46 | Coatings World www.coatingsworld.com March 2015
Protecting the P&C Industry’s Intellectual Assets
by Steve McDaniel and Jon Hurt,
Technology Litigators
Just in time for the European Coatings Show, we finally get around to focus- ing on protecting your “crown jewels” trade secrets in the EU.
So here goes... In the continuing efforts to har- monize trade secret laws and regulations across national boundaries, the
European Parliament is at this minute
considering a trade secret directive
(the “Directive”) that will affect all
28 European Union states (assuming
Greece and some others don’t leave the
EU, but that’s a different story). This is
a big change, as about one third of the
EU countries don’t have laws specifically governing trade secret misappropriation, and even more lack a specific
definition of what constitutes a trade
secret. If passed, probably sometime
this Spring, the EU nations will have
two years to pass local laws that meet
the Directive’s standards.
So, what are the new rules likely to
look like going forward?
The first change is to standardize the
definition of “trade secret.” The draft
definition contains three components:
1. “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;”
2. “has commercial value because it is
secret;”
3.“has been subject to reasonable
steps under the circumstances, by
the person lawfully in control of the
information, to keep it secret.”
Though lawyers love to split hairs
when it comes to legal language, this is
really quiet similar to the United States
uniform trade secret act’s trade secret
definition of:
1.“derives independent economic
value, actual or potential, from
not being generally known to, and
not being readily ascertainable by
proper means by, other persons
who can obtain economic value
from its disclosure or use,” and
2. “is the subject of efforts that are
reasonable under the circumstances
to maintain its secrecy.”
So European markets and the U.S. are
moving toward playing in the same ball-
park (at last agreeing what a trade secret
is). This is not surprising as both defini-
tions seek to conform to the language of
the World Trade Organization’s Agreement
of Trade-Related Aspects of Intellectual
Property Rights (let all multinational cor-
porations around the world now hold
hands and sing Kumbaya). Functionally,
when doing business in the EU if / when the
new laws take effect, you will do well to ap-
ply the skills you learned here in the iPaint
series to maintain the secrecy of your infor-
mation. This way you and all your business
partners in Europe should be able to lay
claim to the trade secret definition above
by establishing that you took “reasonable
steps … to keep it secret.”
However, the current draft has some
specific soft spots to which you will need
to pay particular attention. The EU is ap-
parently hesitating to include language
that would override individual state’s
employment laws so that it is likely that
your employer – employee agreements
will be relied upon as the basis to make
an employee return trade secret informa-
tion. The Directive may be so worded
that an employer would need to show
intent by the employee to misappropriate
your trade secret before you could recov-
er damages. Some opposition by health
care industry and patient groups via the
European Public Health Alliance oppose
the trade secret definition itself as being
too broad and likely to discourage access
to data in the public interest by various
interested parties (e.g., researchers, con-
sumers, journalists, etc.). An example of-
ten trotted out by these groups would be
concerns related to keeping information
on toxic chemicals in products undis-
closed under the “trade secret” umbrella.
Bottom line, your business contracts
(e.g., with employees, contractors, partners,
franchisees, etc.) and documented proce-
dures will likely need to be very stringent-
ly worded to have a leg-up in Europe. It
would be wise to slip your legal team some
extra billable hours to get all your contract
and non-disclosure agreements buttoned
up tight, before adoption of the Directive.
Trade secret misappropriation under
the EU Directive would occur by breach
of these types of contracts or agreements,
or just plain “unlawful acquisition.”
Unlawful acquisition would include in-
tentional actions or gross negligence
resulting in unauthorized access to the
trade secret or materials from which it
can be deduced; theft, bribery, deception,
conduct considered “contrary to honest
commercial practices;” and, of course,
breach or inducement to breach a duty
to maintain secrecy or a confidentiality
agreement. Use or disclosure of a trade
secret will also be unlawful when a per-
son knew or should have known that the
trade secret was obtained unlawfully.
What will be the penalties for some-
one in the EU found to have misappro-
priate a trade secret? A whole bunch of
pain and embarrassment. When you al-
lege infringement, a court may order as
an interim measure: prohibit the use or
disclosure of your trade secret; prohibit
the import, export, production, market-
ing, sale, or storage of goods that infringe
your trade secret; provide for seizure or
prevent delivery of such goods whether
domestically produced or imported.
Upon determining that infringement
has indeed occurred, a court may also;
force product recalls; force alterations to
The Secret about Trade Secrets (In Europe)
