For a long period of time, the protection of trade secrets in the Netherlands was governed by general tort law. A Supreme Court decision dating all the way back to 1919 (Lindenbaum/Cohen) established that it can be unlawful to misappropriate someone’s trade secrets, because this would be contrary to proper social conduct. Once the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) was adopted, Dutch case law continuously sought to align with the trade-secret provisions of TRIPS when interpreting Dutch tort law (eg, honest commercial practices). A significant shift occurred with the adoption of the EU Trade Secret Directive. The Directive was implemented in the Netherlands in specific statutory trade secret law: Wet Bescherming Bedrijfsgeheimen (in English: Law on the Protection of Trade Secrets). This statute codifies all relevant provisions regarding the protection of trade secrets, including the legal measures available upon misappropriation (such as preliminary relief). On the merits, however, the protection of trade secrets has remained largely the same.
Apart from civil law protection, trade secrets are also protected under employment law (non-compete) and the misappropriation of trade secrets can be punished under criminal law with a maximum prison sentence of one year.
There are no limitations as to what type of information can qualify as a trade secret under Dutch law.
Every type or form of information can qualify as a trade secret if (i) the information is secret, (ii) has commercial value because it is secret and (iii) has been subject to reasonable measures to protect its secrecy. From a practical point of view, the most important consideration is whether the information has commercial value because it is secret. This can, for example, be the case with a customer base, commercial plans, recipes, production processes, product configurations, etc.
Arguably, information with a negative commercial value (because it could be damaging) can also fall under this definition. The same holds true for information that has potential commercial value, for example in an early phase of research and development (R&D).
An important exception is in place for trivial information and the experience and skills gained by employees in the normal course of their employment.
As indicated in 1.3 Examples of Trade Secrets, there are three criteria to qualify as a trade secret. More specifically, a trade secret means information which meets all of the following requirements:
A trade secret-owner is required to show that it took reasonable measures to protect its trade secrets. What type of measures can be considered reasonable in a given case depends largely on the type of company invoking trade-secret protection, the type of information concerned and how other companies within the relevant market typically deal with the protection of that kind of information.
Some measures should be taken in any case – because they are relatively simple and cheap – such as non-compete and non-disclosure agreements with employees and NDAs with collaborations. There is Dutch case law stipulating that these are some of the minimum requirements that can be expected to protect trade secrets.
Other measures that could be implemented (depending on the type of company/information) are:
It is advisable to disclose trade secrets to employees only on a need-to-know basis. Also, it is important to have contractual obligations in place which prevent the employee from sharing/using the trade secret. Likewise, when an employee exits the company, it is advisable to schedule an exit conversation to discuss which information the company considers a trade secret and which information the employee can freely use. If these measures are taken, disclosing a trade secret to an employee will likely not affect the availability of protection for the trade secret.
In principle, independent discovery and reverse engineering is allowed. Unlike, for example, patent protection, trade-secret protection does not confer an exclusive right upon its holder. This means that a third party can freely disclose or use the independently developed or reverse-engineered information. Once the information becomes publicly available, trade-secret protection is no longer possible. However, if both companies decide to keep the information secret, they can both still rely on trade-secret protection.
The possibility of reverse engineering can be contractually excluded by the trade secret-holder. This will generally require complex contractual arrangements, also preventing downstream reverse engineering.
There are no unique provisions for the protection of trade secrets in the realm of computer software and/or technology.
In principle, trade-secret protection can be infinite. As long as the information is kept secret, it will enjoy trade-secret protection. Likewise, once the information becomes public (or readily available to those within the circles that normally deal with the kind of information in question) protection ends. In this regard, it does not matter whether the disclosure was accidental.
It is, of course, possible to obtain patent protection for the general invention encompassed by the trade secret – thereby making it publicly available to a certain extent – but at the same time protect the specifics of the invention as a trade secret. For instance, a patent can claim the generality of a specific technical innovation, but does not necessarily have to disclose each specific embodiment (there is no "best mode disclosure" requirement in Europe/the Netherlands). The details of a specific, favourable embodiment or method of manufacturing can be kept secret, and as such may enjoy trade-secret protection.
