The Trade Secrets Act

What is Coca-Cola’s recipe for that popular, brown fizzy drink? How does KFC make its crunchy batter enclosing that tender piece of chicken? How do Google’s algorithms work? These are all questions we will probably never get an answer to, unless we are insiders in these companies.

Many companies already do their utmost to protect their trade secrets, but since 23 October 2018 this kind of information has also been protected by law with the implementation of the Trade Secrets Act (Wet bescherming bedrijfsgeheimen, abbreviated to Wbb).

The Wbb is the implementation of the European Trade Secrets Directive of 2016. The purpose of this directive is to harmonize across the EU Member States the rules on the protection of knowhow and business information that is not in the public domain. The Wbb gives holders of trade secrets various options for taking measures to prevent third parties from unlawfully disclosing, obtaining or using trade secrets. These options did not exist before the Wbb entered into force and there were no specific regulations that guaranteed the protection of trade secrets.

Under the Wbb, a ‘trade secret’ is taken to mean information that:

  • is secret; and
  • has commercial value because it is secret; and
  • is subject by the holder of the trade secret to reasonable measures to protect this information.

If the trade secret meets these conditions, it is protected in principle against third parties using, obtaining or disclosing the trade secret without permission. An exception to this is reverse engineering. If an individual discovers the trade secret in this way, the trade secret cannot be maintained.

The Wbb brings with it a number of advantages for the protection of information and knowhow, from which start-ups and SMEs in particular will benefit. Take, for example, information that does not qualify for protection under trademark, patent or copyright law. This information can now be protected under the Wbb. Another advantage is that, unlike patent law, the Wbb has no publication obligation. In addition, trade secrets are not subject to obligatory costs or a particular period of protection.

With the introduction of the Wbb the Code of Civil Procedure (Wetboek van Rechtsvordering) now contains provisions, on the grounds of which the holder of a trade secret can submit a request for that trade secret to be kept secret. If the court allows this request, no one who is involved in the legal action concerned may disclose or use the trade secret. The trade secret therefore remains confidential.

The Act is a good addition to the customary practice of signing non-disclosure agreements, but cannot of course replace it. It is always a good idea to agree explicitly with your opposite party that you expect your confidential information to remain confidential and that they will not reverse engineer your products.

Do you have your own Coca-Cola recipe and want to keep it secret? We will be pleased to help you decide on the right measures to take.