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Sunday, 15 April 2018

The Danish Act on Trade Secrets has now been adopted

Sture and Emil open the door on the Danish trade secrets
legislation...
With June's deadline approaching, Member States are heating up on their progress in publishing and adopting any national legislation (if) required to implement the EU Trade Secrets Directive.  The latest news comes from Denmark where the AmeriKat's friends Sture Rygaard and Emil Jurcenoks (Plesner) report: 
"As previously reported, in Denmark the EU Trade Secrets Directive (the "Directive") will be implemented in an entirely new and independent act on trade secrets, which has just been adopted in the Danish parliament.

In general, the new act is a very literal implementation of the Directive, which readers of this blog are familiar with. So here is a brief outline of the parts of the act of particular importance to Denmark which might be of interest to other trade secrets-interested Kats: 
  • Reverse engineering: The new act confirms that the acquisition of a trade secret shall be considered lawful when the trade secret is obtained by observation, study, disassembly or testing of a product or object that has been made available to the public or that is lawfully in the possession of the acquirer of the information who is free from any legally valid duty to limit the acquisition of the trade secret (copied from Art. 3(1)(b) of the Directive). According to the comments to the draft proposal to the act published in October 2017, reverse engineering should only be allowed if the analysis has been "relatively straightforward", and reverse engineering should not be allowed if "extraordinary measures have been taken to extract the information". As this would constitute a material change to Danish law, according to which the right to perform reverse engineering is not subject to any limitations, the Confederation of Danish Industry, the Danish Chamber of Commerce and several observers (including these two guest Kats) asked the Ministry of Industry, Business and Financial Affairs to delete these comments in the final proposal; which the ministry subsequently did agreeing that in Denmark reverse engineering should not depend on the method of analysis.
  • Six-month time limit: The new act introduces a six-month time limit for initiating legal proceedings (based on Art. 8 of the Directive). According to the act, an application for a preliminary injunction or institution of ordinary legal proceedings must be filed with the court "within six months from the time when trade secret holder obtained such knowledge about the unlawful acquisition, use or disclosure of the trade secret that the trade secret holder has sufficient grounds for submitting the application/filing the writ". A six-month time limit may seem reasonable in relation to an application for preliminary injunctions, where a somewhat similar time limit has developed through Danish case law.  
  • However, these guest Kats fail to see why it is necessary to introduce a six-month time limit for initiating ordinary legal proceedings, when all other claims (including claims relating to infringements of intellectual property rights) are only limited by the Danish statute of limitations (which contains a time limit of three years) and general rules of passivity. This is especially the case when the purpose of the Directive and the proposal is to strengthen the protection of trade secrets. Following the publication of the draft proposal in October 2017 we therefore asked (together with our colleagues at the Danish Association for the Protection of Intellectual Property (FIR), the Danish branch of AIPPI), the Ministry to delete the time limit in relation to ordinary legal proceedings and let such claims be governed by the Danish statute of limitations as all other claims, or at least extend the time limit to the six years mentioned in the Directive. The Ministry, however, has maintained the six-month time limit. Thus, Danish matters concerning unlawful acquisition, use and disclosure of trade secrets must be pursued as quickly as possible. 
  • Damages: The act introduces the right for the court, when assessing damages, to take into account any unfair profits made by the infringer (see Art. 14 of the Directive). 
  • Criminal sanctions: According to the act, the unlawful acquisition, use and disclosure of trade secrets are punishable by a fine or imprisonment of up till one year and six months, unless a more severe penalty applies under the Danish Criminal Act according to which a maximum penalty of up till six years may be imposed, which was also the case before the adoption of the new act.
The draft proposal to the act from October 2017 did not include any provisions on the preservation of evidence that could make it possible to carry out a search at the suspected infringer's premises through the courts in case of suspected unlawful acquisition, disclosure or use of trade secrets, as is already possible in case of suspected infringements of intellectual property rights.

Today, the difficulty of obtaining the necessary proof of another person's unlawful acquisition, use and disclosure of trade secrets is in practice one of the most important reasons for the trade secret holders' inability to enforce their rights to trade secrets in Denmark. A large number of co-operations and associations, including the Confederation of Danish Industry, the Danish Chamber of Commerce and FIR, therefore urged the ministry to include rules on preservation of evidence in case of suspected unlawful acquisition, disclosure or use of trade secrets.

The final proposal did not, however, include any rules about the preservation of evidence either, and neither does the newly adopted act.

The risk involved with giving access to preservation of evidence in case of suspected unlawful acquisition, disclosure or use of trade secrets is, obviously, that competitors' trade secrets may be compromised. That risk was the reason trade secrets were excluded when the rules on preservation of evidence in case of infringement of intellectual property rights were adopted in Denmark in 2001. Therefore, in spite of the large number of request for such measures to also be available in case of suspected unlawful acquisition, disclosure or use of trade secrets, it is the opinion of the Danish Ministry of Justice, which has contributed to the drafting of the proposal for the new Danish act on trade secrets, that at present there is no sufficiently certain basis for setting aside the balancing of reasons made in connection with the adoption of the rules on preservation of evidence in case of the infringement of intellectual property rights. However, if, following the entering into force of the new Danish act on trade secrets, it turns out that in practice the act does not adequately ensure efficient protection of trade secrets due to the rights holders' difficulties in procuring the necessary evidence, the Ministry of Justice will consider whether the rules should be amended to the effect that they are extended to also include matters concerning unlawful acquisition, use or disclosure of trade secrets to the extent necessary.

The new act is set to come into effect on 9 June 2018; i.e. the date of the deadline for implementation of the Directive. "

Thank you, Sture and Emil!  The AmeriKat looks forward to hearing from other Kat readers as to who the legislation is faring in their Member States, including Germany where a draft was recently leaked.  

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