Practical Tips To Protect Trade Secrets
Gerard Kelly of Mason Hayes & Curran LLP discusses the practical and legal aspects of safeguarding trade secrets in Ireland and highlights potential challenges
Protecting confidential information and trade secrets is an important part of any business. Confidential information is a proprietary element of the business that gives it a competitive edge over the rest of the market. However, a competitive edge can only last as long as the information remains secret and outside the public domain. Protection is often ensured through clear contract terms with employees and contractors, or nondisclosure agreements (NDAs) with various partners.
Legal protections for trade secrets
Irish law recognises the protection of confidential information and trade secrets in two ways — under the common law, through established case law, and through legislation. The EU Trade Secrets Directive was implemented in Ireland by the European Union (Protection of Trade Secrets) Regulations 2018. A trade secret is defined by the Directive as information that:
Is secret, i.e. not generally known; Has commercial value because it is secret; and
Has been kept secret through reasonable steps taken by the holder.
Information meeting all three criteria benefits from protection under the Directive if acquired without the consent of the trade secret holder unlawfully or in breach of a relevant agreement. Unlike the common law regime, the Directive made it unlawful to acquire confidential information as opposed to imparting it.
However, the Directive clarifies that trade secret infringement does not arise where the acquisition of a trade secret may be considered lawful, such as independent creation or reverse engineering from what is publicly
available. The protections available for unlawful use include remedies such as damages, injunctive relief and other corrective measures.
Limitations
It is difficult to prove misappropriation of trade secrets since the perpetrators are unlikely to make their unlawful conduct obvious. They will often ensure there is no record or paper trail. Very often it will be the weight of circumstantial evidence and the evidence of one or more experts in the relevant field which will determine the question of liability, often after a significant discovery exercise looking for the ‘smoking gun’.
Practical protections for trade secrets
In order for a company to best protect itself from misappropriation of its trade secrets there are a few practical steps that can be taken: Companies should identify and define what constitutes their confidential information. This should be documented and form part of the company’s NDAs. There should be adequate safeguards in place to prevent unauthorised access to trade secrets, including physical and technological restrictions on access. For employees and contractors, especially those permitted to have access to the trade secrets, their contracts should have appropriately worded confidentiality, noncompete and non-solicitation clauses. The same goes for third parties who may have access to trade secrets as part of their engagement with a business, for example, a potential purchaser of the business.
Care should be taken that any contractual limitations imposed are clear, reasonable and proportionate in the context so as to remain enforceable. Ideally, while NDAs should be signed at the start of the engagement, companies should consider that contractors sign confirmatory agreements at the end of an engagement. These agreements are useful as they reiterate the position on confidential information and provide for the ability to notify companies that may subsequently engage with the contractor about those obligations.