As of June 9, 2018, an entirely new Law has been implemented in Denmark, namely the Danish Act on Trade Secrets, which implements the Directive of the European Parliament and the Council on protection of trade secrets (hereinafter “the Directive”). The new law replaces paragraph 23 in the Danish Marketing Act, which up until now has been the primary legislative guard against unlawful use of trade secrets, of course supplemented by case law.
Prior to the Directive, trade secrets have been a solely national affair in EU which has caused uncertainty as to the protection of trade secrets and the enforcement of such in case of unlawful use.
The purpose of the Directive is to establish a uniform regulation for the protection of trade secrets for businesses within the European Union to make it easier for businesses and in particular businesses operating cross border to get an overview of the trade secrets legislation.
Several of the articles in the directive regulates conditions which have not been explicitly expressed in the wording of the former paragraph 23 in the Danish Marketing Act. Therefore, the wording of the Trade Secrets Act may contribute to a clarification of the legal aspects of the protection of trade secrets in Denmark.
A definition of the term “trade secret”
Previously, Danish legislation did not include legal definitions of “trade secrets”. Because of the extended use of definitions in the EU legislation and the increase of uniform regulation, the Trade Secret Act contains a definition of the term “trade secret” similar to the definition of the term in the directive.
According to the Trade Secret Act, knowledge, technical drawings, know-how, recipes or similar business information is only characterized as “trade secrets” within the meaning of the Act if the information;
- Is secret in the sense that the information is not known to the public nor available to people who normally are occupied with such information.
- Has a commercial value because it is secret business information.
- Has been a subject to reasonable measures to keep the information confidential.
The third condition is especially noticeable, as it states an obligation for the owner of a trade secret to take reasonable measures to keep the information confidential. An owner cannot achieve protection unless said owner does something to guard and safekeep the trade secrets. This means that both in regard to employees, business partners and others with access to the information, it is necessary for the owner to inform and give instructions as to the procedures for handling the trade secrets.
The burden of proof lies with the owner of the trade secrets and, therefore, the owner must prove that the information is kept confidential and that “reasonable” measures are and have been taken to secure the trade secrets.
However, there is still some uncertainty as to which measures are deemed “reasonable”. This will over time be determined by the case law.
A six-month deadline for initiating legal proceedings
Besides the definition of “trade secrets” the new law stipulates a six-months final deadline for initiating legal proceedings in case of unlawful use of trade secrets. The deadline is calculated from the date of which the owner has obtained knowledge about the unlawful use of the trade secret. No such final deadlines for initiating legal proceedings in IP matters or matters concerning trade secrets have previously been stipulated in Denmark. Instead a more general rule concerning passivity or non-action has been applying.
This explicit stated six-month deadline entails quick legal action as soon as an owner becomes aware of unlawful use of its trade secrets.
Payment of default fines in case of non-compliance with injunction order
In case of unlawful use as defined in the Directive and the new Danish law, the owner can initiate injunction proceedings before the court. There is nothing new about the access to this type of proceedings in court. In fact, the use of injunction proceedings is very common in Denmark in relation to enforcement of intellectual property rights.
However, a newcomer to the list of remedies against the infringers is the access for the court to impose daily or weekly penalties, in case the infringer fails to comply with an injunction. This initiative is a novelty when it comes to law enforcement of legal rights to trade secrets. It is interesting to see how the courts will handle this new remedy access in the future, in particularly in respect of the calculation of the default fines and the execution of such.
Why no means for securing evidence?
In the light of the owners’ responsibility to guard and safekeep its trade secrets and their obligation to respond quickly in case of unlawful use, it is noticeable that the Danish Act on Trade Secrets does not provide the possibility for the owner to initiate search and seizure proceedings in order to obtain evidence of unlawful use. This is similar to the state of the law under the previous Danish Marketing Act, paragraph 23 and a political/legal choice made The use of search and seizure proceedings is a commonly used tool to prove infringements of intellectual property rights and would have been a very valuable tool for the owners in case of unlawful use of their trade secrets.
Who benefits from the new regulation?
The implementation of the Trade Secrets Act means that the trade secrets-area is regulated more comprehensively than previously. In particular, the new law entails a great responsibility and consequently a lot of obligations for the owners of trade secrets.
The legislation may strengthen the position of owners as far as they guard their trade secrets and pursue unlawful use of such, in accordance with the new law.
In case the owners do not comply with the stated obligations they will ultimately forfeit their rights both in regard to taking legal actions and claiming damages but ultimately the owners may lose their trade secrets to the infringers and public at large.
Trade secret owners should, therefore, be very attentive to their stated obligations and need to set up appropriate procedures for the handling of the trade secrets both internally and externally.
As far as we see it quite a lot remains unclear, including the “reasonable measures”-standard in the definition paragraph. For the remaining unclarities we depend on the courts and the future case law to establish norms for the owners’ obligations in order to determine their legal position.
