On October 23, 2018, the Trade Secrets Protection Act ("Wbb"), the implementation of the European Trade Secrets Directive, entered into force. The Act provides protection against the unlawful acquisition, use and disclosure of trade secrets and defines the measures, procedures and remedies that can be used in case of violations. What does this mean for you as an employer?
The Wbb provides enhanced protection for trade secrets. A trade secret is information that meets the following conditions:
is not generally known to or readily accessible to those who ordinarily deal with the information in question;
is not generally known to or
commercial value because it is secret; and
is subject to reasonable measures to keep it secret.
A trade secret extends beyond technical knowledge, manufacturing methods or recipes. Business information such as market strategies, business plans and trade data can also be a trade secret. Be aware of what in your business qualifies as a trade secret and take the necessary steps to protect it.
As an employer, how can you protect your trade secret(s)? Importantly, you must have taken reasonable measures to actually keep the secret secret. These include, for example, digital protection measures such as encryption, limiting who has access to the secret information, and including a confidentiality clause in an (employment) agreement.
In practice, a confidentiality clause is often included in the employment contract or a separate confidentiality agreement is signed. A penalty clause is not always attached to this. This is a shame, because if the non-disclosure clause is breached, it is difficult(er) to recover damages. If a penalty clause is linked to the non-disclosure clause, penalties are forfeited immediately from the first day of violation.
Besides the aforementioned fines to be forfeited directly on the basis of the employment contract, the Wbb offers additional possibilities in the event of violation. Many employers are reluctant to initiate proceedings, precisely because of the confidentiality of the information. They fear that it will be out in the open. The Wbb offers broader possibilities for taking action against violations, while at the same time better safeguarding the confidentiality of the information. For example, upon request, the judge can designate information as confidential, which may then not be used and disclosed. He may also delete or redact confidential passages from the ruling, and/or make the ruling available only to a limited number of persons. This prevents confidential information from becoming public after all.
In proceedings, the court may additionally order, upon request, the following (provisional) measures:
Prohibition or cessation of use of trade secrets;
Ban on production of goods using trade secret;
Seizure and evidence seizure;
Issue;
Recall;
Destruction;
Compensation.
In some cases, a breach of trade secret is justified, such as for whistleblowers and providing information to the works council as part of a request for advice. Members of the works council, incidentally, have a duty of confidentiality under the Works Councils Act.
In addition to suing the (former) employee, the Wbb also makes it easier to sue a new competing employer, for example, if that employer misuses trade secrets that the employee took from his former employer. In such a situation, unlawful competition proceedings are now usually initiated. The Wbb offers an additional possibility. The use or disclosure of a trade secret is in fact also unlawful under the Wbb if a person knew, or given the circumstances, should have known at the time that the trade secret was (in)directly obtained from someone who used or disclosed the trade secret in an unlawful manner.
If your employee transfers and uses confidential information from your company with his new employer, you may be able to sue not only the ex-employee but also the new employer under the Wbb. Of course, this also applies the other way around: if you, as an employer, make use of a trade secret of a new employee who is bound to keep this information secret on the basis of a secrecy clause from his previous employment contract, the former employer could take measures against you on the basis of the Wbb.
The wording of the non-disclosure clause is crucial to protect the employer's business interests. In practice, it often proves difficult to substantiate that a confidentiality clause has been violated, for example because the employer fails to substantiate exactly what secret information would have been used. Another problem arises when the confidentiality clause only prohibits sharing information with third parties. In such a case, the employer must prove that the employee actually shared information with third parties. If an employee sends confidential information to his private e-mail, then a clause that only prohibits sharing the information with third parties is not sufficient for violation of the clause.
Do you wish to invoke the protection of the Wbb? If so, make sure in any case that you take sufficient (technical) measures to keep the information confidential. These include computer and server security and a password policy. In addition, it is advisable to include a proper confidentiality clause in the employment contract, with a penalty clause and a definition of the concept of trade secrets that complies with the law. It is wise to explicitly state which information must be kept secret by the employee.
Even when concluding a settlement/termination agreement, it may be advisable to check the description of the confidentiality clause in the employment contract and, if necessary, to supplement it so that it is in line with the Wbb. This will allow you to invoke the protection of the Wbb at a later date, provided the other conditions are met.
Incidentally, as an employer, you need not fear that confidentiality clauses now included in employment contracts are no longer valid. In any case, the Wbb does not mean that non-disclosure clauses with a broader definition are void or can be declared void.