A trade secret can be licensed in any way the holder deems fit. Dutch law provides significant contractual freedom in this regard. However, it is crucial to agree on appropriate confidentiality terms when licensing a trade secret. Usually, this means that the licensee must take all the measures also taken by the licensor to protect the trade secret. Also, all secret information should be returned/destroyed once the licence ends.
The key difference is that a trade secret does not confer an exclusive right upon its holder. The fact that a trade secret is not considered to be an intellectual property right also means that the EU Enforcement Directive is not applicable. In practice, however, this has relatively little meaning, as the Dutch trade-secret legislative provides for the possibility of preliminary relief and (ex parte) evidentiary seizures. The only measure not available is ex parte injunctive relief.
It is very much possible (and common) for a party to assert a trade secret in combination with other types of intellectual property rights. Usually, trade secrets go hand in hand with patent and copyright protection, but there are no limits as to which combination of rights can be asserted. The advantage of, for example, also asserting a patent right is that this brings the suit within the jurisdiction of the specialised patent court in The Hague.
It is possible to bring claims relating to trade secrets that do not turn on misappropriation. However, in most cases when there is a legal ground to act upon – such as a contractual breach – this can also be considered trade-secret misappropriation.
Dutch criminal law penalises trade-secret misappropriation with a maximum prison sentence of one year or a maximum fine of EUR21,750. It is possible to combine a civil lawsuit with criminal charges. However, the criminal charges will be handled by the public prosecutor and the injured party has little influence on that process. Also, in order for a criminal conviction to take place, there must have been some form of intent (bad faith) with the misappropriating party.
Dutch courts have been relatively generous in granting cross-border relief in IP cases. The authors of this section believe that the same will likely apply to trade secret cases. If the trade-secret misappropriation can be tied to the Netherlands (for example, because the misappropriating party is established in the Netherlands or this is where misappropriation takes place) but also to other jurisdictions, it is believed that the Dutch courts are allowed and equipped to grant cross-border relief. Unlike with traditional IP rights, when assessing a trade-secret claim the courts are not limited by Article 24 EEX-II because trade secrets are not registered rights. This means that, unlike for IP rights, cross-border relief should not be limited to preliminary relief proceedings and can also be granted in merits proceedings.
Under Dutch law access, the use and/or disclosure of a trade secret can amount to individually punishable unlawful acts. This means that legal action can be taken as soon as someone has gained access through unlawful means. If there is still insufficient proof of misappropriation (access, use or disclosure) it is also possible to request ex parte an evidentiary seizure before starting inter partes injunction and damages proceedings. Based on established Supreme Court case law (Dow/Organik), in such a case the claimant must make it plausible – based on the available evidence – that the other party has likely acted unlawfully/misappropriated trade secrets. The courts specifically take into account that an evidentiary seizure is meant to collect evidence and that, therefore, the claimant does not have to prove misappropriation to the extent that it would have to in preliminary relief or merits proceedings to obtain an injunction. The evidentiary seizure action is ex parte: the other party is not heard before a request for seizure is granted and will only learn about it when its facility is dawn-raided by a bailiff, technical expert, IT expert and, when appropriate, with police assistance.
This is the most common scenario in Dutch case law concerning trade-secret misappropriation. The only significant legal difference is the fact that additional statutory provisions (regarding the employer/employee relationship) can be invoked against the misappropriation. This does not usually lead to a material difference in outcome, however. In practice, the courts will scrutinise the agreements that are in force between the employer/employee and the measures that were taken by the employer to prevent misappropriation.
The general rule applies that in the case of a collaboration – joint venture or otherwise – both parties must make clear agreements on which information is considered to be a trade secret and the measures that have to be taken to keep that information secret. No special rules apply.
There are no unique penalties or remedies against industrial espionage. However, the regular measures that are available can provide sufficient relief. Dutch trade-secret law allows injunctions to be imposed and damages to be awarded (arguably also including moral damages, eg, due to loss or exclusivity or reputation). Likewise, it is possible to remove infringing goods – goods that significantly benefit from the misappropriation – from the market. There are also safeguards in place to keep information confidential during litigation.
