In our last alert on the cross-border protection of trade secrets, available here, we discussed similarities and differences between the United States’ Defend Trade Secrets Act (“DTSA”), the federal statute that allows plaintiffs seeking to redress trade secret misappropriation in the U.S. federal courts, and the European Directive on the Protection of Undisclosed Know-How and Business Information (Trade Secret) Against Their Unlawful Acquisition, Use and Disclosure (“EU Directive”).
In this alert, we compare the trade secret statutes of individual European member states and the United Kingdom (“UK”) to the protections provided by the DTSA. While the EU Directive was meant to harmonize the protection available for trade secret information across Europe, it’s important to recognize that each European nation has its own trade secret laws that can vary in the protections they provide and their application. As such, it is critical for companies operating across borders in the EU/UK and in the United States to understand the various trade secret protection regimes, so those laws can be leveraged effectively.
This alert compares the trade secret laws of the U.K., France, and Germany to related protections provided by the DTSA, and examines a recent cross-border trade secret dispute and how a trade secret protection protocol may have avoided the need to file a lawsuit in the first place.
Definition of Trade Secret in the United States and Across Europe
As we discussed in our first post, the definition of what constitutes a trade secret under the DTSA and EU Directive are similar. Under both frameworks, a trade secret can be information of almost any type, including financial, business, scientific, technical, economic, or engineering-related information, that derives value from the fact that it has been kept secret, is not readily ascertainable by those with knowledge in the relevant field, and for which reasonable measures have been taken to keep the information secret. See 18 U.S.C. § 1839(3)(A-B); EU Directive, Art. 2(1)(a-c).
The domestic trade secret laws of the U.K., France, and Germany each have similar definitions of what constitutes a trade secret. Under the UK Trade Secrets Regulations 2018 (“UK Regulations”), a trade secret is information that “(a) is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among, or readily accessible to, persons within the circles that normally deal with the kind of information in question, (b) has commercial value because it is secret, and (c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.” UK Statutory Instruments, 2018 No. 597, § 2.
The French Decree No. 2018-1126 of December 11, 2018 on the Protection of Trade Secrets (“French Trade Secret Decree”) provides a similar definition, explaining that a trade secret is information that “(a) is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question, (b) has commercial value, actual or potential, due to its secret nature, and (c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.” Decree No. 2018-1126, Article L.151-1.
The German Act on the Protection of Trade Secrets of 18 April 2019 (Federal Law Gazette I, p. 466) (“German Trade Secrets Act”) provides a definition that closely resembles that in the UK and France, defining trade secrets to mean information that: (a) is not, as a whole or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question and is thus of economic value; (b) has been subject to reasonable steps under the circumstances, by its lawful holder, to maintain secrecy, and (c) concerning whether there is a legitimate interest in maintaining secrecy. See Act on the Protection of Trade Secrets, Section 2.
It is critical for companies to recognize that the definition of what constitutes a trade secret is similar across the U.S., U.K., France, and Germany and also across many other EU nations, because this alignment of the definition of trade secret allows companies to craft trade secret protection protocols that can work across borders – between business units in different EU nations, or between business units in the EU and US – to ensure effective but efficient trade secret protection. This allows teams in different countries to work together securely and efficiently, without the need for consideration of multiple trade secret protocols.
Embodied within each definition is the requirement that reasonable measures or steps be taken to protect trade secret information. There is no set rule in any of these jurisdictions for what constitutes reasonable measures because what is reasonable for a given company is context specific. That said, the following protective measures should be considered by companies with trade secret assets:
- Identifying and labeling trade secret information as confidential;
- Establishing companywide policies for handing confidential information including trade secret protection protocols;
- Requiring employees to sign confidentiality and nondisclosure agreements as part of their employment agreements;
- Requiring non-solicitation agreements for employees; and
- Adopting reasonable electronic network and physical security measures.
Protections Against Trade Secret Disclosure and Damages for Misappropriation in the United States and Across Europe
Each of the trade secret statutes in the United States, UK, France, and Germany provides for injunctive relief to stop trade secret misappropriation once it has occurred. The statutes also allow for damages to compensate victims of trade secret misappropriation.
United States
A DTSA injunction may prevent actual or threatened misappropriation as long as the injunction does not prevent a person from entering into an employment relationship or conflict with state law prohibiting restraints on the practice of a profession. The DTSA also provides for an award of damages for actual loss or unjust enrichment caused by the misappropriation. See 18 U.S.C. § 1836(b)(3).
United Kingdom
An injunction under the UK Regulations may prohibit use of the misappropriated trade secret or any product made using or embodying such trade secret information, including the recall of any such product, and may direct the destruction of documents and things embodying the trade secret. The UK Regulations also provide for an award of damages for negative economic consequences, including lost profits the trade secret holder has suffered. A damages award may also include non-economic elements, including the moral prejudice caused to the trade secret holder by the unlawful acquisition, use, or disclosure of the trade secret. UK Regulations, Sections 14, 17.
