In order to establish and maintain a competitive market position, companies are increasingly relying on intangible or knowledge-based assets rather than tangible or physical ones. Accordingly, a company’s ability to create, deploy and manage such assets has become a crucial factor in its business success. This current trend has increased the importance of protecting “trade secrets” and other confidential information in the same way as other intellectual property rights are protected. Therefore, it is crucial for a developed country to ensure that its national law protects trade secrets effectively. This article provides general guidance on how trade secrets are protected under German law.
In Germany, business information cannot be the subject of an intellectual property (IP) right, and thus can be protected as a trade secret only. Technical information on the other hand is capable of being protected as either an intellectual property right or a trade secret for example, where the IP right in question - such as a patent or a utility model – is not registered. In fact, many technical inventions are deliberately not registered, for example, the formula of Coca-Cola, which is arguably the world’s most famous trade secret. Both secrets of a technical and commercial nature enjoy the same protection under German criminal and civil law. Therefore, one can use the all-encompassing term “trade-secret” for technical and commercial secrets in the context of German law.
German law protects trade secrets as valuable parts or assets of companies against unauthorised procurement, disclosure and exploitation committed either by an employee, a contracting party or any third party. These are considered to be unfair and punishable activities directed against the legitimate owner of the trade secret. This is the purpose behind section 17 of the Act Against Unfair Competition, which together with sections 18-20 form the core provisions of German trade secret protection. Supplemental protection can also be derived from the general provisions contained in section 1 of the Act Against Unfair Competition and from sections 823 and 826 of the German Civil Code.
These provisions and the related case law form a generally accepted definition of a trade secret under German law. According to German law, a trade secret is defined as follows: a fact relating to a company which is known to a strictly limited group of persons or which is not publicly available and which is to be kept secret according to the expressly stated or presumed intention of the company. The company must have a justifiable interest in keeping the fact secret. This broad definition means that everything of relevance to the economic or competitive position of a business can be protected as a trade secret under German law. Examples of trade secrets include methods of production and marketing or other technical or trade-related information.
The trade secret protection purports to fulfil three functions: it should (i) cover the period of research and development until such time as a patent or utility model is registered as such; (ii) cover the subject matter which cannot be protected as intellectual property right but which nevertheless deserves some protection; and (iii) complete and supplement the special protection available under patent, utility model and copyright laws.
All of the infringing acts comprised by sections 17 and 18 of the Act Against Unfair Competition, namely the unauthorised procurement, disclosure and exploitation of trade secrets are criminal offences punishable by a fine or up to five years imprisonment. However, in practice most cases of trade secret infringement are brought before the civil courts, because the claimant is typically seeking injunctive relief and/or damages. Also, German lawyers and the industry generally prefer the civil route, because there is greater confidence in the specialised civil courts which are, inter alia, better equipped to deal with questions of contract law which often arise in cases of trade secret infringement.
When pursuing an action for trade secret infringement there is the risk that the litigation itself may lead to a disclosure of the trade secret. To avoid this, the claimant may, under the German Code of Civil Procedure, request that the proceedings be carried out “in camera”, i.e. that the public are excluded and that only the parties and their solicitors are present. In addition, the civil court prohibits third parties from inspecting the files in trade secret cases.
In the circumstances it seems that German law and the German courts provide trade secrets with adequate and efficient protection. Bird & Bird has comprehensive experience and knowledge in advising clients in relation to the protection of their trade secrets, both in providing non-contentious advice on how best to keep the trade secrets secret or in providing contentious advice in the event of trade secret infringement.