A new Trade Secret Act – this is how it Strengthens the Protection of Trade Secrets

The Swedish Government has proposed that the present Trade Secret Act shall be replaced with a new Act that further strengthens the protection of trade secrets. It is proposed that the new Act enters into force on July 1st, 2018.

The new Act is an implementation of an EU directive on the protection of trade secrets. The background to the Directive is that the EU has identified that even though trade secrets are a determining factor as regards to a Company’s competitiveness and innovation-related performance, there are important differences in the Member States’ legislation as regards the protection of trade secrets against their unlawful acquisition, use or disclosure by other persons. Therefore, the Directive aims to create a uniform regulatory framework that provides trade secrets with an equivalent protection throughout the Union, as well as with a higher level of protection.

Sweden is one of the most innovative nations in the world

For several years, Sweden has had a Trade Secret Act protecting trade secrets. The legislation is considered to be relatively comprehensive and largely meeting the requirements of the Directive. However, the Directive gives rise to a series of amendments and additions that will best be implemented through the replacement of the existing act on trade secrets.
Apart from adjusting the Swedish Trade Secret Act to better meet the requirements of the Directive, the legislator stresses that Sweden is one of the most innovative nations in the world. In order for Swedish companies to continue to be innovative and competitive, and to be able to hold its ground on a global market, their trade secrets need a stronger protection. Therefore, the Government is proposing in the bill to further strengthen the protection of trade secrets. This shall be accomplished, inter alia, through

  • More infringements of trade secrets shall be considered as unauthorised,
  • More infringements of trade secrets shall result in liability to pay damages, and
  • The protection of confidentiality of trade secrets in trial shall be strengthened.

Notwithstanding the pursuit of a strong protection of trade secrets, the Government clarifies that the protection should never be so strong that it prevents employees from reporting serious irregularities at the workplace (so-called whistleblowing). As well as under the present Act, such an infringement shall be considered as authorised and consequently fall outside the scope of the Act. Further, within the scope of a whistle blower situation the legislator provides the employee in the new Act with more ways to make authorised infringements of trade secrets without having to face remedies. This will be achieved by replacing the requirement that information disclosed by the employee was disclosed to reveal a “serious irregularity” with the requirement “other irregularity”, which is a considerable lower requirement. The protection of whistleblowing will in other words also be strengthened through the new legislation.

An employee’s experience is not a trade secret

Finally, unlike the present Act, the new Act will clearly specify that the definition of trade secrets shall exclude the experience and skills gained by employees in the normal course of their employment. The employee shall be free to use the obtained knowledge in the course of a new employment. This facilitates an employee’s right to freedom of movement and to use his or her acquired knowledge.

The new law is proposed to enter into force on July 1st, 2018.