Decompiling the rules on trade secrets, software and reverse engineering – the sequel

In my previous post from January last year I discussed reverse engineering in light of the Trade Secrets Directive (“TSD”) as well as the Software Directive (“SD”). I strongly recommend you to review my previous post (here) before reading this piece, since said post lays the foundations for the arguments and considerations discussed below.

The focus of this article will lie on implementation of the provision on reverse engineering in Finnish legislation. A very interesting aspect here is the relationship between trade secrets and copyright, which is why I have chosen to discuss in particular in this post.

Background

As a consequence of the adoption of the TSD, the Finnish Ministry of Economic Affairs and Employment (“MEAE”) assigned a working group to prepare the national implementation of the TSD in Finland. On 18 October 2017, the working group published its recommendation (“Finnish Proposal”) in which it proposes reform and consolidation of the Finnish legislation concerning the protection and civil enforcement of trade secrets. The aim is to enhance the protection of trade secrets by providing effective legal remedies against trade secret misappropriation. In the Finnish Proposal, it is suggested that the TSD would be mainly implemented by a wholly new Trade Secrets Act.

Reverse engineering, decompilation and contractual arrangements

Under Article 3 of the TSD, reverse engineering of a lawfully acquired product should be considered as lawful means of acquiring information. A similar provision has been suggested to be included in the proposed Trade Secrets Act in Finland. Reverse engineering would thus be allowed as a point of departure.

However, a few interesting questions may arise in relation to the possibility to restrict reverse engineering by contractual arrangements. Both the TSD and the Finnish Proposal provide that contractual restrictions between the parties are allowed. But recital 16 of the TSD provides a possibility for Member States to limit this freedom to enter such contractual arrangements by law.

The proposed Trade Secrets Act does not contain any new legal restrictions on contractual arrangements related to reverse engineering. Hence, under the proposed Trade Secrets Act the parties could, as a point of departure, freely agree that reverse engineering is not permissible in a certain contractual relationship. This starting point may be considered reasonable since the possibility to prohibit reverse engineering may be essential for companies, research institutes and universities in order for these entities to be able to reveal and test prototypes and develop their innovations further without the risk of losing the trade secret through reverse engineering.

However, under Section 25k of the Finnish Copyright Act, the possibility to use such a contract clause is limited. Under the Copyright Act, decompilation is allowed in order to achieve interoperability and contractual provisions limiting this right may be considered null and void. It appears that the working group in Finland has considered Section 25k of the Copyright Act to limit the freedom to enter contractual arrangement, which would restrict reverse engineering (or to be more specific, decompilation).

Conclusions

Based on the above, the decompliation right in the Copyright Act cannot be effectively restricted by contract, when it comes to copyright. But the same is not necessarily true in relation to trade secrets, i.e. the contractual provision may still be effective from this point of view and reverse engineering may violate trade secret law based on a particular contract.

The Finnish proposal may still be amended before it is brought before Parliament. Nevertheless, the deadline for implementation of the TSD is 9 June 2018 and a new act should be effected before said date. I have written a full article on the implementation of the TSD in Finland which will be published in the coming months, so stay tuned.

I will leave you with a question to ponder: The limitation of freedom to effectively enter into a contract that would prohibit decompilation in the Finnish Copyright Act is based on the Software Directive (“SD”). What is interesting is that Article 8 of the SD reads as follows: “The provisions of this Directive shall be without prejudice to any other legal provisions such as those concerning patent rights, trade-marks, unfair competition, trade secrets, protection of semi-conductor products or the law of contract.” Does this have any effect on the conclusion reached above, what do you think?

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