Lawyers and trade secrets

Lawyers and trade secrets is not something I ever expected to address. The connection between the two is not obvious. Yet now I am now addressing the subject for a second time, in a different context to the first.

Previously, I wrote about how lawyers’ lack of awareness of cybersecurity was making law firms’ databases the easy route for spies wanting access to commercial secrets. The companies which produce the treasured secrets protect them powerfully, but the companies’ lawyers are lagging behind. The American FBI was so concerned about it that they asked large law firms to take action.

The Law Society has now also joined with others to publish cybersecurity advice to law firms.

Maybe not surprisingly, trade secrets - not protected by patents or other traditional intellectual property rights - are dealt with differently across Europe. In 18 member states, there is legislation on misappropriation of trade secrets, although sometimes without defining what trade secrets are (for example, in Germany and Spain). But in other countries, including the UK, there is no specific legislation.  

Protection will depend on judicial interpretation of general provisions on extra-contractual liability or on traditional common law.

Now the European Commission is tackling the topic. Part of its reasoning is to align the EU with the TRIPS Agreement (The Agreement on Trade Related Aspects of Intellectual Property Rights), which comes under the jurisdiction of the World Trade Organisation. The commission’s proposed package aims to bring the protection of trade secrets within the EU into line with that of Japan and the US as far as civil (though not criminal) law is concerned.

On top of that, the commission believes that harmonised EU rules could, over time, contribute to influencing third countries to establish similar frameworks, so benefiting EU companies operating in those countries.

Late last year, the commission published a draft directive on trade secrets (COM/2013/0813 final). As so often with EU legislation, it was preceded by a study, which criticised the ‘fragmented and diversified nature of the existing protection against misappropriation of trade secrets throughout the Union’, which was ‘in general opaque and imposing unnecessary costs and risks’. It considered that security for R&D ‘is a precondition for businesses to innovate’, and concluded that ‘harmonisation of trade secret law in the EU would improve conditions for firms to develop, exchange and use innovative knowledge’.

So what has this to do with lawyers? The main concern is Article 8 of the draft directive, which deals with ‘legal proceedings relating to the unlawful acquisition, use or disclosure of a trade secret’. Parties, lawyers, witnesses and experts who participate in such legal proceedings ‘shall not be permitted to use or disclose any trade secret or alleged trade secret of which they have become aware as a result of such participation or access’.

This may be understandable, but has ramifications for lawyers. Can (or should) a lawyer be bound to secrecy in this way? What about loyalty to the client? What about a fair trial, which might be affected if a lawyer is bound to secrecy for part of the evidence? Is it consistent with the European Convention on Human Rights?

Article 8 goes on to say that there should be at least the possibility to restrict access to hearings and their records and transcripts when trade secrets may be disclosed. Only a limited number of people should be given access: at least one person from each party, their respective lawyer or representative, and court officials.

Secret justice has been in the news this week, and this provision raises similar concerns.

And of course the question of who should have secret access needs to be resolved – for instance, should it be only lawyers, who are subject to strict ethical codes which are enforceable against them, or any legal representative?

Some say that the wording of other parts of the draft directive - for instance, the definition of a trade secret - needs to be tightened. Serious work on the draft has been interrupted by the elections for the European Parliament.

The committee reporter appointed in January of this year did not stand for re-election, and so the work of the European Parliament’s Legal Affairs Committee is planned to resume in September with a new reporter.

So the lobbying will continue. And I eagerly await the eventual third approach to lawyers and trade secrets…

Jonathan Goldsmith is secretary general of the Council of Bars and Law Societies of Europe, which represents around a million European lawyers through its member bars and law societies. He blogs weekly for the Gazette on European affairs