News & Insights

Dates

Enacted and effective on May 11, 2016.

Enacted June 8, 2016.

Effective date July 5, 2016.

Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by June 9, 2018.

Definition of Trade Secret

“Trade secret” means all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if— (A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.

 (See 18 USC §1839)

“Trade secret” means information which meets all of the following requirements: (a) it 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; (b) it has commercial value because it is secret; (c) it has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

(See Article 2)

Misappropriation a/k/a Unlawful Acquisition

“Misappropriation” means: (A) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or (B) disclosure or use of a trade secret of another without express or implied consent by a person who--(i) used improper means to acquire knowledge of the trade secret; (ii) at the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was--(I) derived from or through a person who had used improper means to acquire the trade secret; (II) acquired under circumstances giving rise to a duty to maintain the secrecy of the trade secret or limit the use of the trade secret; or (III) derived from or through a person who owed a duty to the person seeking relief to maintain the secrecy of the trade secret or limit the use of the trade secret; or (iii) before a material change of the position of the person, knew or had reason to know that--(I) the trade secret was a trade secret; and (II) knowledge of the trade secret had been acquired by accident or mistake.

“Improper” means: (A) includes theft, bribery, misrepresentation,

breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means; and (B) does not include reverse engineering, independent derivation, or any other lawful means of acquisition.

The acquisition of a trade secret without the consent of the trade secret holder shall be considered unlawful, whenever carried out by: (a) unauthorised access to, appropriation of, or copying of any documents, objects, materials, substances or electronic files, lawfully under the control of the trade secret holder, containing the trade secret or from which the trade secret can be deduced; (b) any other conduct which, under the circumstances, is considered contrary to honest commercial practices.

The use or disclosure of a trade secret shall be considered unlawful whenever carried out, without the consent of the trade secret holder, by a person who is found to meet any of the following conditions: (a) having acquired the trade secret unlawfully; (b) being in breach of a confidentiality agreement or any other duty not to disclose the trade secret; (c) being in breach of a contractual or any other duty to limit the use of the trade secret.

The acquisition, use or disclosure of a trade secret shall also be considered unlawful whenever a person, at the time of the acquisition, use or disclosure, knew or ought, under the circumstances, to have known that the trade secret had been obtained directly or indirectly from another person who was using or disclosing the trade secret unlawfully.

The production, offering or placing on the market of infringing goods, or the importation, export or storage of infringing goods for those purposes, shall also be considered an unlawful use of a trade secret where the person carrying out such activities knew, or ought, under the circumstances, to have known that the trade secret was used unlawfully.

(See Article 4)

Statute of Limitations

Actions for trade secret infringement must be brought no later than 3 years after the date on which the misappropriation was discovered or should have been discovered.

(See 18 U.S.C. §1839)

Actions for trade secret infringement must be brought within a maximum of 6 years, but Member States can implement shorter time periods.

(See Article 8)

Owner

An owner of a trade secret that is misappropriated may bring a civil action under this subsection.

The term “owner,” with respect to a trade secret, means the person or entity in whom or in which rightful legal or equitable title to, or license in, the trade secret is reposed;

(See 18 U.S.C. §1836 and

18 U.S.C. §1839)

Member States shall ensure that trade secret holders are entitled to apply for the measures, procedures and remedies provided for in this Directive in order to prevent, or obtain redress for, the unlawful acquisition, use or disclosure of their trade secret.

“Trade secret holder” means any natural or legal person lawfully controlling a trade secret.

(See Article 2 and Article 3)

Lawful acquisition of trade secrets

Reverse engineering, independent derivation, or any other lawful means of acquisition.

The DTSA, contrary to the EU Directive, does not provide for the lawful acquisition, use or disclosure of a trade secret when such acquisition, use or disclosure is required or allowed by Union or national law. 

(See 18 USC §1839)

Lawful acquisition of a trade secret means: (a) independent discovery or creation; (b) observation, study, disassembly or testing of a product or object that has been made available to the public or that is lawfully in the possession of the acquirer of the information who is free from any legally valid duty to limit the acquisition of the trade secret; (c) exercise of the right of workers or workers' representatives to information and consultation in accordance with Union law and national laws and practices; (d) any other practice which, under the circumstances, is in conformity with honest commercial practices.

The acquisition, use or disclosure of a trade secret shall be considered lawful to the extent that such acquisition, use or disclosure is required or allowed
by Union or national law.

(See Article 3)

Trade secrets in legal proceedings

The court may not authorize or direct the disclosure of any information the owner asserts to be a trade secret unless the court allows the owner the opportunity to file a submission under seal that describes the interest of the owner in keeping the information confidential.

(See 18 U.S.C. §1835)

Member States shall also ensure that the competent judicial authorities may, on a duly reasoned application by a party, take specific measures necessary to preserve the confidentiality of any trade secret or alleged trade secret used or referred to in the course of legal proceedings relating to the unlawful acquisition, use or disclosure of a trade secret. Member States may also allow competent judicial authorities to take such measures on their own initiative.

The measures at least include the possibility: (1) of restricting access to any document containing trade secrets or alleged trade secrets submitted by the parties or third parties, in whole or in part, to a limited number of persons; (2) of restricting access to hearings, when trade secrets or alleged trade secrets may be disclosed, and the corresponding record or transcript of those hearings to a limited number of persons; and (3) of making available a non-confidential version of any
judicial decision, in which the passages containing trade secrets have been removed or redacted.

(See Article 9)

Remedies

Injunction and Corrective Measures

In a civil action brought under this subsection with respect to the misappropriation of a trade secret, a court^[1] may –

(1) Grant an injunction--(i) to prevent any actual or threatened misappropriation described in paragraph (1) on such terms as the court deems reasonable.

