Trade secrets have received some media attention recently thanks to the case of former Google employee Alexander Lewandowski, who is potentially facing 330 years in prison for stealing trade secrets on self-driving car technology. Trade secrets are not all that commonplace in Europe though - what are they exactly?
The EU did not have a harmonized legal framework for trade secrets until 2016, with some countries even lacking the concept altogether (having them protected by unfair competition laws instead). This situation changed with the passing of the Trade Secrets Directive (2016/943 of the European Parliament of 8 June 2016).
Directives are EU legal mandates to created equivalent internal regulations in each member state within a two-year deadline – so this 2016 directive has resulted in the coming into force of trade secret laws in all of Europe in recent months.
What’s a trade secret?
A trade secret can be any valuable information that is not widely known and that has been object to measures to be kept secret. There is no closed list of the "types of secrets" available: it can refer to client lists, formulae,, business models, cost information, software code, recipes, etc. Universally known examples of a trade secrets are the Coca-Cola formula, the Google algorithm, or the influential New York Bestseller list (before its publication).
How’re trade secrets different from patents?
The most obvious difference is that patents are publicly available while trade secrets are, well, secret. There are also a couple more differences, which may make trade secrets more useful than patents in certain instances. Firstly, patent protection is limited to 20 years, while trade secrets may last forever (see the Coca-Cola example above, whose formula would be in the public domain now, had it been a patent). Also, patents are limited in their scope (i.e., technical inventions), while trade secrets can be potentially anything that’s useful to the company. This leaves a lot of room for things that we may not even be considering in the business world today.
How are trade secrets protected?
In order to turn information into protectable trade secret material, we need to devise measures to protect it. These can of any type. Some are legal (inclusion of non-disclosure clauses in employment contracts) and other are technical (encryption of confidential documents, or use of badges to access parts of the working facility). Even something as simple as printing a “confidential” watermark on a document can be a protective measure.
The key is not only to keep the information secret, but also to be able to show there has been an effort to keep it secret – and thus be eligible for legal protection.
The European Directive differs from the US framework in that trade secret theft is not considered a crime punishable with prison. Instead, it constitutes a civil infringement to be compensated with monetary damages. So the case mentioned in the opening would just not be possible in the EU (or at least not to such dramatic extent).
We are yet to see how the new regulations play out in Europe, and how effective they are in protecting companies' intangible assets. It may well be the case that it will mark the end of the days when employees would spend their last hours in job downloading files into a USB drive.