The “best practices” for safeguarding trade secrets will differ significantly across different industries. For computer software, the Dutch courts will likely expect more cybersecurity measures to be taken. For the chemical industry, one can think of relabelling essential ingredients, limited access to formulae, etc. Moreover, which measures must be taken also differs on a case-by-case basis, even within the same industry. It is therefore very difficult to describe best practices on this topic generally. As mentioned in 1.5 Reasonable Measures, some measures should be taken in any case, such as non-compete and non-disclosure agreements with employees and NDAs with collaborations.
Unfortunately, exit interviews are still a relatively rare, uncommon/unknown phenomenon in the Netherlands. It is highly advisable, however, to conduct an exit interview with any employee who could have had access to trade secrets within the company. In such a conversation, both parties should try to describe clearly which information/knowledge the employee can continue to use and which he or she cannot. This should be formalised in writing and, preferably, another confidentiality obligation is signed at the end of the process.
Dutch trade secret legislation recognises a distinction between an employee’s general knowledge and skills and protectable trade secrets. In practice, however, this distinction is very difficult to make and is unpredictable. The crucial question is whether certain information is acquired by the employee during the normal exercise of their function. Hence, the type of information an R&D employee can continue to use will be different from that of other employees. There is very little case law guidance on how to make this distinction and what (legal) considerations play a role. Dutch law does not recognise the doctrine of “inevitable disclosure”.
When hiring an employee from a competitor, it is always advisable to make clear written agreements on the competitor’s trade secrets before the new employee starts his or her work. By explaining clearly which information the employee should and should not use and why this is the case – eg, placing his or her new employer at risk of trade-secret litigation – the employer can create a situation of good faith and honest commercial practices and prevent unwarranted trade secret misappropriation within the company. Capturing this in writing would help significantly if it were ever to come to litigation.
The key consideration before initiating litigation is how much evidence is available. This means evidence of the existence and ownership of the trade secret as well as misappropriation thereof.
If there is insufficient evidence, Dutch litigation usually starts with an evidentiary seizure. The claimant will then request the court to allow an independent bailiff (assisted by independent experts, such as a technical expert and an IT professional) to take evidence from the defendant, without hearing the defendant prior to the seizure. The claimant will have to specify which documents could serve as evidence of the misappropriation claim and why this evidence will likely be found with the defendant. The bailiff can then copy documents from computers, smartphones, archives, etc. This is not like US discovery, however, where large amounts of documents can be collected for evidence. Also, there is no direct evidence to the seized evidence. The bailiff will hold on to the evidence and once the seizure has taken place, separate access proceedings will have to be conducted in order to obtain access to the seized evidence.
Once sufficient evidence is found/in place, the claimant can choose to initiate preliminary relief proceedings to get a relatively quick preliminary injunction (PI) (which will require there to be an urgent interest) or to initiate merits proceedings to obtain permanent injunctive relief and establish liability for damages. Both types of proceedings (PI proceedings and merits proceedings) are initiated with a front-loaded writ of summons, containing all relevant arguments and evidence. An important consideration in this regard is whether or not to file a combined claim (with IP rights).
The EU Trade Secrets Directive mentions a limitations period of six years. However, the Dutch legislator has chosen to implement a limitations period of five years (both for injunctive relief as well as damages). For injunctive relief, the limitations period starts when the trade secret--holder becomes familiar with the trade-secret misappropriation. For damages, the limitations period starts when the trade secret-holder becomes familiar with the damages and the person or entity liable for those damages.
See 5.1 Prerequisites to Filing a Lawsuit.
There is no special court for trade-secret claims, nor are there any other limitations on the courts in which a trade-secret claim can be brought. This is different when a claim for trade-secret misappropriation is combined with a claim for patent infringement, in which case the exclusive jurisdiction of the technically savvy patent-specialised Courts of The Hague applies.
The amount of evidence that must be presented is different for evidentiary seizures, preliminary relief proceedings and merits proceedings. In evidentiary seizures – which generally takes place when there is insufficient evidence for preliminary relief – the trade-secret misappropriation must be made plausible on the basis of the available evidence (according to the Dutch Supreme Court in AIB/Novisem and Dow/Organik). This will be accepted relatively easily. For preliminary relief proceedings, the standard is somewhat higher. The misappropriation must still be made plausible, but the evidence must be more conclusive, comparable to a preponderance of the evidence. In merits proceedings, the evidentiary rules of the Dutch Code of Civil Procedure apply and an even higher threshold applies. It is generally accepted that, in merits proceedings, misappropriation must be proven by clear and convincing evidence.
