Same law, different lawyers

“Netherlands: Getting the most out of the new trade secret protection act”

Ruud van der Velden

Intellectual Property Partner

The new Trade Secret Protection Act came into force recently in the Netherlands. The Act is an implementation of the EU Trade Secrets Directive, which seeks to improve and harmonise the standards of protection of trade secrets throughout the EU.

The newly introduced confidentiality provisions, in combination with the availability of effective evidence collection opportunities as allowed by the Dutch Supreme Court, make the Netherlands an attractive venue for trade secret misappropriation litigation. It is however essential that the trade secret holder has effective measures in place to protect its trade secrets.

Trade secrets tied down

The Act contains the same definition of a trade secret as the Directive, i.e. 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. The Act clarifies that broad categories of information may qualify as a trade secret: not only technological information, such as manufacturing methods and recipes, but also commercial information, such as information about customers and suppliers, business plans or market research and market strategies.

Unlawful acts & remedies clarified

The Act, like the Directive, sets out the types of acts that may be considered lawful or unlawful, as well as the orders that can be imposed by the Court, such as injunctions, recalls, destruction of infringing goods and documents containing the trade secrets, publication of the decision and damages. In addition, and although this was not required by the Directive, a provision is included that the successful party – like in IP cases – can claim reimbursement of its reasonable and proportionate legal costs.

Protection measures are key

Given the broad protection and enforcement possibilities that are available, Courts will likely critically assess whether the requirements for trade secret protection have been met, particularly whether the trade secret information has been subjected to reasonable measures to maintain its secrecy. Indeed, in a decision from late last year, the District Court in Utrecht for instance decided that insufficient protection measures with respect to certain design drawings were available, even though the design drawings contained wording prohibiting the further distribution of those drawings. The Court therefore rejected the claimed orders. This emphasizes the importance for companies to have effective protection measures in place for their trade secrets.

New confidentiality provisions

In the past, trade secret holders were often reluctant to start legal proceedings because of fears that certain trade secret information could become publicly available.

This is now addressed by the introduction of new confidentiality provisions in the Dutch Code of Civil Procedure (DCCP). The new Article 1019ib DCCP explicitly provides that parties in legal proceedings regarding the protection of trade secrets are prohibited from using or communicating any (alleged) trade secrets which the Court has designated confidential and which have come to their knowledge as a result of the proceedings. The Court can limit access to the trade secrets to specific persons, such as one or more persons from each party and their lawyers. Under circumstances access can even be limited to lawyers only. The Court can impose a penalty payment on violations. Court hearings can take place behind closed doors.

Obtaining evidence

The Act, like the Directive, does not contain specific provisions on obtaining evidence. However, the Dutch Supreme Court ruled on 28 September 2018 that trade secret holders can conduct ex parte evidentiary seizures and detailed descriptions at the premises of parties suspected of trade secret misappropriation (Organik v. Dow). These measures were already available in intellectual property cases, but no provision existed with respect to trade secret cases. Orders to produce specific documents are also available. The Dutch Supreme Court has furthermore ruled that evidence obtained in the Netherlands may also be used in proceedings abroad.

Next steps

The Act ensures better protection of trade secrets in the Netherlands. It is however essential for trade secret holders to make sure that effective measures are in place to protect their trade secrets in order to be eligible for legal protection. The availability of confidentiality regimes as well as effective measures to obtain evidence, make the Netherlands an attractive jurisdiction for trade secret misappropriation proceedings.

For more information or additional input please contact Ruud van der Velden.