NEWSFLASH | Law of June 26th 2019 on trade secrets

Trade secrets have for a long time been insufficiently protected and difficult to defend compared to intellectual property rights. It is however an equally important instrument for the protection of technological or non-technological innovations and knowledge in EU companies.

It is within this context that the law of 26 June 2019 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (the “Law”) has been published in the Memorial[1] on 28 June 2019.

The Law seeks to transpose Directive (EU) 2016/943 of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (the “Directive”) and to establish a sufficient level of protection of trade secrets. In particular, the Law provides for measures and procedures to take action against the unlawful acquisition, use or disclosure of such secrets.

1. Framework for the protection of trade secrets

Until now, in Luxembourg, the concept of trade secrets was only defined by case law. Four levels of protection could be envisaged in case of breach of a trade secret: (i) criminal law (article 309 of the Penal Code), (ii) civil liability law (article 1382 of the Civil Code), (iii) contractual law, or (iv) unfair competition law.

The Law now defines a trade secret as any information that:

• is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
• has commercial value because it is secret;
• has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

This definition excludes current information as well as experience and skills obtained by workers in the normal performance of their duties.

The Law establishes a protective framework for such secrets, without this protection being limited in time. However, the protection is limited to cases of unlawful acquisition, use or disclosure of trade secrets.

1. Unlawful acquisition, use or disclosure of trade secrets

The acquisition of a trade secret without the consent of the trade secret holder shall be considered unlawful whenever carried out by:

• unauthorised access to, appropriation of, or copying of any documents, objects, materials, substances or electronic files, lawfully under the control of the trade secret holder, containing the trade secret or from which the trade secret can be deduced;
• any other conduct which, under the circumstances, is considered contrary to honest commercial practices.

The use or disclosure of a trade secret shall be considered unlawful whenever carried out, without the consent of the trade secret holder, by a person who is in breach of a confidentiality agreement or any other duty not to disclose the trade secret, or of a contractual or any other duty to limit the use of the trade secret.

On the other hand, trade secrets do not require any protection when obtained lawfully. This refers in particular to cases where the secret has been obtained or discovered independently or in conformity with honest commercial practices.

A trade secret shall also be deemed obtained lawfully in the exercise of the right of workers or workers’ representatives to information and consultation.

2. Exceptions to the protection of trade secrets

The protection offered to trade secrets is not absolute and may in some cases conflict with superior interests. In other words, even if there is an unlawful acquisition, use or disclosure of a trade secret, the judge must reject any request from the holder of the secret.

These superior interests are essentially the right to freedom of expression and information in the media as well as the protection of whistleblowers who reveal misconduct, wrongdoing or illegal activity for the purpose of protecting the general public interest. The protection of whistleblowers as it currently exists under Luxembourg law is therefore not affected by the Law.

The protection of trade secrets as provided for by Law will also be excluded in the event of disclosure by workers to their representatives as part of the legitimate exercise by those representatives of their functions in accordance with EU or national law, provided that such disclosure was necessary for that exercise.

2. Measures, procedures and remedies

The holder of a trade secret that has been unlawfully acquired, used or disclosed has several means of action at his disposal.

1. Summary proceedings

He may first request the application of provisional and protective measures before the President of the District Court, who will issue a summary order against the alleged infringer in accordance with Articles 934 and following of the Civil Procedure Code (the “CPC”). The president of the district court is competent regardless of the value of the request.

The President of the District Court may order, in particular, the cessation of the use or disclosure of the trade secret, the prohibition of the production or use of infringing goods, or the seizure or delivery up of the suspected infringing goods.

The Law then sets out the criteria against which the judge must be guided in making his decision. These criteria are different from those in Articles 932[2] and 933[3] of the CPC on summary proceedings. This is therefore a new case of opening of summary proceedings based on autonomous criteria.

The measures ordered by the President of the District Court may be revoked upon request of the respondent, if, in particular, the applicant does not institute legal proceedings leading to a decision on the merits of the case before the Ddistrict Court, within a reasonable period determined by the President or, in the absence of such determination, within a period not exceeding 1 month from the serving of the order.

2. Decision on the merits

The holder of a trade secret may also bring an action before the District Court sitting in commercial matters in order to obtain a decision on the merits. The District Court sitting in commercial matters is competent regardless of the value of the request.

Where there has been unlawful acquisition, use or disclosure of a trade secret, the District Court sitting in commercial matters may order against the infringer the cessation of the use or disclosure of the trade secret, the prohibition of the production or use of infringing goods, the adoption of the appropriate corrective measures with regard to the infringing goods or the destruction of all or part of any document containing or embodying the trade secret.

The trade secret holder may also claim compensation for damage resulting from an unlawful acquisition, use or disclosure of a trade secret due to an infringer who knew that he was engaged in such acquisition, use or disclosure of a trade secret.

Article 14 of the Directive provides that Member States may 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. In our view, it is regretful, that the Law does not address this point, which constitutes an essential provision for the protection of workers who have not acted intentionally.

Finally, the Law also provides that the parties, their lawyers or other representatives, court officials, witnesses, experts and any other person participating in legal proceedings relating to the unlawful acquisition, use or disclosure of a trade secret, are not permitted to use or disclose any trade secret or alleged trade secret which the district court has identified as confidential.

3. Limitation period

Article 8 of the Directive defers to national law for the determination of the limitation period, and sets a maximum limit of 6 years.

According to the Law, the actions described above will be prescribed after 2 years from the time when the trade secret holder has knowledge of the unlawful acquisition, use, or disclosure of the trade secret and is aware of the infringer’s identity.

It is significant to note that Belgium and France opted for a five-year limitation period. For harmonisation purposes, it would have been useful if Luxembourg had chosen to align its limitation period with those laid down in the neighbouring Member States.