Protection of Trade Secrets : Law No. 2018-670 of July 30th, 2018

Paris, August 16^th, 2018 – Law No. 2018-670 of July 30th on the “Protection of Trade Secrets” was published in the Official Gazette, No. 0174 on July 31st 2018¹.

This Law transcribes Directive 2016/943 of the European Parliament and of the Council of June 8th, 2016, on the “Protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure” into national law.

For the record, the French Constitutional Council declared the text in conformity in its decision of July 26th, 2018, after being seized by opponents² who saw in this text a tool of censorship and a limitation of whistleblowing activity.

We must recall that the European Directive 2016/943 aims to “harmonize national rules for the protection of trade secrets” and “strengthen the protection of innovative companies with regard to dishonest practices originating from within or outside of the Union, and which are aimed at the misappropriation of trade secrets, such as theft, unauthorized copying, economic espionage or non-compliance with confidentiality requirements”.

Definition

Law 2018-670 first provides a definition of the information concerned by trade secrets in threefold: the information must 1) have a confidential nature, that is to say it must not be known or easily accessible, 2) have commercial value and 3) have been subject to reasonable measures taken by the legitimate holder to maintain secrecy.³

Lawful acts

Law 2018-670 defines a series of lawful acts. “An independent discovery or creation,” as well as “the observation, study, disassembly or testing of a product or object that has been made available to the public or is lawfully in the possession of the acquirer who obtains the information, excepting contractual stipulations limiting or prohibiting the acquisition of the secret”, constitute legal means of obtaining a trade secret.

Unlawful acts

Law 2018-670 then provides for a series of unlawful acts.

a) Unauthorized access and unfair behavior

“Acquisition of a trade secret is unlawful when it is made without the consent of the rightful holder and results in:
1°) unauthorized access to any document, object, material, substance or digital file which contains the secret or from which it may be inferred, or of unauthorized appropriation or copying of these elements, as well as
2°) any other behavior considered, given the circumstances, as unfair and contrary to commercial practice”.

b) Violation of an obligation

Is also considered unlawful “the use or disclosure of a trade secret made without the consent of its rightful holder by a person who acts in violation of an obligation not to disclose the secret or limit its use”.

c) Exploitation of a product related to a breach in trade secrecy

The law does not limit the scope of unlawful acts to the obtention or the communication of information. It extends the scope of unlawful acts to the exploitation of “any product significantly resulting from an infringement of trade secrets” wherein the person who carried out these activities knew or ought to have known under the circumstances that the secret was being used unlawfully.⁴

d) Obtention of information from a non-legitimate person

The obtention of a trade secret is also considered to be unlawful when the secret is obtained directly or indirectly from a person who unlawfully used or disclosed it.⁵

Derogations and complementary measures

Law 2018-670 then sets out derogations or exceptions permitting disclosure, in particular to ensure freedom of expression, communication, and information⁶.

Finally, the Law establishes measures to prevent or stop an unlawful breach of a trade secret, publicity measures, as well as measures designed to ensure confidentiality during legal proceedings.^{7 8}

In view of the definition given in Law 2018-670, it is even more important than in the past to put in place protective measures identifying a company’s sensitive information of, limiting its access, and controlling the communication of this sensitive information, to be able to qualify it as “trade secrets” and allow it to benefit from the protective measures established by Law No. 2018-670.

A clear identification of the information corresponding to a trade secret may be useful to the holder, for example and in particular to refuse a seizure of the corresponding elements in the case of a seizure for counterfeiting by a third party, or at the very least require a sealing order of these elements.

Conversely, experts operating a seizure for counterfeiting will undoubtedly need to be attentive to all markings identifying an information labeled “trade secrets” by the seized entity.

One last point deserves attention. Directive 2016/943 provided that the duration of the statute of limitations to act against an unlawful act should not exceed six years. Law No. 2018-670 sets this statute of limitations at five years from the date of the acts concerned.

All of the teams at REGIMBEAU are available to study on a case-by-case basis the effects of the Law of July 30th, 2018, in particular the measures to be put into place allowing information to considered as a trade secret.

¹ Although definitively adopted by the National Assembly and the Senate and promulgated by the President of the Republic following the declaration of conformity by the Constitutional Council, the entry into application of this law is still uncertain as it provides in its Art.1 in fine that “the conditions of application of Title V relative to the Protection of Trade Secrets are fixed by decree in Council of State.
² In particular following several complaints emanating from the journalistic profession.
³ According to Law 2018-670, information which is subject to trade secrecy is:
1) information that isn’t, in itself or in the exact configuration and assembly of these elements, generally known or easily accessible to those familiar with this type of information because of their line of business,
2) which has commercial value, whether actual or potential, because of its secrecy, and
3) which is the subject of reasonable protective measures by its legitimate holder, considering the circumstances, to keep it secret.
⁴ The production, offer or placement on the market as well as the import, export or storage for these purposes of any product significantly resulting from an infringement of trade secrecy are also considered as an unlawful use when the person carrying out the activities knew or ought to have known under the circumstances that the secret was unlawfully used.
⁵ Obtaining, using or disclosing a trade secret is also considered unlawful when, at the time of obtention, use or disclosure of the secret, a person knew, or ought to have known under the circumstances, that the secret was obtained directly or indirectly from another person who used or disclosed it unlawfully.
⁶ These exceptions appear in new Articles L. 151-7 to L. 151-9 of the Commercial Code created by Law No. 2018-670. The exceptions relating to freedom of expression, communication and information, in particular, reflect the fears expressed by the journalistic profession.
May also constitute bases for these exceptions, in particular the law of the European Union, the treaties or international agreements in force or national law, in particular in the exercise of the powers of investigation, of control, of authorization or of sanction of jurisdictional or administrative authorities.
An exception may also be made for revelations made, in order to protect the public interest and in good faith, against illegal activity, negligence, or misconduct, including when exercising a right of alert defined in Article 6 of Law No. 2016-1691 of December 9, 2016, relating to transparency, to the fight against corruption and to the modernization of economic life. This last series of exceptions aims to preserve a right of alert.
⁷ It should be noted that Law 2018-670 only provides for civil penalties. It does not provide for criminal sanctions.
⁸ Law No.2018-670 makes only one minor amendment to the French Intellectual Property Code (“IPC”). This change does not call for any particular comment. It simply leads to the replacement of the words “of confection and trade” by the word “business” in Article L.675-5-1 CPI relating to a possible reversal of the burden of proof in the case of a patent relating to a process for obtaining a product, for which the court may order the defendant to prove that the process used to obtain an identical product is different is different from the patented process and for which the defendant fails to provide such proof, any identical product manufactured without the consent of the patent owner is presumed to have been obtained by the patented process if the product obtained by the patented process is new and the likelihood is high that the identical product was obtained by the patented process.
The last paragraph of article L675-5-1 provides a reserve of protection of the defendant which is henceforth worded as follows: “In the production of the contrary proof, are taken into consideration the legitimate interests of the defendant for the protection of his trade secrets”.