(Trade) Secret to Succes
Over two years have passed since the Trade Secrets Directive was implemented in the Netherlands, and trade secrets have been the subject of several court cases since. In this article I will discuss some key points from recent case law, relevant to General Counsels.
In 2016, the Trade Secrets Directive was adopted by the European Parliament and the Council in order to standardise the national laws in EU countries against the unlawful acquisition, disclosure and use of trade secrets. The Netherlands complied with this Trade Secrets Directive by implementing it on 23 October 2018. It is unclear if the new rules also apply to infringements before 23 October 2018. Some Dutch courts apply the rules on general tort without involving the new trade secrets rules in this situation, other Dutch courts also apply the rules on general tort, but do involve the new rules in their assessment, whilst the rest assess the case entirely on the basis of the new rules.
Protection of trade secrets
A trade secret is protected if (i) it is secret in the sense that it is not generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question; (ii) it has commercial value because it is secret; and (iii) it has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.
It appears that – up until now – the Dutch courts easily assume that there is a trade secret. The District Court in The Hague ruled that, when substantiating that there is a trade secret, the claimant must bring forward sufficiently specific arguments that demonstrate that there is a trade secret, but not in such way that the defendant learns about the trade secret in full. The claimant’s duty only goes so far that the defendant has to be able to defend themselves.
Hearing in closed session
The law provides that hearings in proceedings regarding trade secrets can be held in closed session. This is not automatically the case which means that the owner of the trade secrets has to request such a hearing. Dutch case law shows that (at least in interim injunction proceedings) the claimant only has to state that there are trade secrets involved, a further substantiation is not necessary. Whether or not the request is granted depends on the court’s weighing of the interests of both parties and interested third parties.
Full cost order?
The court has the discretionary power to order that reasonable and proportionate legal costs and other expenses incurred by the successful party shall be borne by the unsuccessful party, unless equity does not allow this. Contrary to IP matters, the legislator only deems this appropriate if the defendant knowingly and deliberately infringed the trade secret or if the claimant submitted an obviously unfounded claim. In a case regarding trade secrets in 2019, the District Court Midden-Nederland ruled that there were no exceptional circumstances as a result of which the court cannot use its discretionary power. When opting for initiating proceedings on the basis of trade secrets, one should thus be aware that a full cost order will often not be likely.
Apart from the classic IP rights, General Counsels now have an additional weapon in the battle against infringing parties due to the implemented European Trade Secrets Directive in The Netherlands. In this regard they should note that it is still unclear if the rules apply to infringements committed before 23 October 2018.
From recent court cases you can learn that:
- Dutch courts seem to easily assume that there is a trade secret;
- A hearing in a closed session can be ordered by the court upon request of the claimant, without having to substantiate the existence of a trade secret in detail;
- The full cost order in such matters is not the same as in classic IP matters: the full cost order will only be allowed in case of exceptional circumstances, so you may encounter additional legal costs if you are the successful party to an infringement case regarding trade secrets.
In order to use the above to their advantage, General Counsels should identify and protect their trade secrets by taking the necessary measures in a timely fashion. The discussed list above is far from complete so do not hesitate to contact us for more information and if you want to discuss your specific case.
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