The protection of confidential information remains a top priority for businesses across all sectors. Immeasurable damage can be caused by the theft and misuse of know-how, business information and trade secrets.
To improve the protection available against the unlawful use and disclosure of sensitive information, the UK has introduced The Trade Secrets Regulations 2018 (the Regulations). The Regulations came into force on 9 June 2018.
Essentially, the Regulations were brought in to implement the EU Trade Secrets Directive 2016/943/EU. Whilst the substance of the Regulations was largely reflected by the English common law rules relating to confidentiality, there were a number of gaps which the Regulations have sought to address.
It is worth bearing in mind that although the UK will no longer be an EU member state following Brexit, the Regulations will continue to apply.
The Regulations create a new statutory claim for the misuse of trade secrets, which can be claimed alongside a common law claim for breach of confidence. Prior to the Regulations coming into force, the UK already had strong well-established common law rules on confidentiality.
However, the Regulations provide a new definition of what amounts to a ‘trade secret’, as information which is “secret in a 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”. The information must also have “commercial value” and there should have been “reasonable steps” taken to keep it secret.
The test for what constitutes a trade secret under the Regulations is arguably different to the test that applies to determine whether information is confidential at common law. This could make it more difficult for a business to show that they have the appropriate systems in place to meet the prescribed thresholds under the Regulations.
The Regulations cover the remedies available, including an injunction and damages, and they specify the basis for calculating damages. They also clarify, among other things, the fact that the remedies available at common law will also beavailable to a business that has brought proceedings under the Regulations. It therefore seems that a business may now apply for remedies under breach of confidence, in addition to, or as an alternative to remedies provided for in the Regulations.
Under the Regulations, the court is required to give consideration to additional factors when deciding whether or not to grant an injunction, and the alleged infringer has the right to apply to the court to pay damages instead of complying with an injunction to cease and refrain from infringement.
It follows that notwithstanding the aims of the new law, businesses may have difficulty in showing that their sensitive information meets the threshold for a trade secret under the Regulations. Additionally, there is some uncertainty over whether the remedies prescribed are the same in scope as the existing remedies for breach of confidence.
It seems likely that claimants will therefore bring actions for both statutory infringements under the Regulations, and common law breach of confidence at the same time. This will undoubtedly introduce an unintended and additional layer of complexity to breach of confidence actions.
However, the precise impact the Regulations will have on the law of confidential information will only become clear, once they start to be applied and interpreted by the courts.
It would be prudent in the meantime for businesses to assess the ways in which they deal with, and look to protect their confidential information. Any standard contractual clauses that address confidentiality should be reviewed to assess how they sit with the new definition of trade secrets under the Regulations. It would be advisable for businesses to ensure, if appropriate, that the information they wish to protect qualifies as a trade secret under the Regulations.