France
Under the French Trade Secret Decree, an injunction may prohibit the performance or continuation of acts related to trade secret disclosure, including removal of products from the market that utilize the trade secret, and an order for the destruction of misappropriated trade secret information unlawfully retained. When calculating damages, courts will take into account the negative economic consequences of the infringement of business secrecy and the profits made by the person who infringed the business secret. French Trade Secret Decree, Articles L. 152-1 – 152-7.
Germany
An injunction under the German Trade Secrets Act allows for destruction of documents representing trade secrets, removal of infringing goods from sales channels/marketplace, and destruction of infringing goods. In Germany, an infringer who acts intentionally or negligently is liable for damages for any harm arising from the infringement. The profit made by the infringer as a result of the infringement may be taken into account when assessing the damages, and the claim to damages may also be determined on the basis of the amount that the infringer would have had to pay in appropriate remuneration if he or she had obtained consent to acquire, use, or disclose the trade secret. German Trade Secrets Act, Sections 7, 10.
Trade Secret Protection Protocols for Safe Transfer of Trade Secrets Across Borders
The above and other related provisions in the trade secret protection regimes in countries across Europe are important to keep in mind with crafting non-disclosure agreements for protection of information exchanged between entities across Europe and across the world. As a part of that required diligence in protecting trade secrets, it is a recommended practice to include trade secret protection protocols as part of partnership and joint development agreements to further specify how valuable trade secret information is to be treated to maintain secrecy as the information travels across borders, especially given the current volume of trade secret litigation relating to cross-border exchanges of information.
Recent cases alleging trade secret theft illustrate the need for inclusion of such protocols in partnership agreements. For example, Prema Engineering S.r.l. (“Prema”) recently filed a lawsuit against Automobili Lamborghini S.p.A. and Automobili Lamborghini America, LLC (together, “Lamborghini”) for trade secret misappropriation related to Lamborghini’s alleged theft of multiple versions of Prema Hypercar steering wheel setups.
Hypercars are like Formula 1 cars in that they are technologically advanced and constantly collect large amounts of data. Each Hypercar and its driver is supported by large teams of engineers and technicians that analyze collected data in real time to maximize performance and implement strategies for important decisions the drivers and teams must make throughout a race. Each vehicle setup contains a proprietary package of computer code developed by the engineers and technicians. The setups are customized for each racetrack and race session, and they enable the collection and processing of data collected from the Hypercars while they are running. Setups are also used to customize and configure steering wheels to enable the driver to effectively process and use relevant data during a race to maximize the Hypercar’s performance.
Lamborghini sold racing team Iron Lynx two Hypercars, with the intention that Prema would be responsible for all servicing, maintenance, technical, and engineering support for the team, including provision of the steering wheels and proprietary steering wheel setups. The complaint alleges that Lamborghini stole multiple versions of Prema Engineering’s steering wheel setups from the Iron Lynx racing team’s Lamborghini-manufactured Hypercar throughout the 2024 racing season including at Circuit of the Americas (“COTA”) in Austin, Texas.
Prema Engineering alleges that it only learned of Lamborghini’s theft of its setup from the COTA testing after Lamborghini returned the steering wheel hardware it had borrowed from Prema Engineering. Prema Engineering had loaned a blank steering wheel—i.e., without a copy of any of Prema Engineering’s proprietary Setups – to Lamborghini after Lamborghini requested the steering wheel to test its racing simulator at their factory in Sant’Agata Bolognese, Italy. After Lamborghini returned the steering wheel to Prema Engineering, a Prema Engineering engineer was surprised to find it was no longer blank. Instead, the steering wheel now had a copy of Prema Engineering’s COTA testing setup installed, even though Prema had never provided this setup to Lamborghini and Lamborghini had no permission to access or use copies of Prema Engineering’s setups. Prema Engineering also alleges that it confirmed that Lamborghini had used the steering wheel and the copy of Prema Engineering’s COTA testing setup several times for racing simulator testing.
A trade secret protection protocol paired with the agreements governing the exchange of proprietary information between Prema and Lamborghini may have avoided some of the alleged trade secret misappropriation that led to this lawsuit. For example, while the lawsuit alleges that Lamborghini engineers stole Prema’s proprietary steering wheel setups while Prema steering wheels were on loan to Lamborghini, it’s possible that if a specific protocol for the protection of trade secrets had been put into place with respect to those steering wheel setups in advance, and had the engineers and other individuals with access to the steering wheel setups been trained on that protocol, that the alleged theft may not have occurred. Sometimes what is framed as “theft” in a complaint can boil down to miscommunication or oversight that can unfortunately lead to long and expensive litigation.
Trade secret protection protocols, in other words, can serve to educate business collaborators on the trade secret nature of the information exchanged, and limit its use in a way that avoids costly litigation. When two businesses are already taking the time to negotiate a lengthy partnership or joint development agreement, it’s worth adding a trade secret protection protocol to the deal papers as well. And the similarities among the trade secret regimes of the U.S. and its major European trading partners makes that process less daunting than it might seem.
For questions about trade secret protection and cross-border protection protocols, contact Nick Armington, or any member of Prince Lobel’s Intellectual Property practice group.
