Antitrust and Trade Secrets: The U.S. and the EU Approach

By Czapracka, Katarzyna A. | Santa Clara Computer & High Technology Law Journal, January 2008 | Go to article overview

Antitrust and Trade Secrets: The U.S. and the EU Approach


Czapracka, Katarzyna A., Santa Clara Computer & High Technology Law Journal


Abstract

This paper examines the divergent approaches to application of antitrust principles to trade secrets in the EU and in the U.S. The U.S. antitrust enforcers recognize the need to protect trade secrets and treat them as a type of intellectual property. By contrast, the European Commission takes the view that trade secrets do not merit the same level of deference as that accorded to intellectual property rights. In Microsoft, the Commission decided that Microsoft's refusal to disclose secret interoperability information to its competitors constituted an abuse of a dominant position because the refusal created an unfair competitive advantage for Microsoft. Moreover, as the recent controversy over the implementation of the Microsoft decision shows, the Commission position is that Microsoft does not have the right to charge royalties or control the secret interoperability information it was forced to disclose, unless such information qualifies for patent protection. The source of these divergent approaches may be the lack of harmonized EU standards of trade secret protection. Whereas U.S. antitrust authorities naturally relied on the harmonized principles of trade secrets law, the EU antitrust enforcers, lacking such uniform standards, have been using competition law to shape substantive trade secret laws. In doing so, they have undermined national trade secret protection measures and thus created a legal environment which may discourage private R&D investment and impede diffusion of technologies.

I. INTRODUCTION

The tension at the intersection of intellectual property (IP) and competition law has provided a fertile soil for debate. Yet, little has been said about the application of competition rules to trade secrets. Specific features of trade secrets and their status as a form of IP merit closer consideration, as has become evident after the European Commission decision in the Microsoft case (1) and the litigation that ensued. (2) Should the same standards that apply to compulsory licensing of IP apply to compulsory licensing of trade secrets? If compulsory licensing is ordered, is the owner of the information entitled to royalties? Does the value of the trade secrets at stake or the degree of innovation involved matter when applying antitrust rules to trade secrets? The European Commission faced all these questions in the Microsoft case. The Microsoft decision also illustrates that trade secrets are treated significantly differently by the EU antitrust enforcers than by their U.S. counterparts. This paper is an attempt to systematically compare and assess the application of antitrust rules to trade secrets in the EU and in the U.S. It asserts that trade secrets should be treated as a form of IP for the purpose of applying antitrust laws, as is the case in the U.S., but not so in the EU.

The issue of how trade secrets should be treated for the purpose of applying antitrust laws cannot be considered without examining first the basic questions on the nature and economics of trade secrets, such as how trade secrets are defined, how they differ from IP rights, and why they deserve to be protected. These questions are discussed in the first part of this paper. These general considerations are followed by a brief comparison of the laws governing trade secret protection in Europe and in the U.S. Both in the EU and in the U.S., trade secret protection is a matter of state or national law. However, in the U.S. a number of measures have been taken to create standards of trade secret protection at the federal level. There has been no similar development in the EU.

Both in the U.S. and in the EU, "federal" antitrust rules trump inconsistent state trade secret laws. Yet, whereas the U.S. antitrust authorities treat trade secrets with the same deference as I.P. rights, the position of EU competition policy makers is that trade secrets do not deserve the same level of protection as IP rights. …

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