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03/12/2016

Uproar over protection of trade secrets

Digital

Uproar over protection of trade secrets

One quarter of EU companies fall victim to information theft every year.

[Flazingo Photos/Flickr]

Outcry from journalists has forced French Economy Minister Emmanuel Macron to remove a “trade secrets” clause from his economic bill. Concerns are being raised over EU plans for a similar law. EurActiv France reports

French journalists have condemned the severity of the punishments that could be handed down under the proposed law, designed to protect the valuable secrets of businesses. The question of trade secrets is also being debated in Brussels.

>> Read: Commission hails French economic bill as ‘a step in the right direction’

The clause criminalising the disclosure of business secrets was introduced as an amendment to Emmanuel Macron’s economic growth and activity bill, under discussion in the French Parliament.   The amendment was withdrawn on 30 January, just days after it was first presented.

Economic espionage

The creation of the legal notion of “trade secrets and civil protection” was intended to protect French companies against economic espionage.

The amendment proposed a maximum punishment of three years imprisonment and a fine of €375,000.

A large number of journalistic, political and civil society associations reacted with anger to the proposal, which they fear could penalise investigative journalism and inhibit the freedom of information.

A group of French journalists criticised the plans in an editorial, saying that “you could fall foul of the Macron bill simply by revealing plans for a social programme”.

European mometum

While the French government has already abandoned the legal protection of trade secrets, the subject remains on the table in Brussels, where the directive proposed by the Commission in 2013 is under still examination by the European Parliament.

The EU’s objective is both to harmonise legislation between the different European countries, which varies greatly, and to protect European companies, whose trade secrets are becoming increasingly vulnerable. According to the Commission, one in four European companies fell victim to at least one case of information theft in 2013, compared to 18% in 2012.

Definition of trade secrets in question

The directive’s detractors say the risks outweigh the benefits, and that the definition of trade secrets is too broad: a group of NGOs has argued that “almost anything” could be placed under the seal of secrecy.

“For me the definition seems clear enough, even if the work of the Parliament will clarify it further,” said Constance Le Grip, a centre-right French MEP and directive’s rapporteur. “This proposed directive is no more than a legal framework that is to be implemented in the different member states, it not a regulation to be followed to the letter,” she added.

The European text defines trade secrets as techniques (manufacturing processes, chemical compounds, etc.) or commercial information (client lists, results of marketing studies, etc.) with economic value to a company. These are often of vital importance to innovative companies and SMEs.

Exceptions to the rule

Constance Le Grip said, “the text contains explicit exceptions to protect journalists and whistle-blowers, which can also be improved”.

These exceptions include “legitimate use of the right to freedom of expression and information” and “revealing misconduct, wrongdoing or illegal activity”.

Article 4 of the directive specifies that this last exception will apply “provided that the alleged acquisition, use or disclosure of the trade secret was necessary for such revelation and that the respondent acted in the public interest”.

The phrasing leaves a certain amount of legal uncertainty, as the necessity of revealing a trade secret “can generally only be evaluated after the fact,” the NGOs complained.

The rapporteur explained that “the proposed directive will be examined and voted on in the European Parliament Committee on Legal Affairs between February and April. This will be followed by a vote in the plenary, or, I hope, a trilogue between the different European Institutions in order to accelerate its adoption”. 

Background

In November 2013, the European Commission proposed a directive establishing a common definition of what constitutes a trade secret.

The theft of business secrets is an increasingly widespread problem in the EU. In 2013, one in four European companies fell victim to at least one case of information theft (compared to 18% in 2012).

Confidentiality tends to be more important to SMEs, start-ups and companies that deal in knowledge capital (expertise, R&D and creative products) than to large businesses.

Differences in national legislation and the absence of a European definition of trade secrets means levels of protection vary considerably from one EU member state to another. 

Further Reading

European Commission

France

Media

  • Journalist editorial: Trade secrets: informing is not a crime (in French) - Médiapart
  • Unions' editorial: Macron bill: prison for whistle-blowers, unionists and journalists (in French) - Libération

NGOs