Information makes the world go round and companies are aware of this. To maintain their competitive advantage, they may try to protect certain commercially valuable information. The conceptual malleability of trade secrets means that they are potentially key to ensuring the success of any such attempt to keep information secret. This flexibility in the definition of trade secrets is something companies can leverage, although it is being criticised as non-transparent by States and consumers. Legislators have tried to find a balance between private and public interests, among others, by setting limitations to the possibility of making information secret. Against this backdrop, the increasing attention in the EU devoted to, on the one hand, the protection of whistleblowers and, on the other, the protection of trade secrets by business owners represents an interesting scenario.
In 2019, the EU legislator issued the Whistleblowing Directive (2019/1937) with the aim to create “safe channels” to report violations of EU law. The Directive protects whistleblowers who reveal misconduct, wrongdoing or illegal activity […] in the general public interest, shielding them from the risk of being convicted. The term ‘whistleblower’ includes “reporting persons working in the private or public sector who acquired information on breaches in a work-related context”. This definition covers employees and individuals who have access to the information in question, endowing them with the right to report while guaranteeing their legal security.
Why are whistleblowers so crucial nowadays?
Whistleblowing can be considered as a form of internal regulation. The legislator and authorities can monitor any wrongdoing from the outside, but it may be unclear whether illegal activity is being conducted behind a company’s closed doors. Tax evasion, financial schemes, restriction of competition, or even infringements of others’ intellectual property rights are examples of common misconducts. However, new eras bring new problems.
A wave of whistleblowing scandals, connected with Big Tech companies and large corporations, has emerged in recent years. These mediatic scandals show that whistleblowing is now a global phenomenon worth looking at. The whistleblowers in question revealed confidential company information. Not all confidential information is automatically considered trade secrets. Under EU law, trade secrets cover business information, which is secret, has commercial value and in relation to which reasonable steps have been taken to protect it. Yet whistleblowers can reveal any internal company information which violates public interests, whether or not it is protected by trade secrets.
The biggest scandal occurred in 2021, when a whistleblower revealed confidential Facebook files. Frances Haugen, a former Facebook product manager, reported that the company prioritised profit over safety and that Facebook’s AI algorithms harmed people. She argued that the company’s existing algorithm and its engagement-based ranking increased the spread of misinformation. She also stated that Facebook management had denied to install integrity and security systems in most of the languages of the engagement-based rankings. Adding to this, she claimed that the Instagram algorithms (Instagram is owned by Facebook, Inc (now Meta Platforms)) dramatically influence children’s mental health. According to Haugen, the company’s leadership was not interested in introducing fundamental algorithmic changes. Thus, Haugen decided to disseminate internal Facebook documents, notifying authorities and the general public about the company’s wrongdoings. Without such whistleblowing, this confidential information, including technical information about Facebook’s business model and algorithms, would never have been made accessible to the public, as the internal confidential documentation is stored inside the company.
In 2016, 11.5 million files exposing special offshore tax regimes were made public. This was one of the most well-known cases of documents and information being made secret to conceal illegal actions against public interests and safety. The leak, which represented the biggest data leak in history – 260 GB of information – grabbed global headlines due to the involvement of various national leaders and showed that even heavily secured corporate information can be accessed and disclosed.
One of the most recent whistleblowing scandals, related to Uber, occurred in 2022. Mark MacGann, a former lobbyist for Europe, the Middle East and Africa, unveiled more than 124 000 company files. These files disclosed the company’s unethical behaviour and internal wrongdoings, such as its kill-switch strategy that cuts access to the company servers to hide documentation from the authorities. It was also revealed that Uber had tried to manipulate national transportation laws.
Even though these cases did not lead to instant change, they have established whistleblowing as a form of fighting breaches of law and illegal activities.
Can companies claim a violation of their trade secrets by a whistleblower?
