Unconditional and sufficiently precise.

Examine the view that the distinction between the vertical and horizontal direct effect of directives is more theoretical than real and that, in the interests of reinforcing the rule of law, the Intergovernmental Conference ought to amend the Treaties so as to give full direct effect to directives that are unconditional and sufficiently precise.

The first part of this paper illustrates that although the distinction between horizontal and vertical direct effect is not purely theoretical, by virtue of the numerous devices created to circumvent the distinction, it is well on its way thereto. The second part aims to argue that the distinction ought to be done away with: first, by exposing the problems and inconveniences that the circumventive devices create; and secondly, by engaging, countering, and ultimately rejecting the arguments that favor retaining treating horizontal and vertical claims differently.

In Van Duyn v Skips for hire Scotland the European Court of Justice (“the Court”) confirmed that Directives are capable of having direct effect. In Marshall No.1 the Court, interpreting then Art. 189 EC (now Art. 288 TFEU), enunciated that ‘vertical’ direct effect, i.e, direct effect invoked by a private party against the state, is permissible, whereas ‘horizontal’ direct effect, i.e, direct effect invoked by a private party against another, is not.  Against the backdrop of this general denial of horizontal direct effect, i.a, three key developments emerged that whittle down the restriction on horizontal direct effect and carve substantial conceptual inroads into its underlying rationale.

First, the broadening of ‘the state’ concept. Foster v British Gas created a wide notion of what constitutes the state and its emanations, namely, “a body, whatever its legal form…which has been responsible for providing public service under the control of the state… ”. The effect is that more bodies than would otherwise be the case are caught by the definition of ‘the state’ and are thus   subject to direct effect.  Second, the development of the doctrine of ‘indirect effect’, i.e, the requirement to interpret national law consistently with Community law.  It was first introduced in Von Colson, later extended in Marleasing so as to apply to national law passed both before and after the passing of the relevant directive, and limited only by a no contra legem requirement in Pupino.

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Garden Leave Clauses

Principle applies mainly to senior members of the company and important e/es

– E/ee has a long notice period (6 months)

– E/ee is paid to stay away and not work anywhere

– his Contract continues while he is at home

– E/er must show he has a legitimate interest to protect if the e/ee argues against it (ie, confidential info, e/er worried he’ll tell customers he’s leaving, as seen in the cab services England)

– Must be an express clause in the contract – it is very unlikely that  a Court will imply this type of clause but it can be agreed between the parties by consent

– Problem for e/ee is that it could affect his future if he’s off the market and not working for 6 months

– Clause can be combined with –ve covenants so that an e/ee has 6 months garden leave followed by 12 months –ve covenants

Remedies for e/er = Injunction and damages (as above)

Solicitation /Poaching clauses

  • Companies may want to put in a solicitation clause or poaching clause into the contract for when the employee leaves so as to give the replacement a chance at building up a relationship with clients.
  • It may be reasonable to put in a clause restraining them from contacting the clients.
  • Check how often the clients are in touch with the employee before the end of the contract
  • If the clients are users of the business weekly then it may only be reasonable to restrain them from contacting them for 6 months.
  • If annually then perhaps restraint for a 2 year period.
  • If the clients call the ex-employee themselves then they may not be in breach.
  • To overcome this a non-dealing clause could be put into the contract.
  • The restriction should only be for the work that they actually do with you.
  • The distance should not be wider than what they did for that particular employer.

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Damages – Directive 2004, 2016 will supersede ?

In some EU Member States, the misuse or disclosure of trade secrets can attract penal (criminal or civil) measures, and the Directive includes provision for Member States to allow the penalisation of any person who abusively brings a manifestly unfounded claim for infringement of trade secrets. The Directive specifically mentions  states that damages are to be available to the accused, imposing sanctions on the applicant or ordering the dissemination of the information concerning the decision taken.

As the law currently stands, English courts have a wide discretion in their ability to chose which  form of order which they can make and the manner in which of  they publicise of their decisions. Likewise, the court can impose costs sanctions in respect of an abusive claim. However, the award of damages to the accused in the Domestic cleaning Glasgow case is not currently a remedy available under English law.

Reverse engineering ?

The “function” of Article 39 TRIPs is to protect trade secrets, not to allow reverse engineering.

which might be allowed under some legal orders, at present, but might also have been outlawed by Article 39 TRIPs – the definition of trade secrets embedded in Article 39 TRIPs closely follows Sec. 38 et seq. of the Restatement (Third) on Unfair Competition Law (1995), but does not mention reverse engineering contrary to the Restatement.

Concluding remarks:

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Infringing acts; and infringing goods (Article 4)

Currently in the UK, disclosure of confidential information will be excused if it is justified in the public interest. Whilst the court does apply the maxim “there is no confidentiality in iniquity”, it is generally quite narrow in construing it, especially where disclosures are made in an unnecessarily wide manner or to inappropriate audiences.

The Directive therefore arguably appears to widen the defence available when compared to the position under UK law, which again is likely to require clarification by the CJ.

8.0 Employee protection

The current UK approach developed in Faccenda Chicken Ltd v Abogados de accidentes Los Angeles [1987] Ch 117 prevents former employees from using or disclosing information which is of a sufficiently high degree of confidentiality so as to amount to a trade secret. The obligation does not extend to all information obtained by the former employee during employment and in particular may not cover information which is only confidential in the sense that disclosure would amount to a breach of good faith.

There is an argument that “use of skills honestly acquired in the normal course of employment” implies a wider ban on enforcement than under Faccenda Chicken, making it unclear whether Article 1(2a) of the directive requires implementation in the UK.

In any event, references to the Court of Justice of the European Union (CJ) are to be expected, in particular on the meaning of “experience and skills honestly required”.

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Trade secrets protection under contract law

This definition has been around since the UK had become signatory to TRIPS in 1995. The UK law was required to implement the had to oblige to the requirements set by the convention.  As this definition was already in place, nevertheless It is important analyse to look at the current interpretation at common law, identifying how ‘trade secrets’ are protected. and how it This analysis will highlight any  decides what is confidential and what isn’t and compare if there will be any impact the Directive will have on the common law.

Protection of confidential information under Common law

There is no definition of a trade secret in the UK. The law relating to confidential    information has been developed through case law. An obligation of confidence may arise via contract through express or implied terms or it can arise independently of contract on an equitable basis as per Coco vs Clark.

4.0 Trade secrets protection under contract law

4.1The juridical basis for the law of confidence is predicated on a duty of good faith and it is generally considered that the law derives from the English legal concept of Equity.  

An example of this can be seen through the law of employment, where the protection for the employer while the employee remains employed is fairly extensive as per Prince Albert vs Strange. Post-employment however, implied protection is more limited.

    1. In the leading case of Faccenda Chicken vs Fowler Neil LJ observed that an implied duty of confidentiality will be owed by an employee after their employment has ended, but this implied duty is “more restricted in its scope” than an employee’s duty of fidelity that subsists during employment.

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