On the 14th May 2019, the Trade Secrets Act, 2018 (“the Act”) came into force. This Act transposes Directive (EU) 2016/943 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (“the Directive”).
A ‘trade secret’ is defined in the Act as a means of information which (a) is a secret (“not known among or accessible to persons within the circles that normally deal with that kind of information”); (b) has commercial value because it is secret; and (c) in regard to which, the trade secret holder took reasonable steps to keep it secret.
Why do trade secrets require protection against their unlawful acquisition, use and disclosure? Such trade secrets have proven to be increasingly valuable assets for businesses who invest heavily in R&D to innovate their know-how which can give them a competitive advantage over their competitors.
Like other intellectual property assets, this undisclosed, confidential and valuable know-how and information defined as ‘trade secrets’ are fundamental for the advancement of start ups and SMEs as well as established businesses. Hence, regulation for the protection of trade secrets is also fundamental for the local and European economy that is ever more based on intellectual creation and innovation.
Prior to the implementation of this Act, there was no formal definition of ‘trade secret’ under Maltese law and despite various references in different pieces of legislation, such a term was not regulated. Trade secrets holders could generally protect their interests through fiduciary obligations and non-disclosure agreements.
The EU Directive on Trade Secrets
The 2016 Directive’s aim was to harmonise the definition of trade secrets as well as to define the various forms of legal and illegal acquisition, use and disclosure of trade secrets and propose remedies for those affected by such misappropriation
EU member states were bound to implement this Directive by the 9th June 2018.
The Trade Secrets Act, 2018
The Act, in line with the Directive, sets out circumstances of lawful and unlawful acquisition, use and disclosure of trade secrets.
Unlawful acquisitions of a trade secret are those carried out without the consent of the trade secret holder by:
(a) unauthorized access to, appropriation of, or copying of any documents, objects, materials, substances or electronic files, lawfully under the control of the trade secret holder and
(b) any other conduct which is considered contrary to honest commercial practices.
Furthermore, the unlawful use or disclosure of a trade secret is when carried out by a person who acquired the trade secret unlawfully; or was in breach of a confidentiality agreement or a duty not to disclose the trade secret; or in breach of a contractual or other duty to limit the use of the trade secret.
Similarly, the production, offering or placing on the market of infringing goods, or the importation, export or storage of infringing goods for those purposes, is also considered an unlawful use of a trade secret where the person carrying out the activity knows or ought to have known that the trade secret was used unlawfully.
There are however some exemptions from infringement:
- For exercising the right to freedom of expression and information as set out in the Charter of Fundamental Rights of the EU, the Constitution of Malta and the European Convention Act, including in respect for the freedom and pluralism of the media;
- For revealing misconduct, wrongdoing or illegal activity, provided that the respondent acted for the purpose of protecting the general public interest;
- Disclosure by workers to their representatives as part of the legitimate exercise by those representatives of functions in accordance with the law, provided that such disclosure was necessary for that exercise;
- Any disclosure by an employee to a whistle-blowing reporting officer or whistle-blowing reports unit as provided for in the Protection of the Whistleblower Act; or
- For the purpose of protecting a legitimate interest recognized by law.
The remedies provided by the Act in cases of infringement include the award of damages to the rightholder, imposition of sanctions on the infringer and publication of the court decisions. The Act also provides for the preservation of confidentiality of the trade secrets in the course of legal proceedings and the provision of provisional and precautionary measures.