New Dutch act on protection of trade secrets

The Dutch Act on the protection of trade secrets (in Dutch: Wet bescherming bedrijfsgeheimen, also the “Act”) intends providing broader protection to companies in the Netherlands that are confronted with unlawful disclosures of their trade secrets. The Act entered into force on 23 October 2018.

More and more companies are confronted with unauthorized access or disclosure of corporate information, trade  secrets and knowhow. For example: a former employee has unlawfully copied and disclosed confidential business information to a competitor, or a hacking incident through which confidential business information was publicly disclosed. Such information often represents significant value, so the company will suffer damages.

The Dutch Act on the protection of trade secrets forms the implementation in the Netherlands of the European Directive (2016/943) on the protection of undisclosed knowhow and business information (trade secrets) against their unlawful acquisition, use and disclosure (the “Directive”). The Act has recently entered into force, only 4 months after the implementation deadline. However, the question is, does this Act contribute to our already existing legal framework?

 

The relation between trade secrets and intellectual property rights

The Directive is the result of a discussion in Europe on whether trade secrets and knowhow should have the same protected status as intellectual property rights. No consensus could be reached. Interestingly enough, the definition of ‘trade secret’ is based on the definition thereof in the Agreement on Trade Related Aspects of Intellectual Property Rights (also known as “TRIPs”), which acknowledges trade secrets as an intellectual property right. The Dutch Act on the protection of trade secrets, however, considers the protection of trade secrets as an ‘addition to’ or ‘alternative for’ the protection of intellectual property rights. Thus, according to the Directive and the Act, trade secrets do not have the same legal status – and corresponding enforcement possibilities(!) – as intellectual property rights, such as patents and copyrights.

Anything new under the sun?

The Dutch Act on the protection of trade secrets describes a trade secret as information which meets all of the following requirements:

  1. the information is secret;
  2. the information has commercial value because it is secret; and
  • the person lawfully in control of the information has taken reasonable steps to keep it secret.

The holder of a trade secret may initiate a civil procedure to prohibit the further use or disclosure of an unlawfully obtained trade secret and/or claim damages. As such, the Act adds little to the current Dutch legal framework. The holder already has these enforcement possibilities on the basis of tort. But the Act does enhance the holder’s enforcement possibilities. A new Title to the Dutch Code of Civil Procedure introduced the seizure of evidence as well as a possibility for conviction for integral legal costs, similar to infringement of intellectual property rights cases in the Netherlands.

Still, some critics consider this a missed opportunity. For example, because the seizure applies to allegedly infringing goods, whereas trade secrets specifically concern the underlying intangible confidential information. This may be true, but for a successful evidence seizure, an object must pass the test of ‘sufficiently determinable’ (in Dutch: voldoende bepaalbaarheid). It is questionable whether and if so, to what extent intangible information would meet that requirement. The seizure of intangible information could lead to a fishing expedition which is not permitted.

As far as the integral legal costs are concerned, this has been mitigated and may only be rewarded with concern to clear, obvious and intentional trade secrecy breaches. This seems fair, provided however, that the courts in such unmistakable cases shall indeed award full legal costs otherwise this will become a dead letter. Note that in regular civil proceedings in the Netherlands, only a fraction of the actual legal costs are awarded to the winner.

In short, what can you do yourself?

Back to the beginning: does this Trade Secrecy Act contribute to our already existing legal framework? I would say: “yes, it does”. However, this does not automatically always have to mean that the holder of a trade secret benefits from better protection under the Act than already available under Dutch civil law.

In an era where employees switch jobs as often as partners, a company would rather not want such former employee to work with the competitor. Also under the Dutch Act on the protection of trade secrets, reverse engineering remains allowed. As a consequence, a former employee cannot be prohibited from using the acquired (technical) knowledge and knowhow for another company. Although the Act provides some guidance, any company is advised to prepare and ensure adequate technical, organisational and contractual information security measures in order to protect the confidentiality of knowhow and trade secrets.

Further, the importance of having technical information security measures in place and adequate confidentiality-, non-competition and exclusivity clauses inserted in commercial contracts, management agreements and employee contracts, is increasing. In addition to the technical and contractual measures, also organisational measures are required. For instance, a proper documentation of the company’s trade secrets is essential. Who developed, what and when? After all, although a trade secret does not have the same legal status as an intellectual property right, they will most likely form (part of) the ‘crown jewels’ of an organization. In this respect, the company’s knowhow and trade secrets should at all times be part of the IP asset management process within the organisation.

If you have any questions about the new Dutch Act on the protection of trade secrets or the measures that should be implemented in your organisation to protect the company’s trade secrets, please do not hesitate to contact Chantal Bakermans at BWK Partners Attorneys. Email: c.bakermans@bwkpartners.com and telephone: +31 20-2400710.