The EU countries have implemented new legislation on Trade Secrets. Now we are looking forward to the European Court’s interpretation of these rules. Will Swedish practise, based on the only previous separate national law in Europe, and quite similar to the new European legislation, give advice.
The 5 most interesting issues to learn more about >

5 questions we want the European Court
to answer on Trade Secrets

1) What will a court consider as a Trade Secret?
From Swedish practice, which is an interpretation of a previous Swedish legislation resembling the new EU harmonized law based on the European directive, Trade Secrets very often are a mixture of compiled information, i.e. a set of information which is not obtainable on the market, often requires qualified knowledge when conducting the compilation and in its compiled form gives the user a competitive advantage. Common examples are lists with client information, technical drawings of new products and financial information. Will the European Court confirm this interpretation?

2) Is access to information the same as a consent?
If an employee or an external co-worker is given access to specific information as part of their assignments, this is normally considered as a consent for use and disclosure in line with the assignment. However, if the employee or external partner obtains more information than expected by the company and is using it to an extent beyond what is required for conducting the assignment or discloses it beyond what is part of the assignment, it is considered as an unauthorized act prohibited by the Trade Secret legislation. Is this interpretation going to be changed?

3) Who has the burden of proof?
Initially, the plaintiff has to prove that the former employee etc. unauthorized has obtained, used or disclosed a Trade Secret. However, when the information presented to the court shows a distinctive similarity between the Trade Secrets and the material collected by the former employee etc., the burden of proof turns to the defendant. This is a general rule of procedure applied by the Swedish courts. Will the European Court balance the burden of proof in the same way?

4) How can we find out if someone has unauthorized access to Trade Secrets?
Normally, an infringement investigation is a sufficient tool for obtaining the right to search the premises of a suspected infringer in order to collect evidence about the suspected violation of the Trade Secrets Act. Will infringement investigations be as useful under the new Trade Secrets legislation?

5) Is all critical information considered as Trade Secrets? Quite often, when a third party is obtaining, using or disclosing critical information it might be harmful to the person or the business being exposed in this information but yet without being classified as a violation of the Trade Secrets Act. Many of these situations have their own legal regulation in other legislations, e.g. a doctor or nurse looking into information on other patients than their own, a developer checking in on a colleague’s work or an accountant leaking financial information to the client’s bank is most likely committing a breach of trust (crime) rather than a breach of the Trade Secrets Act. How will the European Court look at this type of critical information?

By Anders Hansson & Maria Frödin

Will the new European legislation on Trade Secrets handle the most common situation of unauthorized procurement, use or disclosure of Trade Secrets, i.e. a former employee, who recently left the company bringing some compiled information on clients and other critical data along? These are our 7 advices on how to prevent situations of unauthorized procurement, use or disclosure of Trade Secrets:

7 advices on how to prevent situations of unauthorized procurement, use or disclosure of Trade Secrets

1) Awareness is key!
You can never stop critical information from unauthorized use, wilful or unwilful, if you have not taken measures for letting every employee know that your company is handling information critical to the business, some of it to be classified as Trade Secrets, and that such information has to be handled with care. This will lower the risk for careless handling of Trade Secrets.

2) Make a risk assessment
It is normally beyond human nature to identify all, i.e. all, information that might be considered Trade Secrets by the company. Accordingly, assuming company responsibility should include conducting a proactive risk assessment.

3) Classify your business information
All businesses have critical business information. If very critical, classify it as Trade Secrets, if not so critical, but not open to the public, classify it as Critical Information, and if easily obtainable on the market or on the Internet, classify it as Open Information. Then let all your staff know about this classification, with plenty of examples. Use proper marking, see below.

4) Keep on informing!
Awareness and knowledge of the classification of specific information is not something executed by one point of information. This is both an act of information and education. It needs to be repeated. Over and over again. Mark documents etc with “Trade Secret ”or “Confidential” whenever possible. Start staff information, orally or in writing, with a general remark that some of the information to be presented might be critical business information.

 5) Limit the access to Trade Secrets
In some cases, access is not for everyone. Even though documents on the CTO’s desk might comprise Trade Secrets and, accordingly, it is not for any employee entering the room when it is empty to inspect, there should not be any such documents openly displayed on the table or on the computer if the room is left empty. Behind R&D locked doors is an option, or screens covering product development from bypassers’ eyes. There are also a number of computerized devices for handling trade secrets, such as platforms for publishing of joint documents, key-locked systems etc

6) Include a secrecy clause in every agreement!
Employment contracts, consultancy agreements, sub-contractor confirmations, option and licensing agreements etc should all comprise a clause on secrecy where, if so required, some business information classified as Trade Secrets can be specified.

7) File a patent application
This is the most bullet proof way to handle Trade Secrets if they are to be exposed to the public at a time decided by the company. If, however, they represent an equivalent to the Coca Cola recipe, which has to be kept secret for eternity, then please, keep it secret for eternity.