EU Trade Secrets Directive and Panama Papers

The leak of the Panama Papers highlighted an unprecedented disclosure of 11.5m files from the database of one of the world’s largest offshore law firm, Mossack Fonseca. The records were obtained by an anonymous source who shared them with the International Consortium of Investigative Journalists.

On 28 April 2016 the US House of Representative passed the Defend Trade Secrets Act 2015, to provide jurisdiction for the theft of trade secrets, and other purposes in the US.

The EU is currently implementing the new EU Trade Secrets Directive, which could prevent leaks akin to the Panama Papers. However, we are now preparing for the second wave of Panama paper leaks on 9 May 2016, however, this time they will be in a more user friendly searchable database format.

Trade Secrets are valuable as there are no formalities, procedural hurdles or initial costs involved to establish a Trade Secret and the right continues indefinitely as long as the secret is preserved.

At present, the European Parliament has voted to approve a new EU Trade Secrets Directive, which has just had its first reading at the European Parliament. The new EU Trade Secrets Directive concerns the unlawful acquisition, use and disclosure of trade secrets, to impose a minimum harmonised protection of trade secrets.

Under Article 2 (1) the EU Directive will define a “trade secret” as information that is secret, has commercial value as it is a secret, and it has been subject to reasonable steps to keep it secret.

The EU Trade Secrets Directive expressly states that trade secrets are not “intellectual property rights”. However, they are not normally acknowledged as such due to the fact that the subject of the right is not in the public domain.

At present, there is no definition of a “Trade Secret” in the UK. We rely on case law precedent, whereby information is eligible for protection if it has the “necessary quality of confidence about it”. This can be obvious (Coca-Cola are famous for their trade secret, in that allegedly the knowledge of the secret recipe is only known by two Coca Executives), or less so, even if the information is encrypted, if it is available to the public then it is not confidential. Therefore merely stating “confidential” is not sufficient if is not treated as such. There is more than enough scope for argument to interpret this. The new EU definition of a Trade Secret could be deemed wider than the current definition under English case law.

However, this widening of the scope with regards to the definition of Trade Secrets may create a bar to future Panama Paper leaks.

The aim for the new Directive is to create an environment whereby all EU companies, inventors, researchers and creators are on an equal par within the EU. This in turn will hopefully reduce the scope of unfair competition in the EU.

If the Directive is approved by the Council on 26 May 2016, it will come into force 20 days later, and subject to Brexit, the UK will then have two years in which to implement the EU Trade Secrets Directive.

Briffa comment
If you have any concerns regarding protecting your Trade Secrets or confidential information, please ensure that you include any and all Intellectual property concerns in your Non-Disclosure agreements and employment contracts.

Briffa advises on Trade secrets and confidential information and all other aspects of intellectual property law.