On July 5th, a new EU directive, which aim is to secure uniform protection of business secrets, came into force. The member countries have until June 9th, 2018, to implement the rules. The Directive protects against illegal acquisition, use and disclosure of business secrets.
In Denmark, business secrets are already protected by the Danish Marketing Practices Act, but the new Directive contains a number of new initiatives which may affect the protection of business secrets in Denmark, including a deadline of maximum six years and new rules on the statement of damages.
The protection
The definition of business secrets in Denmark is not expected to be changed with the introduction of the new Directive and business secrets will still be protected against illegal acquisition, use or disclosure. The term “business secrets” is a common name for confidential internal knowledge which is not common known and has a market value because of the confidentiality.
Cases on business secrets often arise when an employee changes job to a competitor or establishes his own competing company. In this case, the employee will unlawful be able to use his knowledge from his former position.
The new Directive does not protect business secrets against business knowledge nor general experience acquired on a normal and honest way by the employee.
Furthermore, business secrets are not protected against whistle blowers if the purpose of the acquisition, use or disclosure of the business secrets is to uncover offenses, irregularities or illegal activities which are in the publicity’s interest.
Reactions
According to the Directive, violation may lead to claim for compensation, prohibition and injunction.
The Directive suggest that the claim for compensation must correspond to the damage caused by the illegal activity. Therefore, all relevant factors shall be included when imposing the claim for compensation, including negative financial consequences, e.g. lost profit and the profit earned by the violating part.
Furthermore, the Directive suggests that non-financial damages can be included in the determination of the claim of damages.
As an alternative, the Directive sets forth the opportunity for the Courts to set a fixed amount of compensation corresponding to the charges and fees which it would cost the violating part if he requested an authorization to use the business secrets.
In relation to employees’ liability to the employer the Directive suggests that the member countries can impose rules limiting the employees’ responsibility if the employees do not know that their actions are illegal. It is unknown if the government will use the opportunity to impose rules in this field.
iuno’s opinion
The Directive will possibly affect the protection of business secrets in Denmark even though the current Marketing Practices Act already makes it possible to award a reasonable compensation for the violation.
Case law shows that companies in Denmark generally have a hard time obtaining compensation. The Directive may make it easier for Danish companies to achieve compensation for violations, but this will eventually depend on how the Courts enforce the rules.
The Directive makes demands on the member countries to give easy access to grant an injunction and to get compensation. Hence, we hope that the Danish Parliament along with the implementation will make it easier for companies to defend business secrets in Court.
Because the current protection of business secrets is fairly poor, IUNO recommends that companies consider the possibility of a non-solicitation covenant and non-competition clause if they want to protect their business secrets properly. We have previously written about the new rules in this field, which became effective as of January 1st, 2016.
iuno follows the development of the Directive and its implementation in Denmark.