Companies seem to be embracing these developments, with 61% of the executives in our survey saying they would like to see greater trade secret protection and enforcement in their countries, particularly those executives based in Asia Pacific (73%). That’s a sign of growing consensus given that 50% of our respondents identified China as the export market in most need of strengthening its trade secret protection laws, followed by India with 21%.
China is revising its trade secrets law to broaden the definition of trade secrets and increase the penalties for misappropriation. The changes, expected to take effect later this year, also include an explicit provision against trade secret theft by current and former employees.
India’s government is also taking steps toward improvement. Last year the Indian government launched the National Intellectual Property Rights Policy designed to strengthen the country’s IP protection and enforcement regime, including enacting a trade secrets law. How effective these changes will be in practice remains to be seem, but the efforts show promise.
“Couple the passage of the DTSA and EU Directive with the strengthening of the laws in Asia Pacific and you have a powerful recognition of the importance of trade secrets and the need to enforce them quickly and efficiently,” Baker McKenzie’s O’Brien says. “That we have all three regions working simultaneously is truly extraordinary.”
No less significant, US Congress passed the DTSA almost unanimously, with politicians from across the political divide seeing eye-to-eye with the business community on an issue of great mutual importance. It was also a popular measure in the EU.
“It was one of those rare occasions when a legislative initiative didn’t have a split of interests between one sector and another,” says Jorge Novais, legal and policy affairs officer in the European Commission’s Directorate General for Internal Market, Industry, Entrepreneurship and SMEs. “Also the initiative was welcomed by large and small companies, which was important.”
Since the DTSA took effect last May, companies have already filed over 300 trade secrets cases under the new law, according to the US Chamber of Commerce. The EU Directive, which passed within weeks of the DTSA, still needs to be transposed into the national laws of each of the EU’s 28 member countries, which have two years to do so. But some companies in Europe have already expressed interest in seeking recourse under the legislation.
“It’s still early, but in terms of litigation and court cases, we may expect some impact,” Novais says. “More important than that is the fact that companies in the EU will now have a harmonized legal framework with adequate measures, procedures and remedies available throughout the union.”
Important legislative achievements in their own right, the DTSA and EU Directive have also sparked changes in other parts of the world. Last year, for example, Japan amended its Unfair Competition Prevention Act and half of the 12 countries in the Trans-Pacific Partnership Agreement strengthened their trade secret provisions and enforcement regimes.
This heightened awareness was reflected in our survey, with 71% of respondents saying they completely, mostly or partially understand the implications of the DTSA on their companies, and 73% saying the same for the EU Directive. Although the laws differ in some respects, the DTSA and EU Directive share a common purpose: to create a uniform approach to trade secret protection and enforcement within the US and among EU member states.
Prior to the DTSA, US companies could seek redress for trade secret theft in federal court, but only under certain circumstances such as the company and the accused residing in different states. In many cases, companies had no choice but to sue in state court, where trade secret laws and the application of those laws differed from state to state. The DTSA now provides a uniform law under which companies can seek civil remedies for trade secret misappropriation in federal court.
Similarly, the EU had no unified trade secrets legislation prior to the EU Directive. All member states offered some form of trade secret protection and enforcement in their national laws, but it varied from country to country. In fact, Sweden was the only one to have a law specifically protecting trade secrets.
Both the EU Directive and the DTSA define trade secrets, outline the reasonable measures companies must take to ensure their protection, and provide legal remedies for those that suffer trade secret theft, such as court injunctions and damage awards based on lost profits.
News headlines about global cyberattacks and legal battles between tech titans have made it nearly impossible for corporate executives to ignore the issue of trade secrets. The enactment last year of two game-changing pieces of legislation – the US Defend Trade Secrets Act and European Union’s Trade Secrets Directive – has helped sharpen that focus.
Companies in the EU will now have a harmonized legal framework with adequate measures, procedures and remedies available throughout the union.
In your opinion, which three of your company’s main export markets need to strengthen their trade secret protection and enforcement the most?
In your opinion, does trade secret protection and enforcement need to be strengthened in your country?
To what extent do you understand the implications of the US’ Defend Trade Secrets Act for your company?
To what extent do you understand the implications of the EU’s Trade Secrets Directive for your company?
© 2019 Baker McKenzie