Trade secrets directive

In July 2018, France enacted new legislation to strengthen protections for trade secrets. The law—entitled the Loi du 30 juillet 2018 relative à la protection du secret des affaires—is the first piece of French legislation expressly guaranteeing trade secret protection.

The French National Assembly enacted the law in large part to fulfill France’s obligation to transpose the European Trade Secrets Directive of 8 June 2016. That directive, like the U.S. Defend Trade Secrets Act (2016), was loosely modeled upon the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), in particular with respect to the definition of trade secrets. Because of these origins, France’s law should strike those with some knowledge of other jurisdictions’ trade secret protections as very familiar.

Thanks to the new French legislation, companies doing business in France will enjoy thorough protections for their trade secrets, including trade secrets that might need to be disclosed during the course of contract negotiations or in pursuit of a joint venture.

Overview of 2018 reforms

Definition of a trade secret. Under the new French legislation, in order to be protected as a trade secret, information must meet three requirements. First, it must be secret in the sense of not being “generally known” in the relevant industry. Second, its owner must derive commercial value from the information’s secrecy. And third, reasonable steps must have been taken by the owner to preserve the secrecy of the information¹.

By way of example—and this list is by no means exhaustive—trade secrets might include customer lists, supplier lists, formulas, recipes, algorithms, code, business strategies, data sets, technical drawings or specifications, salary information, promotional or marketing materials under development, and a variety of other commercially valuable, non-public information.

Prohibited conduct. French legislation now prohibits the unlawful acquisition, use and disclosure of a trade secret.  Trade secret information is unlawfully acquired if done without the owner’s consent and by means of unauthorised access to, appropriation of, or copying of any documents, objects, materials, substances or electronic files. It can also be unlawfully acquired if acquired by way of conduct which, under the circumstances, is considered “contrary to honest commercial practices”². Information is unlawfully used or disclosed when used or disclosed by a person who unlawfully acquired it, or when used or disclosed in violation of a legal or contractual duty (for instance, in breach of an employment or confidentiality agreement)³. Moreover—and this is a key point—a person who indirectly acquires the trade secret information can also be held liable for trade secret misappropriation, provided that the person knew or reasonably should have known that his or her source of the information was using or disclosing the trade secret unlawfully⁴. In other words, and by way of example, this provision extends potential liability to competitors who, having been approached by an employee or former employee of the owner of a trade secret, agree to receive the confidential information. Liability would attach even if the competitor did not originally solicit the information.

Fair use and other exceptions to trade secret protections. It should be noted that, just as under the U.S. Defend Trade Secrets Act, French trade secret protections do not prohibit the lawful, good faith discovery of a trade secret. There is no prohibition against the independent creation or discovery of trade secret information, including through reverse engineering, unless done in violation of contract⁵.

Moreover, the law expressly provides that there is no privilege to protect trade secret information from disclosure to government officials in the context of a lawful investigation⁶ or when necessary to guarantee the exercise of workers’ or workers’ representatives’ right to information and consultation⁷. Information that is a trade secret can also be revealed by a person making a good faith report of wrongdoing (whistleblowing) or in connection with the exercise of the fundamental right to freedom of expression (as, for example, by the press)⁸. In these cases, trade secrets can only be revealed to the extent that their disclosure is done in good faith and is limited to the information necessary to substantiate a report of wrongdoing or to provide information the public on a question of legitimate public concern⁹.

Remedies. To guarantee meaningful protections for trade secrets, French law now authorizes civil actions for damages¹⁰, as well as the possibility of temporary or permanent injunctive relief¹¹. It also authorizes courts to issue orders limiting the dissemination of trade secrets during and after court proceedings¹².

Takeaways for businesses

• France offers robust protections for trade secrets. Those doing business in France, or considering doing so, can feel confident about France’s commitment to protecting companies’ valuable intellectual property, including intellectual property that is not the subject of trademark, patent, or copyright protections. Provided that reasonable steps are taken to preserve the secrecy of commercially valuable, non-public information, trade secrets benefit from robust substantive and procedural protections under French law.
• Take “reasonable steps” to protect your trade secrets. Given that trade secret protections hinge upon the “reasonable steps” an owner has taken to preserve secrecy, taking sufficient steps to protect sensitive information is key. Some reasonable actions that can be taken to preserve secrecy include:
  • Marking documents containing trade secrets as “secret” or “confidential”;
  • Storing particularly sensitive information under lock or in password-protected databases;
  • Sharing trade secret information (even internally) on an exclusively need-to-know basis;
  • Training employees on what trade secrets are and the rules surrounding their proper use and dissemination;
  • Including information about preserving the confidentiality of company information in employee manuals;
  • Including appropriate clauses in employment contracts prohibiting the dissemination of confidential information;
  • Engaging in appropriate monitoring of employees’ use of company networks and equipment;
  • Conducting exit interviews and ensuring that departing employees return all employment-related documents and materials upon departure;
  • Asking any third party needing access to trade secret information—for example in order to conclude a deal, engage in a joint venture, or provide goods or services—to sign a non-disclosure agreement limiting use and disclosure of the information and guaranteeing its return or destruction once no longer needed for the purpose for which it was originally provided. Also, take appropriate steps to ensure that these undertakings are in fact observed.
• If you believe you have been the victim of a trade secret violation, consider your procedural options. Those with good reason to believe they have been or will likely become victims of trade secret violations can seek preliminary injunctive relief (similar to a temporary restraining order) to protect their interests pending final resolution of the matter.

Delcade lawyers have expertise in helping you to protect your trade secrets at all stages of the life of your business, in particular during contract negotiations, the setting up of operations, or in the context of dispute resolution. For further information, you can contact Benoit Lafourcade.

– Benoit Lafourcade

– Johanna  Schwartz Miralles « Avocate au Barreau de Pennsylvanie »

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