Europe Inconsistently Protects Trade Secrets

Nations vary markedly in number of cases brought and level of enforcement.

By Seán Ottewell, Editor at Large

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The European Chemical Industry Council (CEFIC), Brussels, has welcomed the results of a study into trade secrets carried out by the European Commission in conjunction with international law firm Hogan Lovells, London, that shows dramatic differences in protection within the European Union (EU).

Improved legal protection is crucial to innovation and competitiveness.

CEFIC describes the report as a step in the right direction towards improved legal protection and enforcement of companies’ confidential business information (CBI) — adding that support of activities in this area is crucial to innovation and competitiveness, especially for small and medium-sized enterprises.

Director general Hubert Mandery says, “It is important for our industry to effectively fight against theft of CBI, which is an important, intangible asset of companies. Greater protection will help their competitiveness and empower them to continue to more confidently invest in research and innovation in Europe.”

Mandery points out that European chemical industry investment in R&D has averaged €7.8 billion/year ($10.3 billion/year) from 1998 to 2008. In addition, the sector employs 1.2 million workers and had 2010 sales of €491 billion ($643.8 billion).

Together with other firms, Hogan Lovells spent six months compiling “Report on Trade Secrets for the European Commission” — the first analysis on how trade secrets are protected under the national laws of all 27 member states.

The report finds that the number of trade secrets cases brought in each jurisdiction over the last five years varies considerably, both over time and within particular jurisdictions. Data are not available for some countries, but where they are, generally it seems that courts hear far fewer trade secret actions than patent or other intellectual property (IP) right cases.

Statistics from the U.K.'s Ministry of Justice indicate that the number of issued trade secret and confidential information claims is growing (from three in 2006 to 95 in 2009) but is low compared to other IP cases. Where statistics are available, the report found relatively few trade secret cases ever reached a court. Many are settled because the plaintiff might risk further information being disclosed at a trial, whereas in others the evidence may be so damning that the defendant has little to gain from a trial.

Overall the research reveals major differences across the EU in what can be protected and what the courts can or will do to enforce rights.

For example, some countries treat misuse of a trade secret as a criminal act punishable by a prison sentence or a fine. The level of applicable fine demonstrates how differently individual states view the importance of trade secrets; fines vary from as little as €50 ($66) to €30,000 ($39,000) or more. In other countries only civil remedies are available and in some cases the court procedures provide only limited relief. In one or two countries there’s simply no basis for any effective remedy.

"The differences in protection across the EU mean that businesses trading in some parts of Europe are in danger of losing significant revenue to their competitors and opportunists. Investors in industry, particularly those interested in innovation and technology, are more willing to invest in countries where they believe that their secrets are adequately protected from misuse or misappropriation," says Sarah Turner, counsel at Hogan Lovells, and co-author of the report along with consultant Robert Anderson.

"Trade secrets are an increasingly important area to business providing protection for the investment of time and money and research and development that are difficult to protect by other means. The need for adequate protection has become even more important today because technology allows the simple and quick reproduction of documents and their transmission,” notes Anderson.

He adds: "Despite the fact that trade secrets are often extremely valuable (think of the Coca Cola recipe), this is an area of law which has been overlooked in Europe. This is in contrast to the U.S. which has developed both a Uniform Trade Secrets Act to codify the law across the different states and the Economic Espionage Act which makes certain types of trade secret theft a crime punishable by severe penalties." (Two research scientists for Dow recently have been sentenced to jail under the Economic Espionage Act, see: “Rapacious Researchers Steal Secrets,” www.ChemicalProcessing.com/articles/2012/rapacious-researchers-steal-secrets.html.)

“Report on Trade Secrets for the European Commission” is available online at: www.ChemicalProcessing.com/wp_downloads/pdf/study-trade-secrets.pdf



Seán Ottewell is Chemical Processing's Editor at Large. You can e-mail him at sottewell@putman.net.

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