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Trade Secrets Regulations 2018 – what are the implications?
The Trade Secrets Regulations 2018 came into force in June. Their purpose is the protection of undisclosed know-how and business information from being unlawfully acquired, used and disclosed. It is also intended to standardise national laws and remedies related to trade secrets in EU member states.
These Regulations complements existing common law, which will continue to apply, addressing any gaps in the law and clarifying procedural implementation across jurisdictions.
Previously, confidential information was protected through case law. In order to successfully claim for a breach of confidence, it will still be necessary to establish the following:
- The information has the necessary quality of confidence (i.e. it is not generally known by the general public, or persons who specialise in that subject).
- The information was shared in circumstances imparting an obligation of confidence (i.e. a reasonable person would have realised that the information was being given in confidence).
- There has been an unauthorised use of that information to the detriment of the party communicating it (i.e. it has been used by the recipient for purposes beyond the consent of the owner, or it has been disclosed to third parties without the owner’s consent).
Key elements of the 2018 Regulations
Trade secrets are redefined by the Regulations as being information that:
- is secret – i.e. is not generally known among, or readily accessible to, persons within the circles that normally deal with this kind of information;
- has commercial value because it is secret; and
- has been subject to reasonable steps to keep it secret by the person lawfully in control of the information.
Under the 2018 Regulations, the limitation period for bringing a claim is six years, either from the day that the unlawful use of trade secrets ceases or the day of knowledge of the trade secret holder, whichever is later. It is also stipulated that Trade secrets must be protected during court proceedings.
The Regulations grant the court powers to order:
- the party misusing the trade secret to stop producing or selling infringing goods,
- a recall of the goods, modification of the goods to deprive them of their infringing quality, or destruction of the goods.
- damages, potentially reflecting loss of profits.
- compensation, not exceeding the hypothetical cost of the licence fee for using the trade secret.
Potential impact of the 2018 Regulations
Due to the existing UK common law on confidentiality, the 2018 Regulations are unlikely to have a significant impact in the UK. However, they provide a welcome statutory confirmation of the definition of trade secrets and the remedies available to the innocent party faced with the unlawful use of trade secrets.
Nevertheless, whilst the new definition is expected to help businesses protect their trade secrets, they must show that they have already taken reasonable steps to protect the secret if they wish to benefit from the available rights and remedies.
Although it remains to be seen precisely how “reasonable steps” will be interpreted, businesses can take proactive steps to protect confidential information:
- Consider whether to introduce confidentiality and usage provisions within relevant supplier and/or client contracts.
- Where necessary, enter into NDAs and ensure that their terms are suitable for the scope of the particular project
- Develop and implement procedures for marking, segregating and storing trade secrets. This could include new IT procedures to ensure that the information is encrypted, or warnings appear before the information is sent externally.
- Designate a team who will have overall responsibility for the protection of trade secrets and keep a record of who has access to the confidential information.
- Provide training to employees and/or suppliers who are most likely to access confidential information.
For more information on how we can help in this regard, please call 01733 888888.