On October 23, 2018, the Trade Secrets Protection Act (Dutch: WBB) came into effect.1,2 This article discusses what entrepreneurs can expect from the WBB and what is important in that respect. We also discuss which actions enterprises should undertake.
The WBB provides a definition of the term ‘trade secret’ and sets three conditions:
- Information must be secret, in the sense that it is not generally known or easily accessible within circles that are usually occupied with such information;
- The information must have commercial value because it is secret;
- The information must be subject to reasonable measures under the circumstances, to keep it secret.
The WBB also sets out when the acquisition, use or disclosure of trade secrets is considered unlawful or lawful. Also, the WBB provides enforcement measures, which makes it possible to refer directly to the WBB, if a certain measure is claimed.
A new set of procedural rules is also implemented with the WBB, specifically concerning cases about (alleged) trade secrets. For example, a judge can be asked to consider documents as confidential, so that these documents must be kept secret during and after the legal proceedings by the party, its lawyer and other persons involved. Upon request access to the (alleged) trade secrets can be restricted to a limited number of persons. The act also enables obtaining full cost award, comparable with cases about intellectual property.
It is to be expected that the introduction of the WBB will lead to an increase in the number of trade secret proceedings. A trade secret becomes easier to’grasp’, due to the conditions set out, which must be met, and the procedural measures provided offering more certainty that conducting legal proceedings on the trade secret does not disclose the secret yet. Such conditions will make taking judicial measures more accessible.
Why is the WBB important?
Nearly all organisations have knowhow; information that is valuable for the organisation and that the competition does not (directly) have. Such information is not only related to new technological- or product developments, but can also concern a customer base built over years, a market strategy or another useful trading instrument.
Such information usually represents an immense value for companies. It provides a unique or pioneering position vis-à-vis the competition, exactly because of that customer base or that strategy or due to that piece of technology that has not yet been developed to an extent that it may obtain protection of a patent.
For the growth of an enterprise, it is often necessary to share such information; internally with new colleagues or externally with third parties for entering collaboration or other relationships whereby sharing confidential knowledge is necessary. The confidential information is also usually stored in (IT) systems of an enterprise. However, sharing confidential information does not always run adequately, partnerships get derailed and personnel leave the enterprise, revealing confidential information, also with malicious intentions.
Within this context, the article in the Dutch newspaper De Volkskrant, dated October 15, 2018, is relevant. It deals with industrial espionage related to the closer cooperation between Chinese enterprises in the Netherlands.3 The article refers to news items of the General Intelligence & Security Service (Dutch: AIVD) about Chinese attempts at industrial espionage. Cybersecurity expert Sico van der Meer is also quoted; he states that companies lack the necessary vigilance when entering deals. Lithium Werks, which entered a partnership with a Chinese party, according to the article, argues that it has prepared itself by placing data on various servers and by making important information accessible only via internal networks. Kees Koolen, CEO of Lithium Werks, is quoted in the article: “This is a serious issue. It is (sic), the biggest problem is that many people are not aware of the risks and therefore, do not have a good strategy.” The article shows that knowhow protection is immensely important.
However, attention paid only to trade secret protection is not sufficient. Having an arsenal of enforcement possibilities enables the holder of a trade secret to keep this information secret without immediately exposing all the knowhow. The introduction of the WBB makes this possible.
Action required; implement reasonable protection measures
For a successful appeal to the WBB, it is minimally necessary that a trade secret within the meaning of the WBB is invoked. This means that you must demonstrate that there is evidence of valuable trade-secret information and that this is subject to reasonable protective measures.
Recently, the court of Central Netherlands had determined that a the protection of trade secrets could not be successfully invoked, because the party involved could not prove that reasonable measures were taken to keep the information secret.4 Therefore, it is essential that measures are taken and that this can be proven. This requires a plan of action that – in addition – is continuously monitored and updated.
For this purpose, it is useful to first map where the knowhow is located within the organisation, who has access to it and who may or may not, which technical measures are taken, and which technical measures are necessary to secure the knowhow better. Checking the existing (employment) agreements must be included in mapping the knowhow status. Where necessary, additional agreements should be made.
We concur with the quote of Kees Koolen and like to think along on the best strategy for protecting trade-secret information. Feel free to contact us for a Trade Secret Assessment.
¹ See also previous articles on this topic:
3 Niels Waarlo; www.volkskrant.nl/nieuws-achtergrond/zet-nederland-de-deur-open-voor-chinese-bedrijfsspionage-~ba91605d/
4 Rechtbank Midden-Nederland, 8 augustus 2018, ECLI:NL:RBMNE:2018:3715