17 May 2018

New legislation puts Netherlands on the map as venue to fight trade secrets infringements

On 17 April 2018, the Dutch parliament passed new trade secrets legislation, implementing a European directive on the subject. Trade secrets are an important asset for all businesses, forming part of their competitive edge. The EU has recognised the need for greater protection of trade secrets within the EU and introduced the EU Trade Secrets Directive in 2016. The directive provides for minimum harmonisation, which means member states can create broader protection than the directive prescribes. The deadline for implementation of the directive is 9 June 2018 (as previously reported here and here).

Based on a bill of 14 November 2017 (which is a literal implementation of the EUTSD), the final act addresses various concerns regarding the possibilities of obtaining evidence and the awarding of costs. Those concerns arose from the Enforcement Directive (ED) and its national implementations not applying to trade secrets. Although the EUTSD stresses that trade secrets do not constitute exclusive intellectual property rights, this does not in our view mean that enforcement should be more difficult. The Dutch act recognizes this.

Seizure of evidence

The EUTSD does not provide a system of obtaining evidence through evidentiary seizures and access proceedings, even though evidence is key in trade secret cases because of the lack of exclusivity. The ED, however, does contain such a system. For national implementation of the EUTSD, the question of how countries would deal with this important issue arose.

The explanatory memorandum to the Dutch bill stated in November 2017 that in the Netherlands, evidentiary seizures are possible in trade secret cases in view of a 2013 Dutch Supreme Court ruling. In light of the pending modernisation of the national laws on evidence, this was deemed sufficient for now. In the debate on the new Dutch Act, the minister stressed that in the modernisation process trade secret cases would be provided for.

Although evidentiary seizure and subsequent proceedings to obtain access are already customary in Dutch trade secret proceedings, it is positive news that specific trade secret provisions on this subject will be implemented into Dutch law once the law on evidence is modernised

Protective order

The Dutch act provides for a protective order system whereby a limited group of people will have access to documents submitted in the proceedings (next to the hearing being behind closed doors and a redacted decision becoming public). This is in line with the EUTSD. In addition, the Dutch act provides for the possibility of a protective order in cases that do not as such relate to trade secrets (f.i. patent infringement or patent invalidation litigation). In those cases, only the lawyers or someone specifically appointed will have access. This further provides protection of trade secrets in all civil proceedings.

Awards for full legal costs

The ED provides for a full award for costs, while the EUTSD does not. In the final Dutch act, a provision has now been included to cover this. The new article (1019ie DCCP) gives judges the possibility of issuing an order for the payment of reasonable and proportionate costs to the winning party in a trade secret case, unless this would go against the principles of equity or fairness. Under the article, the judge has discretionary power – which is different from the ED system – to award full costs, depending on the circumstances. The goal of this article is that on the one hand it can lower the hurdle for companies to bring a claim knowing that your costs can be awarded (e.g. in cases of clear trade secret infringement), on the other hand the discretionary power allows for tailor made decisions on costs taking into account the circumstances.

The Netherlands is – as far as we are aware – the first country where full award of costs is possible in trade secret cases.

The Netherlands: gateway to Europe

Due to its highly ranked infrastructure and two significant European cargo ports (Schiphol airport and the port of Rotterdam), the Netherlands is a key logistics hub for the through-transportation of goods to Europe. Goods from, for example, China pass through the Netherlands before they enter the European market. While it is difficult to target trade secret infringement in China, it is now possible to target import of infringing goods under the new Dutch trade secrets legislation. Combined with the possibility to obtain a full award for costs, this makes the Netherlands an attractive jurisdiction to target trade secret infringement.