The recent Directive on the protection of trade secrets sparked widespread criticism. Much has been said on this text, accused of having been written under the influence of multinational companies and of allowing prosecutions against journalists and whistleblowers. A careful reading of the text, however, can dispel most of the expressed concerns. The purpose of the Directive is not to organize the disguise of wrongdoing or unethical behavior. It is, however, aimed at protecting any information that would constitute a competitive advantage, without inducing intellectual property rights.

Approved by the European Union’s Parliament on April 14 this year, the Directive on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure sparked widespread criticism. Much has been said on this text, accused of having been written under the influence of multinational companies and of allowing prosecutions against journalists and whistleblowers. It has been claimed that the companies involved in the “Panama Papers” scandal could have, on the basis of such a text, prevented the media from discussing the case. It has also been written that the Directive could prevent investigations by public authorities on sensitive issues.

A careful reading of the text, however, can dispel most of the expressed concerns. The purpose of the Directive is not to organize the disguise of wrongdoing or unethical behavior. It is, however, aimed at protecting any information that would constitute a competitive advantage – without inducing intellectual property rights, either when such information cannot actually be protected by such rights or when the holder waived them by, for instance, abstaining from filing a patent. The European institutions, which based their work on several studies, have concluded that a harmonization of various regulations on this issue would be likely to further growth, competitiveness and innovation.

The Directive therefore contains a definition of the “trade secret” concept which has been criticized for being too broad. Such extensive definition can be explained by the fact that the vital pieces of information a company does not wish to see disclosed or used – in order to preserve its competitiveness – greatly vary in nature. The text is based on Article 39-2 of the Agreement on Aspects of Intellectual Property Rights (TRIPS), voted in 1994 under the aegis of the WTO, and indicates that the relevant information should not be “generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question,” also that it must have a commercial value and have been the object of reasonable steps to be kept secret.

Although the Directive penalizes the disclosure or use of such information, it provides for civil sanctions only. Contrary to what has been written here and there, the Directive does not contain any criminal measure, the EU institutions not having the power to legislate on criminal matters in an area where no harmonized measures were previously adopted. The Directive will therefore have no impact on the criminal proceedings brought against some whistleblowers, as Antoine Deltour, sued in Luxembourg because of his disclosures in the LuxLeaks case. The text merely provides that anyone obtaining, using or disclosing trade secrets unlawfully could have their civil liability engaged, which means they may have to compensate for any damage suffered by the victim of the disclosure or be imposed to cease to use or disclose the information considered. It is far from the US federal law, with its Economic Espionage Act of 1996 – section 1832, which makes any theft or fraudulent use of trade secrets a criminal offense punishable by 10 years imprisonment and a fine of up to $5 million.

In addition, only the behaviors mentioned in the Directive may lead to the liability of the author. It is the case when confidential information is acquired without authorization or by a behavior which is  “considered contrary to honest commercial practices.” Disclosure or use of information obtained unlawfully is sanctionable, as well as its disclosure or use despite a promise to keep secrecy. The production, offering or placing on the market of infringing goods, or the importation, export or storage of infringing goods can lead to civil liability if the person involved is or should have been aware that the trade secret was used unlawfully. Overall, the Directive clearly seeks to punish dishonesty and the making profits at the expense of others.

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Journalists and whistleblowers
It does not appear, in this context, that the Directive directly threatens the freedom of the press. Article 5 expressly excludes any application in case a trade secret is obtained, used or disclosed in order to exercise “the right to freedom of expression and information as set out in the Charter” of Fundamentals Rights of the European Union “including respect for the freedom and pluralism of the media” (Article 5a). The Charter of Fundamental Rights specifically protects, in Article 11, freedom of expression and information. Therefore the Directive, once implemented, could not be used to support a lawsuit against a newspaper.

The concern is perhaps more justified when expressed by people not alluded to in this exception granted to the press, starting with journalists’ sources. These people will see themselves spared by the Directives’ consequences only if they have obtained, used or disclosed a trade secret to reveal misconduct, wrongdoing or illegal activity » and under the condition that they have acted “for the purpose of protecting the general public interest” (Article 5b). This effectively means that the disclosure of information about lawful activities may be sanctioned, which covers, for example, the disclosure of a trade secret having to do with a licensed product suspected of being toxic. The challenge here is that a particular activity, such as the choice of a tax system or the use of some components may be lawful in the country where it is conducted and unlawful in the country where it is revealed. Moreover, it will be possible to hold people who revealed such unlawful activities responsible if they prove unable to demonstrate that they acted to protect the public interest. However, such evidence should be easy to produce if we admit that revealing unlawful behavior always serves the public interest. The text clearly targets revelations meant to harm a competitor or a former employer.

Finally, there is always another chance to escape the civil liability provided for by the Directive by proving that the acquisition, use and disclosure of the trade secret took place for the purpose of protecting a legitimate interest recognized by Union or national law (Art. 5d). If such an exception – which at the end of the day remains quite imprecise – does not find a common interpretation and application in the different Member States, such a configuration would provide the defendant with an additional argument.

To conclude, it does not seem quite correct to assert that whistleblowers lack protection under the text of this Directive. It is possible to agree, though, on the need for a text specifically written in their favor, and organizing their protection.

The first version of this article was originally published in French by our syndication partner Telos-eu.com.

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  • A bit of a misunderstanding: the European Directive on trade secrets and freedom of informationon May 31st, 2016

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