See 2.1 The Definition of Misappropriation, 5.1 Prerequisites to Filing a Lawsuit and 5.5 Initial Pleading Standards.
The primary pre-trial mechanism available to collect evidence is evidentiary seizures. Evidentiary seizures are handled by a court-appointed bailiff. It is also possible to request the court to order the other party to submit evidence, pending proceedings. The type of evidence that can be gathered is not limited in any way. However, the party that tries to obtain evidence must specify which evidence it seeks to obtain (no fishing expeditions are allowed).
Although legal proceedings are, in principle, public in the Netherlands, documents and legal briefs that are submitted in those proceedings are not. Furthermore, in cases in which trade-secret legislation applies, confidentiality can be requested, based on Article 1019ib of the Dutch Code of Civil Procedure. This means that relevant parts of hearings will only take place behind closed doors, the court decision can be redacted, and the parties, lawyers or other representatives, witnesses, experts and other persons participating in the proceedings are prevented from using or disclosing the trade secrets that the judge labelled as confidential at the request of the trade secret-holder.
The confidentiality pools that can be created under this provision are somewhat different from those regularly applied under US law, as it is mandatory also to give access to all information (including the trade secrets) to one natural person of each party. The authors of this section believe that, in most cases, this will be undesirable, as this means that the other side will definitely get access to the trade secrets at issue. This provision is the result of the right to fair proceedings and not wanting to exclude a party from the evidence on the basis of which his or her case is handled. It is unclear whether the parties can contractually agree to deviate from this provision.
If certain information is labelled confidential, pending the proceedings, it will also not be included in the decision and, insofar as the trade secrets are discussed during trial, this will be done behind closed doors.
The most common defence is that the asserted information is not a trade secret. If the information is generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question, it is impossible to invoke trade-secret protection. It is also commonly argued that the suing party did not take (sufficient) reasonable measures to protect its information. Likewise, it can be argued that the other party’s information was not acquired or used at all, or that this happened in good faith.
It could perhaps be possible for a party, who fears becoming the defendant in a trade-secret misappropriation case, to take the "initiative" and initiate proceedings to obtain a Declaratory Judgment that certain information does not qualify as trade secrets, or has not been misappropriated. However, this is not really a dispositive motion in that it requires a full trial on its own. The plaintiff will load the "burden of proof" upon itself, and it is likely that the defendant will counterclaim for a finding of misappropriation, injunctive relief and liability for damages. There are no precedents, as far as is known.
The costs associated with litigating trade secrets are highly dependent on the factual circumstances of the case, as well as the defences raised against a complaint. Very generally speaking, PI proceedings will cost between EUR100,000 and EUR200,000 and merits proceedings will cost between EUR150,000 and EUR350,000. Unlike in IP proceedings, the losing party does not automatically have to compensate for the winning party’s legal costs. There is a provision, however, giving the courts the discretionary power to order a full cost order against the losing party. This will depend on the circumstances of the case (and can make litigation significantly more expensive).
No cure-no pay agreements are not allowed under Dutch law. It is, however, possible to agree on contingency fees, fixed fees, or other cost arrangements.
In the Netherlands, all legal proceedings are heard and decided by a judge or panel of judges. There are no jury trials.
In principle, Dutch litigation is based on written submissions. The proceedings are relatively streamlined, with a front-loaded writ of summons and statement of answer being the main written submissions. It is also possible to submit expert evidence and to hear witnesses. The parties can also bring their experts to trial in order for them to address the court or answer questions. There is no cross-examination of experts or witnesses.
A trial usually takes half a day or a full day, depending on the complexity of the case. Both parties will get two rounds to present their arguments and respond and the judges usually ask questions.
It is possible to file and rely on expert evidence. There are no strict rules as to how the expert must be approached, what can be the subject of expert evidence and what an expert declaration should look like. It all comes down to an assessment of credibility. As indicated in 6.2 Trial Process, there is no cross-examination of experts. It is common, however, to have a battle of the experts in writing.