(2) Affirmative actions to be taken to protect the trade secret.

(3) In exceptional circumstances that render an injunction inequitable, that conditions future use of the trade secret upon payment of a reasonable royalty for no longer than the period of time for which such use could have been prohibited.

Award

(1) Damages for actual loss caused by the misappropriation of the trade secret; and

(2) Damages for any unjust enrichment caused by the
misappropriation of the trade secret that is not addressed in computing damages for actual loss; or

(3) In lieu of damages measured by any other methods, the damages caused by the misappropriation measured by imposition of liability for a reasonable royalty for the misappropriator's unauthorized disclosure or use of the trade secret.

(4) If the trade secret is willfully and maliciously misappropriated, award exemplary damages in an amount not more than 2 times the amount of the damages awarded.

(5) If a claim of the misappropriation is made in bad faith, which may be established by circumstantial evidence, a motion to terminate an injunction is made or opposed in bad faith, or the trade secret was willfully and maliciously misappropriated, award reasonable attorney's fees to the prevailing party.

(6) Based on an affidavit or verified complaint satisfying the requirements of this paragraph, the court may, upon ex parte application but only in extraordinary circumstances, issue an order providing for the seizure of property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.

(See 18 U.S.C. §1836)

Injunction and Corrective Measures

Member States shall ensure that, where a judicial decision taken on the merits of the case finds that there has been unlawful acquisition, use or disclosure of a trade secret, the competent judicial authorities may, at the request of the applicant, order one or more of the following measures against the infringer:

(1) The cessation of or, as the case may be, the prohibition of the use or disclosure of the trade secret.

(2) The prohibition of the production, offering, placing on the market or use of infringing goods, or the importation, export or storage of infringing goods for those purposes.

(3) The adoption of the appropriate corrective measures with regard to the infringing goods, which includes: (a) recall of the infringing goods from the market; (b) depriving the infringing goods of their infringing quality; (c) destruction of the infringing goods or, where appropriate, their withdrawal from the market, provided that the withdrawal does not undermine the protection of the trade secret in question.

(4) The destruction of all or part of any document, object, material, substance or electronic file containing or embodying the trade secret or, where appropriate, the delivery up to the applicant of all or part of those documents, objects, materials, substances or electronic files.

(5) The seizure or delivery up of the suspected infringing goods, including imported goods, so as to prevent their entry into, or circulation on, the market.  “Infringing goods” means goods, the design, characteristics, functioning, production process or marketing of which significantly benefits from trade secrets unlawfully acquired, used or disclosed.

Award

(1) Member States shall ensure that the competent judicial authorities, upon the request of the injured party, order an

infringer who knew or ought to have known that he, she or it was engaging in unlawful acquisition, use or disclosure of a trade secret, to pay the trade secret holder damages appropriate to the actual prejudice suffered as a result of the unlawful acquisition, use or disclosure of the trade secret.

(2) Member States may limit the liability for damages of employees towards their employers for the unlawful acquisition, use or disclosure of a trade secret of the employer where they act without intent.

(3) The competent judicial authorities shall take into account all appropriate factors, such as the negative economic consequences, including lost profits, which the injured party has suffered, any unfair profits made by the infringer and, in appropriate cases, elements other than economic factors, such as the moral prejudice caused to the trade secret holder by the unlawful acquisition, use or disclosure of the trade secret.

(4) The competent judicial authorities may, in appropriate cases, set the damages as a lump sum on the basis of elements such as, at a minimum, the amount of royalties or fees which would have been due had the infringer requested authorisation to use the trade secret in question.

(See Articles 2, 10, 12 and 14)

Criminal Liability

Potential criminal liability under Economic Espionage Act 18 U.S.C.§1831 (intended beneficiary is a foreign power) and Theft of Trade Secrets 18 U.S.C. §1832 (product in interstate or foreign commerce).

No criminal liability.

Whistleblower Protections

Immunity from liability under Federal and State civil and criminal trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a Federal, State or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

There is no specified exception for journalists.

Notice Requirement for contracts and agreements that are entered into or updated after the date of enactment of this subsection (May 11, 2016). ^[2]  

If an employer fails to give notice to an individual in the manner prescribed by the DTSA, the employer may not be awarded exemplary damages or attorney fees in a DTSA action against an employee to whom notice was not

provided.

Employee includes any individual performing work as a contractor or consultant for the employer.

(See 18 U.S.C. §1833)

Immunity for revealing misconduct, wrongdoing or illegal activity, provided that the respondent acted for the purpose of protecting the general public interest.

Immunity for exercising the right to freedom of expression and information as set out in the Charter, including respect for the freedom and pluralism of the media.

No Notice Requirement.

(Recital 20 and Article 5)

Employee Mobility

A court may grant an injunction provided that the order does not: (1) prevent a person from entering into an employment relationship, and that conditions placed on such employment shall be based on evidence of threatened misappropriation and not merely on the information the person knows; or (2) otherwise conflict with an applicable State law prohibiting restraints on the practice of a lawful profession, trade, or business.

(See 18 U.S.C. §1836)

Nothing in this Directive shall be understood to offer any ground for restricting the mobility of employees. In particular, in relation to the exercise of such mobility, this Directive shall not offer any ground for: (1) limiting employees' use of information that does not constitute a trade secret as defined in point (1) of Article 2; (2) limiting employees' use of experience and skills honestly acquired in the normal course of their employment; (3) imposing any additional restrictions on employees in their employment contracts other than restrictions imposed in accordance with Union or national law.

(See Article 1)