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15 October 2019
The EU Trade Secrets Directive (2016/244/EU) seeks to harmonise the protection of trade secrets in all EU member states.
To date, the directive has been implemented in several EU member states, including the United Kingdom, Germany, France, Belgium, Italy, Spain and the Netherlands.
This article comments on what this means for franchisors, or indeed any party, that engages third parties to sell their products and services.
A 'trade secret' is defined as any information which:
This is a reasonably broad definition. Although there are some areas of ambiguity (eg, how much must information be worth to be recognised as having commercial value), this definition is likely to broaden the protection of confidential information – particularly across jurisdictions that previously had limited protections. The directive is also a minimal rule and allows for countries to legislate beyond its provisions.
In general, the implementation of the directive has been positive for franchisors, as the protection of trade secrets and confidential information is key to the success of a franchise system. The level of impact varies from country to country, depending on what previous protections were in place. Although the directive replaces no existing local laws, and various jurisdictions have implemented the directive in different ways, there are some consistencies. The primary example of this is the definition of a 'trade secret'. As discussed above, despite some ambiguity, the definition generally makes it easier to protect trade secrets; however, a key element of the definition is that franchisors will need to demonstrate that they have taken reasonable steps in order to rely on the statutory protection. Therefore, it is prudent for franchisors to consider taking the following steps:
Franchisors should continue to take appropriate steps to protect their confidential information. It is important for franchisors to keep evidence of any unauthorised access or use of trade secrets and to act swiftly should this arise (in the United Kingdom this is particularly important should the franchisor wish to take advantage of an injunction).
While the directive provides an additional layer of protection for trade secrets, the statutory definition – and additional provisions and remedies – do not dilute the importance of contractual terms and protections. Nothing in the directive undermines or overrules commercial agreements. Although franchisors may be able to rely on the statutory definition of 'trade secret', they should nonetheless continue to ensure that their confidential information is safeguarded contractually.
For further information on this topic please contact Gordon Drakes at Fieldfisher by telephone (+44 20 7861 4000) or email (firstname.lastname@example.org). The Fieldfisher website can be accessed at www.fieldfisher.com.
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