period as applies to claims for breach of contract or breach of confidence and is much longer than the two year limitation period for claims included in an early draft of the Directive.
- The Regulations amend section 5 of the Protected Disclosure Act 2014 to provide that where a whistle-blower discloses a trade secret in the course of making a disclosure under that Act, the disclosure will be a ‘protected disclosure’, provided that the whistle-blower has acted for the purposes of protecting the general public interest.
Next steps for businesses
Organisations who want to avail of the protections provided by the Regulations need to take reasonable steps to ensure that their trade secrets are kept secret. However, the existence of new remedies under the Regulations does not mean that businesses can afford to be any less vigilant than previously and having proper policies, procedures and practices in place to ensure the protection of trade secrets, e.g. through limiting access and confidentiality/non-disclosure agreements, remain as crucial as ever.
In addition, businesses which are heavily reliant on trade secrets should consider carrying out an audit to determine what trade secrets they hold and what action should be taken to ensure their continued protection.
This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.