Introduction of Bill on trade secrets

The Danish Minister for Industry, Business and Financial Affairs has introduced a Bill to bring together the regulation on trade secrets in Denmark.

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On 8 June 2016, the European Parliament and the Council adopted the EU Trade Secrets Directive.

Denmark – as well as the other EU member states – had two years to implement the new rules into national law. Now the Minister for Industry, Business and Financial Affairs has proposed a Bill to implement the provisions of the Directive. This means that the existing regulation in the Danish Marketing Practices Act will be abolished.

The purpose of the new Act is to strengthen the protection of trade secrets, ensure homogenous conditions across the EU and bring together the regulation on trade secrets in Denmark.

Below you will find our comments on the essential elements in the Bill.

Definition
The Bill introduces a definition of trade secrets. Until now, there has been no such definition in Danish law, and the concept of trade secrets has thus been inferred from case law.

According to the definition in the new Act, trade secrets are information which is not generally known among persons who have knowledge of the relevant industry. The information must also have a financial value and the owner of the information – the company – must have taken steps to keep the information secret.

It is stated in the explanatory comments to the Bill that the new definition harmonises with the concept of trade secrets which so far has been inferred from case law.

Lawful and unlawful conduct
The Bill distinguishes between lawful and unlawful conduct.

It is not considered unlawful to acquire a trade secret if a person through his or her knowledge of the industry in question is able to deduce information on the basis of a product or object when the person has had authorised access to that product/object. This applies to the concept ”reverse engineering” which means that a trade secret can be extracted by analysing a product or object available in the market.

It is, however, unlawful to acquire a trade secret by, for example, gaining unauthorised access to a company and copying the products and other material held by the company.

Acquisition of trade secrets in a way which is contrary to honest commercial practices is unlawful. This is of course a fluid concept and the provision is intended to “fill in the gaps” in situations where the express rules in the Act are insufficient.

In addition, there is a ban on use and disclosure of trade secrets when the trade secret has been acquired unlawfully or is disclosed in breach of a confidentiality clause. Use and disclosure of trade secrets are further unlawful if the third party knows or should have known that the trade secret was acquired by unlawful means.

The media and whistleblowers
According to the Bill, disclosure of trade secrets cannot be remedied as prescribed in the Act if the disclosure was a means of exercising freedom of the press. The legislative material explains that according to case law from the Danish Supreme Court interference with the freedom of expression and freedom of information of the media requires compelling reasons. However, obviously the media cannot just make trade secrets public.

The Bill further contains a provision on whistleblowers, stating that the remedies available under the new Act cannot be used if the whistleblower acted to protect general public interest. The Bill does not distinguish between internal and external whistleblowers, and for this reason it is not only employees who enjoy protection.

Legal remedies
The new Act lays down the conditions for obtaining prohibitory and mandatory injunctions: it must be rendered probable that a trade secret has unlawfully been acquired, disclosed or used.

Temporary legal remedies must be followed by legal proceedings in which the courts can take various corrective measures such as stopping the use and disclosure of the trade secret, prohibiting the production of the infringing products or recalling such products from the market, or destroying the infringing products.

Under certain circumstances, the courts may award a compensation as an alternative to the above measures.

Damages
The Bill provides that the infringed party can obtain damages for the damage done if a person wilfully or by negligence has engaged in activities breaching the Act. The amount in damages will be determined on the basis of the value of the damage done to the infringed party, and the loss of profit and the infringer’s unlawfully obtained earnings will be taken into account as well. Further, according to the Bill damages can always – in case an infringement has occurred – be set at the same level as an appropriate compensation for using the trade secret. And as a new element, compensation may be awarded for non-financial losses.

The wording of the provision on damages leaves the impression that it will be possible to be awarded larger damages under the new rules compared to the existing rules in the Danish Marketing Practices Act and the explanatory comments to the Bill do confirm that the state of the law is changed; however, a loss must always be rendered probable.

The legislative process
The Bill had its first reading in the Danish Parliament on 23 January 2018 and it is specified in the Bill that the effective date is 9 June 2018. Norrbom Vinding will report on the new Act when the new rules have been finalised.

The content of the above is not, and should not be a substitute for legal advice.

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