New Law for the Protection of Trade Secrets in Germany

By Thomas Hey, Dr. Catharina Klumpp, Dr. Kathrin Kruse, Benjamin Karcher

06-2019

The German Law for the Protection of Trade Secrets (Gesetz zum Schutz von Geschäftsgeheimnissen, "GeschGehG") came into force on 26 April 2019, following considerable delay. This new law is based on Directive (EU) 2016/943 of the European Parliament and of the Council dated 8 June 2016. The new law provides for the protection of undisclosed know-how and business information ('trade secrets') from their unlawful acquisition, use and disclosure.

Up until the introduction of the new law, the protection of trade secrets in Germany was only regulated in a rudimentary way by provisions contained within the Unfair Competition Law and Criminal Code. Given that this did not meet the requirements of the Directive, the German legislator was forced to take further action.

What does the new law provide?

For the first time, a definition of the term "trade secret" will now exist under German law. "Trade secrets" covers information which meets all of the following requirements:

  • it is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
  • it has commercial value because it is secret; and
  • it has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

In other words, a trade secret is confidential business information which has commercial value and which is subject to appropriate measures of confidentiality. Information is considered to have commercial value if its acquisition, use or disclosure without the consent of the company that owns it, adversely affects the economic or technical potential, business or financial interests, strategic position and competitiveness of that company, i.e. supplier lists, business strategies, market analyses, formulas and recipes. Therefore, such information will mainly be relevant to business transactions.

It is up to an employer to take appropriate measures to ensure confidentiality, whether in a technical, organizational or contractual way.

The new law provides the owner of a trade secret with a number of civil law claims in case of infringement, such as claims for removal and omission, further information, damages or surrender.

The new law also provides that the owner of a company will be held liable if his or her employee violates the law in respect trade secrets owned by another company, assuming that said employee has committed the infringing act in direct connection with the performance of his or her duties for the company for which they work.

Action points for employers

The most important change under the new law is that when secrets are transferred, companies must now take appropriate measures in order to secure the confidentiality of relevant information. If appropriate measures are not taken, such information may lose its quality as a trade secret and hence may no longer benefit from protection.

Until now in Germany, many employment contracts had included a standard provision obliging employees to maintain the confidentiality of all business/trade secrets. With the new definition, such wording no longer makes sense.

What might an appropriate measure be for the purposes of the new law? This will primarily depend on the nature of the confidential information but, in any event, it will be important for a company to analyze and be aware of what internal information it holds which may possess the quality of being a trade secret, and therefore what information will need to be secured with appropriate measures. This may take the form of physical barriers, such as access restrictions to certain departments (e.g. R&D), technical barriers, for example, to prevent access to and copying of, company data (e.g. customer lists), or contractual barriers, such as NDAs for individuals with special knowledge.

However, appropriate training for all employees will likely be more important than any physical barriers , and companies will need to continually raise awareness as to what qualifies as a trade secret. In this respect, it will be important for companies to clearly label a trade secret as a trade secret, and to inform employees that certain information must be kept confidential. A first step will be to update employment contracts and include wording to specify what information must be kept confidential. For employees with specific internal knowledge and access to relevant confidential information, it will also be advisable not only to include such wording in employees' employment contracts and/or to enter into NDAs at the beginning of any employment relationship, but also to set up processes to ensure that the content and scope of all such agreements is regularly reviewed, so as to cover new responsibilities, changes to roles or additional fields of activity, in order to provide for an appropriate level of protective measures throughout the duration of any employment relationship.