The draft directive defines a trade secret as information that has all of the following characteristics:

The Commission contemplates that this will cover information that is:

Under the draft directive, it will be unlawful to:

It will, however, be permissible to use and disclose trade secrets obtained through:

Also, no legal action can be taken where trade secrets are being used or disclosed:

Member states must set a limitation period for bringing proceedings of between one and two years. They will be required to put in place measures, procedures and remedies that are fair and equitable, effective and dissuasive, not unnecessarily complicated, and proportionate. There are no criminal sanctions available.

Domestic courts will be able to grant interim relief. For example, orders to: cease or prohibit use of the trade secret; prohibit it being placed on the market; or seize suspected infringing goods. In addition to this relief (which may also be granted on a permanent basis), domestic courts will be able to make orders for: a declaration of infringement; recall or withdrawal of the goods from the market; depriving infringing goods of their infringing quality; and destruction of the infringing goods.

Damages can also be obtained where: the person acquired the trade secret in good faith; the enforcement measures would cause that person disproportionate harm; and pecuniary compensation appears reasonably satisfactory. Sanctions will include recurring penalty payments.

Parties involved in legal proceedings may also be restricted from disclosing or using any trade secrets that are revealed. Member states will be able to restrict access to documents containing trade secrets, and to hearings (allowing for lawyer-only hearings), and to make non-confidential versions of the judgment available by removing passages that contain trade secrets. All of these elements are currently available to litigants in UK legal proceedings.

The Commission has focused on trade secrets as a form of intellectual property right and its approach is closer to that taken in UK intellectual property cases, rather than employment law cases. However, the new regime is equally relevant to employment law; for example, the classes of information covered by the draft directive appear broader than those currently protected after termination of employment under the employment-related line of confidential information cases. This may encourage the UK courts to conform the tests for confidential information and trade secrets within employment and intellectual property law, as well as in line with the definition in the draft directive.

As the draft directive will run alongside UK common law, confidential information provisions will still be needed in employment contracts, particularly if there is a risk that the information may fall outside of the draft directive's definition. However, employers may wish to bolster their definitions of confidential information by including a reference to trade secrets as defined by the draft directive.

An employer seeking a remedy under the draft directive would need to show that the employee intended to use or disclose, or was grossly negligent in using or disclosing, the trade secret without consent. This is not required where the employer is suing the employee for breach of contractual confidentiality obligations. However, this additional requirement may not be so difficult since, in most cases, the employees know full well what they are doing, unless perhaps they could reasonably argue that they did not realise the information was a trade secret.

Similarly, if an employer is seeking to sue a new employer to whom a departing employee has given confidential information, it would need to show a similar intention or gross negligence on the part of the new employer, as opposed to the latter having simply turned a blind eye to the employee's breach of contract. This may be more difficult to prove.

The draft directive may prove most useful to employers that do not have adequate contractual provisions to protect their confidential information, as this would seem to give them a simpler cause of action to pursue than, for example, a springboard injunction.

Peter Frost and Mark Shillito are partners, Rachel Montagnon is a professional support consultant, and Christine Young is a senior associate, at Herbert Smith Freehills LLP.