The requirement for obtaining preliminary relief is that there is an urgent interest, that the trade-secret misappropriation (or threat thereof) is made plausible and that a balancing of interests weighs in favour of granting the relief.
There are no specific rules on the duration of an injunction. In theory, it could be infinite (until the information at issue loses its status as a trade secret). This is at the discretion of the court. Another example of how the court could calculate the duration of an injunction is how long it would have taken the defendant – or any other third party – to develop the trade secret at issue independently. If this is impossible to determine, the court can estimate a duration at its own discretion. In any event, it must be long enough to diminish the economic advantages gained by the misappropriation.
The court can demand that the claimant put up a bond before an injunction is granted. Conversely, if a preliminary injunction would harm the interests of the defendant too much, the court can order the defendant to post a bond in order to avoid a preliminary injunction and safeguard a potential damages claim. There is no case law precedent on this.
Dutch trade-secret law provides for quick and effective relief against misappropriation. The measures currently available are:
In all cases, the court will have to take into account whether the measures are proportionate based on the circumstances of the case and that the measures are not abused or would otherwise impair legitimate trade.
It is possible to get permanent injunctive relief against a misappropriating party. As discussed under 7.2 Measures of Damages, the duration of the injunction will depend on the circumstances of the case. It is also possible for infringing goods to be recalled and destroyed (at the cost of the misappropriating party). Goods are considered to be infringing if the trade secret at issue had a significant influence on the quality, value or price of the goods, or if the trade secret limited costs or eased or quickened the production process or trade thereof. This relatively new definition (stemming from the EU Trade Secret Directive) will likely lead to diverging case law.
It is also possible to request an injunction to be lifted if the trade secret at a later point in time becomes public, for example because its holder makes the information public.
In trade secret litigation, cost orders will be based on fixed rates, which are relatively low (in the range of EUR250 to EUR2,500). However, the newly implemented trade-secret legislation gives courts the discretionary power to award full cost orders to the winning party. It remains to be seen whether courts will use this discretionary power as a main rule or as the exception to the rule.
See 7.4 Attorneys’ Fees.
Once a first-instance decision is granted, both parties can file an appeal. In preliminary relief proceedings, the appeal must be filed within … In merits proceedings, the appeal must be filed within three months. The writ of summons on appeal is a very short document, basically indicating to the other party and the court of appeal that an appeal is launched. The next step is filing grounds of appeal. These must contain all arguments against the first-instance decision, as well as any new points. Appeal proceedings are de novo proceedings, meaning that the entire debate can be repeated and fine-tuned. In response, the respondent will have to file a statement of answer (and can lodge a counter-appeal simultaneously). The procedural rules on appeal are very strict and these two documents (grounds of appeal and statement of answer) should contain all relevant facts and arguments. There is very little room for second chances and correcting mistakes on appeal. It is also possible to appeal from orders that are not final judgments, but this requires the express permission of the first-instance court.
An appeal usually takes about six to 12 months in preliminary relief proceedings and 12 to 18 months in merits proceedings. Timing may vary somewhat between the different courts of appeal, but, other than that, there are no significant differences.
As indicated under 8.1 Appellate Procedure, in the Netherlands appeal proceedings are de novo proceedings. The court of appeal will review both factual and legal issues. The court of appeal will also hear live arguments. An appeal to the Supreme Court is limited to legal issues.
See 1.1 Sources of Legal Protection for Trade Secrets. Criminal offences are handled by the public prosecutor with little to no involvement from the trade secret-owner.
Parties are at liberty to initiate any type of ADR mechanism they see fit. This can, for example, be mediation, arbitration or binding advice. The main advantage of ADR – specifically arbitration – is that specialist arbiters can be selected and confidentiality can be tailored to the dispute.
The most prominent development in the field of trade secrets has been the adoption of the EU Trade Secret Directive and its implementation into Dutch national legislation (Wet Bescherming Bedrijfsgeheimen) on 23 October 2018. Trade secrets were traditionally protected in the Netherlands under general tort law, employment law and criminal law. There is now specific legislation covering the protection of trade secrets, as well as the more procedural aspects of trade-secret litigation.
