During the past months, the European Commission put forward a proposal for a directive on the protection of undisclosed material and business information, also known as trade secrets, and against their unlawful acquisition, use and disclosure. The idea of this proposal is for the protection against the misappropriation of business information and the safeguarding of confidential business practices.
A recent survey has showed that 1 in 5 companies has suffered an attempt to steal its trade secrets in the last ten years, and the numbers are on the increase. Factors which contribute to this include the rise of global competition and the increased use of digital technologies.
This proposed directive introduces new EU-wide rules to help safeguard against the misappropriation and misuse of confidential business information and it aims to make it easier for national courts to deal with such cases and for victims of such abuse to receive compensation for damages.
The discussion brought together MEPs and involved investors from the private sector, who exchanged opinions on how this proposed directive could affect commercial activities in Malta as well as cross-border activities and businesses within the EU internal market.
To date, there are no specific provisions on trade secrets in Maltese civil law and the enactment of this European directive would thus guarantee local businesses the essential protection through a European framework.
Trade secrets differ from patents and intellectual property rights such as copyright and trademarks in that they are not exclusive. Thus competitors can, and often do, strive to create similar products or solutions, but the trade secret holder has a competitive advantage in having created it first. Providing a harmonized legal framework on how to register these ‘trade secrets’ will strengthen the protection of the whole business value chain. So far, with regard to intellectual property rights, it is only the final product or service which is protected, but not the process leading to it.
As things stand today, the lack of protection provided for trade secrets has impacted innovation and research and development negatively. Furthermore, SMEs (small and medium sized enterprises) do not have the financial resources to undertake an expensive and lengthy legal proceeding.
This issue also inhibits business cooperation across borders and holds back innovation because a company’s creation or research may not be adequately protected. SMEs are particularly vulnerable as the cost of patenting means they rely more heavily on trade secrecy.
The proposals put forward by means of this European Directive provides for a safer environment in which businesses can create and share information, without the concern that their information might be misappropriated or misused.