Business critical information needs to be managed to avoid the risk of losing valuable assets and competitive advantage
In summary:
- Companies should identify the valuable intellectual property assets within the business and take appropriate actions to protect them
- Trade Secrets are important tools for a company to be able to protect the value of confidential information and to maintain a competitive advantage in an ever more digital market.
- Clear and considered Trade Secret management is an important part of the IP toolbox, sometimes even more important than registered intellectual property rights (IPR)
- To maintain value management should take adequate measures, which make it critical to have a well thought-out Trade Secret Strategy
- Companies must educate the employees about the Strategy and the importance of confidentiality.
- The EU Data Act that entered into force on 11 January 2024 and will be applicable on 12 September 2025 has the goal to make more data (in particular industrial data) more accessible and usable, encouraging data-driven innovation and increasing data availability, making it even more key for companies to identify their Trade Secrets and take measures to preserve the confidentiality.[1]
Earlier this year, the World Intellectual Property Organization (WIPO), “World Intangible Investment Highlights”[2], which revealed that investment in intangible assets (including brands, designs, data and software) has “grown three times faster over the past 15 years than investment in physical assets like factories and machinery”. Sweden, along with the US and France, saw the most activity. At the same time, research shows that conscious and strategic usage of trade secrets is not widespread. Around 40% of SMEs provide no Trade Secrets training to their employees[3].
In principle, all companies have business-critical information that should be handled thoughtfully to avoid the risk of losing valuable assets and competitive advantages. However, many companies lack a clear and considered strategy for both the external and the internal management of business-critical information in general and more specifically of Trade Secrets. As no registration is necessary to obtain Trade Secret protection, it is up to the management of the company to take steps to develop a strategy that is appropriate for the company. Essentially, the law protects those who protect themselves but many companies lack basic knowledge of what they need to do in order to be covered by the legislated protection. Of course, the amount of time and resources a company should reasonably spend on a Trade Secret Strategy varies greatly for different types of companies. Nevertheless, every business owner/management should at least:
- identify valuable Trade Secrets,
- analyse which individuals, external as well as internal, should have access to the information, and
- apply reasonable protection to maintain secrecy.
When a company considers that Trade Secrets have been attacked, the most critical question for the outcome of the case is generally the question of what can constitute a Trade Secret. The definition of Trade Secrets is regulated across the EU, primarily by the Trade Secrets Directive (2016/943), and trade secrets are defined as confidential information, which is or has:
- Secret
Not generally known among, or accessible to, the persons in the relevant business sector
- Valuable
Commercially valuable because it is secret, and
- Reasonable actions of protection
Subject to reasonable steps taken by the rightful holder of the information to keep it secret, such as e.g. the use of confidentiality agreements for business partners.
Two cases involving Trade secrets from Swedish Courts during this year concluded, again, that it is crucial to have acted proactively, early on.[4] In this digital decade, the importance of actions and keeping a stringent strategy for Trade Secret management becomes even more important. For one thing, data is transferred more easily and faster with the ongoing development of new technology. In addition, on 11 January 2024, the EU Data Act entered into force with the aim to make more data available for use and sets up rules on who can use and access what data for which purposes in the EU.
To protect Trade Secrets without undermining the goal of the Data Act to make more data available, the responsibility falls, again, on the data holder to act. The data holder and the user/ third party should agree on certain measures to preserve the confidentiality of the Trade Secrets. Where these measures are not respected, the data holder may withhold or suspend the data sharing. The data holder may only refuse to share data where it can demonstrate that it is highly likely to suffer serious economic damage from the disclosure of Trade Secrets. And anyone who has tried to show evidence of highly likely serious economic damages, knows it can be, if not impossible, a huge challenge.
At Rouse, we offer a wide array of trade secret services, including trade secret policy development, litigation advisory for trade secret infringement, and trade secret protection training to control and enhance your business’s competitive advantage. Please contact My Mattsson for more information.
For further information, please contact:
My Mattsson, Rouse
mmattsson@rouse.com
=====
Footnotes:
[1] https://digital–strategy-ec-europa-eu.translate.goog/en/policies/data-act?_x_tr_sl=en&_x_tr_tl=sv&_x_tr_hl=sv&_x_tr_pto=sc
[3] https://www.wipo.int/web-publications/wipo-guide-to-trade-secrets-and-innovation/en/foreword.html
[4] Mål: PMT 6373-22 – Patent- och marknadsöverdomstolen vid Svea hovrätt
