Fresh EUIPO Report on trade secrets and patents – Finnish companies top the list in use of trade secrets

Last month, the EUIPO published an interesting report titled “Protecting innovation thru trade secrets and patents: determinants for European Union firms” (“the Report”). Seven findings have been included in Executive Summary, and in this post I will dig into the three findings I find most interesting (No. 2, 4 and 5 in the Report).

“The use of trade secrets for protecting innovations is higher than the use of patents by most types of companies, in most economic sectors and in all Member States”

Upon first reading, I didn’t find this very surprising. Namely, virtually all companies have some kind of trade secrets like e.g., sales or related data, but only some companies are innovative enough to be granted patents even if they would apply. But what surprised me somewhat was that Finland (where I reside and practice law) was the country where trade secrets would be used the most compared to all other countries in Europe (page 28 of the Report). I found this surprising, since while every serious IP lawyer must know trade secret law, the topic is not widely debated in Finland. In Finland, as in many other countries in the world, trade secrets law is still the “Cinderella” of IP.

Based on the Report, large companies typically utilize both trade secrets and patents on a larger scale compared to SMEs. Nevertheless, Finnish SMEs are the heaviest users of trade secret protection in Europe, based on the report (page 30 of the Report). Namely, a staggering 76,8 % of Finnish SMEs use trade secrets to protect trade innovations according to the Report. Innovative SMEs in Finland use trade secrets 2,5 more than patents. This may of course be rooted in several different factual and legal aspects. By way of example, patents are of course more expensive and the threshold may not always be met (e.g., novelty and inventive step). Also, patents have a fixed term (20 years), while trade secrets do not. Continue reading “Fresh EUIPO Report on trade secrets and patents – Finnish companies top the list in use of trade secrets”

Decompiling the rules on trade secrets, software and reverse engineering

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My last post concerned trade secret litigation (read it here), and since I am (at least momentarily) quite fascinated by the subject of trade secrets, I decided to do a follow-up post on another topical issue in this field. In trade secret law, two types of behavior are generally considered to be allowed: i. independent discovery and ii. reverse engineering. Especially the latter sparked discussion in the EU with the arrival of the new Trade Secrets Directive (2016/943) (“TSD”). Reverse engineering is allowed based on Art. 3 (1) (b) and recital 16 of the TSD. Recital 16 of the TSD stipulates that

“[…] Reverse engineering of a lawfully acquired product should be considered as a lawful means of acquiring information, except when otherwise contractually agreed. The freedom to enter into such contractual arrangements can, however, be limited by law.”

Let’s pause here for a moment and decompile this provision:

  • Main rule: If you lawfully acquire a product, you may reverse engineer it.
    • Exception: Reverse engineering is not allowed if it has been contractually agreed that such behavior is not permitted.
      • Exception to exception: However, the freedom to enter into such an agreement restricting the permissibility of reverse engineering may be restricted by law. This, in a sense, takes you back to the main rule in the first bullet point.

Continue reading “Decompiling the rules on trade secrets, software and reverse engineering”