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DANISH IMPLEMENTATION OF DIRECTIVE 2016/943/EU: PROTECTING YOUR TRADE SECRET

2018-07-10

On 9th June 2018, a new Act came into force in Denmark specifically relating to the protection of commercial trade secrets.

The Act implements the EU Directive on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure which was adopted with the purpose of remedying the inconsistencies that existed between Member States as regards to the standard of protection accorded to trade secrets.

In particular, the Directive was adopted with the purpose of dealing with the disparities that existed between Member States as to the definition of a trade secret and the measures that should be taken in response to its unlawful use, acquisition or disclosure.

What is a trade secret?

The Danish Act, in faithfully conforming to the EU Directive, provides a three-pronged definition as to what amounts to a trade secret.

In the first place, it must be such that the relevant information is not commonly known amongst those that generally deal with that kind of information.

Secondly, it must be such that the commercial value of the information is inextricably connected to the fact that the information is kept secret. As such, the information would lose its value if it became public knowledge.

The concept of “commercial value” is not dealt with expressly in the Danish Act itself but the recital to the EU Directive outlines that the relevant information will have such value:

“where its unlawful acquisition, use or disclose is likely to harm the interests of the person lawfully controlling it, in that it undermines that person’s scientific and technical potential, business or financial interests, strategic positions or ability to compete”.

The final component of the definition requires that reasonable steps must have been taken, in the circumstances, by the individual controlling the purported trade secret to preserve its confidentiality.

Although not elaborated on in the Danish Act, such steps may include the finalisation of confidentiality agreements with employees or third parties that have had access to the confidential information in question or employee training to impart on such individuals the importance of the relevant information that amounts to a trade secret and how they can go about protecting it.

Unlawful acquisition, use or disclosure and consequences

The Danish Act outlines specific circumstances in which the acquisition, use or disclosure of a trade secret will be regarded as unlawful.

At the same time, the Act expressly preserves the legality of the acquisition, use or disclosure of such information in certain circumstances ranging from acquisition by virtue of reverse engineering where the individual is not restricted from doing so by any sort of legal obligation, to disclosure to reveal wrongdoing or illegal activities when in the public interest, which essentially covers whistleblowing operations.

Further, the Act makes specific provision for preserving the confidentiality of trade secrets during the trial process, where there exists a heightened risk of such confidential information being unlawfully appropriated given that such a process may necessitate the disclosure of confidential information to preserve the fairness of the trial.

As such, the Danish Act makes clear that any individual involved in the trial shall be prohibited from using or disclosing any trade secret that has been expressly outlined as being confidential during the trial so long as the relevant individual has become aware of the information as a result of participation in the trial. Any individual who acts contrary to this may be subject to private prosecution in accordance with section 152 of the Danish Penal Code.

Remedies

In the first place, the Act provides the Danish court with specific powers to order preliminary measures against an individual who is alleged to have unlawfully acquired, used or disclosed a trade secret. The recital to the EU ‘Trade Secrets’ Directive outlines the rationale behind granting the court such an option when it states that:

“The unlawful acquisition, use or disclosure of a trade secret by a third party could have devastating effects on the legitimate trade secret holder, as once publicly disclosed, it would be impossible for that holder to revert to the situation prior to the loss of the trade secret. As a result, it is essential to provide for fast, effective and accessible provisional measures for the immediate termination of the unlawful acquisition, use or disclosure of a trade secret”.

As such, prior to delivering a definitive judgment, the Danish court may order a preliminary injunction against the alleged infringer or alternatively, on the trade secret holder’s request, order that the alleged infringer forfeits any goods that are alleged to have been the product of the trade secret if there are specific reasons for believing that such an individual will use them in violation of the preliminary injunction ordered.

The Act further clarifies the punishments that can be ordered in case of a definitive finding by the Danish court that there has been an unlawful acquisition, use or disclosure of a trade secret.

In the first place, the infringer may be ordered to pay compensation, so long as the unlawful act was done intentionally or negligently, or alternatively infringement can be punishable by imprisonment of up to one year and six months unless a higher punishment is stipulated by section 299a of the Danish Penal Code.

The Act also details a number of coercive and injunctive measures that can be ordered in case of unlawful acquisition, use or disclosure of a trade secret which seek to, alongside protecting the confidentiality of the trade secret itself, prevent the infringer relying on an unlawfully obtained trade secret to produce goods of their own.

As such, the Act prescribes that the court may order the prohibition of production, marketing or use of such infringing goods. Furthermore, the court can also order that all such infringing goods on the market are to be withdrawn or alternatively destroyed if revocation from the market is insufficient in itself to protect the trade secret effectively.

Steps to take as a business

The transposition of the ‘Trade Secrets’ Directive into Danish law provides an opportune time for businesses to evaluate their approach to any such information that they may regard to be a trade secret.

In particular, it is worth considering whether sufficient steps have been taken to maintain the confidentiality of such information which is pivotal if such information is to come within the scope of protection of the new Act.

It is further worth noting that although the Act generally strengthens the protection accorded to trade secrets, businesses must act fast if labouring under the belief that there has been an unlawful acquisition, use or disclosure of their trade secret. The Act prescribes that in these circumstances, legal proceedings must be initiated within 6 months of the trade secret holder gaining knowledge of the occurrence of any such unlawful act.

Contact Magnusson for more information on the steps that can be taken to effectively protect your trade secret and action that can be taken if you believe that your trade secret has been acquired, used or disclosed unlawfully.

For further information on this topic please contact Nikolaj Juhl Hansen at Magnusson by telephone (+45 82 51 51 00) or email (njh@magnussonlaw.com).

The content of this newsletter is not intended to provide a comprehensive picture of the legislation. It is generally held and should not be considered as advice.

Download the article in the PDF format

Related People: Nikolaj Juhl Hansen

Related Service Areas: Corporate and M&A, Data Protection

Related Countries: Denmark

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