Companies invest in the acquisition, development, and application of know-how and information, the two core elements of the knowledge economy which result in a competitive advantage. Companies use various means to appropriate the results of their innovation-related activities, including intellectual property rights such as patents, design or model rights, or copyright. Another option is to shield access to, and use of, knowledge which is valuable to the organisation and not generally known. Valuable know-how and undisclosed business information, which is intended to remain confidential, is also known as a “trade secret”.
In 2016, to protect trade secrets, the Council of the European Union adopted a Directive on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use, and disclosure (hereinafter: “the directive”). The directive must be transposed into national legislation by all EU Member States by 9 June, 2018.
The directive defines a trade secret as information which 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 have commercial value because it is secret, and must be subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.
The acquisition of a trade secret without permission is considered unlawful if it is acquired through unauthorised access, unauthorised appropriation, or copying of the trade secret. Using or disclosing a trade secret is considered unlawful if the offending party acquired it unlawfully, is in breach of a confidentiality agreement, or is in breach of a contractual or other duty to limit the use of the trade secret.
The directive obliges EU Member States to provide for the measures, procedures, and remedies necessary to ensure the availability of civil redress against the unlawful acquisition, use and disclosure of trade secrets
The directive also authorises Member States to limit the liability for damages of employees towards their employers for the unlawful acquisition, use or disclosure of a trade secret of the employer where they act without intent. Given the current design of employment law, it is expected that the Netherlands will include such a clause. It fits in the system of Dutch employment law and ties in with the underlying idea of employment law, namely that employees are given a high level of protection.
It is important for employers to make clear agreements with employees regarding which information is considered a trade secret, and to make means available to protect these trade secrets. It is also important to make it clear which employees are authorised to access trade secrets. If an employer concludes a non-disclosure agreement with an employee to this effect, and the employee breaches the agreement, the breach will be considered unlawful according to the directive. Another option, which is less far-reaching than a non-disclosure agreement, is to include a confidentiality clause in the employment contract, with a sanction in the form of a penalty clause in the event of an infringement of the clause. The confidentiality clause gives the employee a clear signal that not all information the employee has access to within the organisation may necessarily be disclosed.
In summary, as an employer, it is a good idea to include a confidentiality clause with a penalty clause in your employees’ employment contracts.