Trading secrets

Trade secrets are undisclosed information all companies, regardless of size or operating sector, possess. This data defines the ability of the company to innovate, brand and compete in the national and global market.

Take Coca-Cola as an example.

The company’s identity is also its best kept secret: the recipe for the Coca-Cola syrup. This information has only been known to a handful number of employees since Dr. Robert W. Woodruff invented the formula in 1886.

While many may regard trade secrets as IPR, the two concepts are different. Unlike patents, trade secrets do not require registration procedures, and they have immediate effect that is not limited in time (as long as the secret remains a secret).

Patents on the other hand require application, registration fees, and the time of protection is limited to 20 years from the time of filing the application.

On the other hand patents do enjoy a higher level of legal protection since the holder of the patent is also the owner of the exclusive right over its creation. 

In the case of trade secrets, once the secret is made public, anyone may have access to it and use it at will.

Moreover, trade secrets can be used in relation to commercially valuable information for which there is no IPR protection, but for which investment or research are nevertheless required. This means that competitors and other parties may freely use the same formula without any contribution.

In fact, trade secrets are only legally protected in the cases where someone obtains the confidential information by illegitimate means (i.e. through theft or bribery). Under these circumstances it is no wonder that one in every five companies reported to have suffered at least one attempt to steal its trade secrets in the last ten years.

Whereas industrial espionage is becoming a daily reality for companies, we should be able to supply European businesses with more tools that will guarantee their protection against unlawful acquisition of trade secrets.

That is the aim behind the European Commission’s proposal on trade secrets, announced by the Commissioner for the Internal Market and Services, Mr Michel Barnier, on 28 November.

Mr Barnier presented a draft directive that aims to harmonize the EU’s legal framework on this topic, by introducing common definitions and provisions on trade secrets protection.

Furthermore the draft specifies means companies can use to seek in case they discover trade secrets have been misappropriated.

There are also external benefits to the draft – particularly for EU companies who are operating in third countries (i.e. China), where the level of protection of trade secrets remains low. In that context the Commission is similarly hopeful that the proposal could help raise the global level of trade secrets protection.

All-in-all, this is very good news for European business!

Greetings from the European Parliament,

Lidia Geringer de Oedenberg

For more information:
Study on trade secrets and confidential business information in the internal market – 11.07.2013

Next steps:
The Commission’s proposal will be transmitted to the Council of Ministers and the European Parliament for adoption under the ordinary legislative procedure.


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