Commission moves to improve protection for trade secrets

Proposal designed to combat industrial sabotage, hacking and theft by third-country companies

The European Commission today proposed harmonising the patchwork of laws in the European Union that protect companies’ businesses secrets.

The proposed regulation would introduce a uniform definition of what constitutes a trade secret and would require national courts to make injunctions and damages available to victims.

In particular, the proposal would allow a company to seek an injunction banning imports that are produced using an illegally obtained trade secret.

This would be of use to companies such as Alstom. The French energy and transport conglomerate claims that it licensed air-quality equipment to a Chinese company for use in China, only for the company to tear up the licensing agreement and start selling the product in the EU.

Most of the technology involved in the air-quality equipment was not protected by patent law, but was confidential. Yet, given member states’ different laws on protecting trade secrets, Alstom has encountered difficulties in preventing the Chinese company from manufacturing the equipment within the EU.

A quarter of all companies complained about having information stolen in 2013, according to a study by Kroll, a risk-management company.

While international companies are using longer supply and production chains, they are becoming more exposed to the risk that their trade secrets will be revealed and misappropriated.

Internet hackers are also increasingly targeting companies’ confidential information.

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Strong rules on protecting trade secrets would not only protect EU companies from unfair competition, argues the Commission, but would also encourage greater global investment in research and development into the EU.

Michel Barnier, the European commissioner for internal market and services, commented: “This proposal aims to boost the confidence of businesses, creators, researchers and innovators in collaborative innovation across the internal market. They will no longer be dissuaded from investing in new knowledge by the threat of having their trade secrets stolen.”

Hubert Mandery, director-general of the European Chemical Industry Council, said: “For chemicals producers in Europe, confidential business information is an important, intangible asset. The proposal would empower them to more confidently invest in Europe.”

Markus Beyrer, director general of BusinessEurope, said: “This is good news for European business, especially SMEs. A single legal regime across the EU will protect companies against theft and misuse of their know-how.”

Commission officials argue that adopting EU-wide legislation on protecting trade secrets would bring the bloc in line with the Unites States and Japan, both of which offer a high level of protection.

BusinessEurope last month sent a letter to Karel De Gucht, the European commissioner for trade, and to Michael Froman, the US trade representative, calling for them to use negotiations on a free-trade agreement to co-ordinate their approaches to protecting trade secrets.