It is undisputable that the protection of whistleblowers is crucial, now more than ever, as transparency and accountability become increasing important issues in an age of sophisticated and intrusive technologies. However, concerns may arise from the interpretation of the EU Whistleblowing Directive and a related piece of EU secondary legislation, namely the Trade Secrets Directive.
The two Directives clearly have different underlying rationales. Whereas the Trade Secrets Directive aims to protect the private interests and investments of companies, the Whistleblowing Directive protects the public interest in accessing information owned by those same companies. A joint reading of these Directives unveils one point of connection: Article 5 of the Trade Secrets Directive. This provision sets out that trade secret disclosure should guarantee the defence of public interest.
Article 5 foresees four exceptions where disclosing trade secrets is not considered a violation of the law and which do not entail negative consequences for the discloser. They uphold the goals of supporting and protecting fundamental rights and making the Union a safe and comfortable place to live and do business.
The first exception is the right of freedom of expression and information. This provision is aligned with the stronghold that is Article 11 of the EU Charter of Fundamental Rights, including the protection of freedom of information across society.
The second exception is the key focus of this Insight. It refers to revealing misconduct, wrongdoing, or illegal activity in the general public interest. This provision ensures that trade secrets are not an obstacle in situations where information needs to be disclosed to avoid harming the general public interest or where such information has the potential to “undermine fundamental rights and freedoms or the public interest, such as public safety, consumer protection, public health and environmental protection”.
The last two exceptions refer to the need of workers or anyone else to disclose confidential information whenever necessary for the purposes of exercising their functions or protecting a legitimate interest in EU or national law.
Article 5 of the Trade Secrets Directive as (also) “whistleblowing” exception
With the aim of protecting fundamental rights and public interests, Article 5 of the Trade Secrets Directive foresees exceptions whose scope can be considered rather broad. One of the most prominent of these creates a specific mechanism of internal protection of the general public interest. Although not literally mentioned in the text of the article, it can be easily demonstrated that Article 5, and particularly its paragraph (b), corresponds de facto to a whistleblowing exception.
The provision is a breakthrough in the sphere of whistleblowing, representing an unprecedented provision in EU law. Since 2019, the Whistleblowing Directive specifically regulates whistleblowing; nevertheless, the 2016 Trade Secrets Directive was among the first documents to develop the whistleblowing institution within the EU. Article 5(b) establishes a safe ground for whistleblowers to report violations of EU laws and protect public interest.
The main purpose of Article 5(b) is to protect public interests through the creation of internal and external reporting mechanisms. Recital 20 of the Trade Secrets Directive specifically highlights that “the protection of trade secrets should not extend to cases in which disclosure of a trade secret serves the public interest”. This shows the legislator’s intention to limit the power of private businesses and organisations in accordance with public interests and goals. Article 5 of the Trade Secrets Directive essentially acts as a restraining mechanism to find a balance between the private and public domains, between secrecy and transparency.
Within the scope of Article 5, publicity and fundamental rights prevail, highlighting respect for the freedom of expression and information alongside the interests of the Union and national law. The only trait linking all the abovementioned exceptions is their public nature. As a supportive mechanism of transparency, the whistleblowing exception represents a worthy mechanism in line with those already mentioned.
The Whistleblowing Directive represents a new, more profound step in the development of the whistleblowing exception. It presumes the public interest importance of a whistleblower’s call of attention to a violation of EU law, whereas the Trade Secrets Directive is more specific in defining this public interest, highlighting fundamental rights and freedoms of public interest with a focus on public safety, consumer protection, public health, and environmental protection.
Conclusion In the modern world, there is an endless fight between the private and public sector, with digitalisation giving Big Tech and large corporations more and more power and influence. With a view to establishing a golden mean, Article 5 (b) of the Trade Secrets Directive as (also) “whistleblowing exception”, together with the Whistleblowing Directive, establish the basis for whistleblowing in the EU, moving public interests forward. Although certain formulations of the acts still raise some questions of legal certainty across the EU, the status of whistleblowers remains stable and protected.