One of the topics not covered by this new legislation is evidentiary seizures. Trade-secret litigation is all about evidence. In order to claim an injunction or damages successfully, it is necessary to prove that the other party has unlawfully obtained, used and/or disclosed a trade secret. Often, acquiring evidence of trade-secret misappropriation can be difficult as most misappropriating parties will usually have taken careful actions to cover their tracks. Some examples of these actions are computers that were smashed with a sledgehammer, emails and documents that were deleted, hard drives that were overwritten hundreds of times. This is where evidentiary seizures come into play.
Dutch law provides for the possibility to obtain a court order appointing an independent bailiff and a team of technical and (forensic) IT experts to conduct an ex parte (ie, unannounced) evidentiary seizure if it is plausible that the defendant has misappropriated one or more trade secrets. Although evidentiary seizures were traditionally only applied in civil litigation and later also in IP litigation, recent Supreme Court case law (Dow/Organik) confirms that evidentiary seizures can also be used in trade-secret litigation. The burden of proving (a reasonable suspicion of) trade-secret misappropriation for getting an evidentiary seizure order granted is relatively low. After all, this is a tool to be used for the collection of evidence, which naturally implies that the claimant does not yet have a complete case.
The bailiff will be instructed by the claimant before the seizure starts as to which specific documents/data to look for and seize. Evidence that can be seized is not limited to information contained in (electronic) documents, such as emails, process descriptions, recipes, client lists, etc, but can also be a detailed description of a manufacturing process that takes place in the factory, or samples of ingredients, intermediate products or end products. Regarding electronic documents, the bailiff’s possibility to seize evidence is not necessarily limited to data physically stored in the Netherlands, but may also get access to data stored in the cloud or on foreign servers, provided that the data is (also) normally accessible in/via the Netherlands (hence, if a Dutch branch of an international group of companies also has access to documents within foreign group members, this evidence may be seized in the Netherlands).
The bailiff and his team will take evidence from the seizure location and make copies, or make copies directly on site. These copies will be stored by the bailiff, and the claimant can get access to these documents via separate inter partes access proceedings (which can be done in summary proceedings – a decision will be available within a couple of months after the seizure).
The evidence obtained through an ex parte evidentiary seizure and subsequent inter partes access proceedings can be used in Dutch litigation, but can also be used for trade-secret misappropriation litigation in foreign courts.
Another important issue relates to confidentiality pools. For many years, Dutch procedural law accommodated a limited form of confidentiality for trade secrets that were disclosed pending litigation (eg, hearing a case behind closed doors and redacting decisions). However, legal options on the protection of confidentiality were limited to excluding third parties getting access to information, and there was no uniform practice and no clear guidance on how to establish confidentiality pools. The implementation of the EU Trade Secret Directive led to a new provision governing confidentiality pools in trade-secret litigation. The confidentiality pools that can be created under this provision are somewhat different from those regularly applied under US law, as it is mandatory also to give access to all information (including the trade secrets) to at least one natural person of each party. The rule is not “attorney’s eyes only”.
This may seem logical at first sight. After all, a party to litigation should have access to all relevant evidence in order to have a fair chance of bringing a defence (ie, the right to a fair trial). At the same time, however, it seems somewhat strange that a claimant should give the defendant access to their trade secrets pending litigation that should determine whether the defendant actually even had (and used/disclosed) the trade secret in the first place. This may not be a big issue for large companies with in-house legal teams. In that case, one of the members of the legal team can simply gain access to the confidential evidence and keep the information away from those dealing with the information at issue (such as R&D employees). However, when dealing with small- (and potentially also medium-) sized companies, this can become a problem.
For instance, what if an employee leaves the company, starts his or her own company and is subsequently accused of trade secret misappropriation by his or her former employer. Pending litigation, the ex-employee may get access to his or her ex-employer’s trade secrets – based on the newly implemented provision – but what if the court then ultimately decides that misappropriation cannot be established? The ex-employee has then had access to the trade secrets through the litigation – how does one ensure that the ex-employee does not subsequently use that for his or her own business after all? This may lead to some further interesting case law, or creative lawyers avoiding getting into such a situation in the first place.