After several months of delay and heated political discussion among all German parties about the scope of protection regarding journalists, whistleblowers and employees, the German parliament adopted the Federal Government’s draft Trade Secrets Act on 21 March 2019. This act implements Directive (EU) 2016/943 of the European Parliament on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure into national German law with the aim of establishing a homogenous protection of trade secrets.

Previous Regulation

So far, in Germany, the protection of business and trade secrets has fragmentarily been regulated in the three different areas of torts, unfair competition and criminal law, each area only covering its respective specific scope while lacking a comprehensive and universal approach.

According to the previous standards, a trade secret was defined as any fact which is not generally known or accessible and which, according to the will of the proprietor, is to be kept secret on the basis of a legitimate economic interest. In addition to the objective fact that the information was not made public, it was above all the owner’s will to maintain secrecy that was important. The new law now moves away from this approach by focusing primarily on objective measures for the protection of trade secrets.

Legal Definition of Trade Secrets

In the new Trade Secrets Act (Gesetz zum Schutz von Geschäftsgeheimnissen – “GeschGehG”), which has now been passed, the term “trade secret” is legally defined for the first time. Pursuant to § 2 No. 1, a trade secret is information,

  1. which is not generally known or readily accessible, either in its entirety or in the precise arrangement and composition of its components, to the persons in the circles who normally deal with this type of information and is therefore of economic value,
  2. which is subject to appropriate confidentiality measures by its lawful holder under the circumstances, and
  3. in whose confidentiality the holder has a legitimate interest.

Accordingly, the owner of a trade secret now has to apply “appropriate” measures to ensure non-disclosure of trade secrets and – in case of any dispute – prove that such measures have been in place.

In order to claim protection under the GeschGehG, it will thereby be crucial that the owner of the trade secret is able to demonstrate what specific measures have been taken to protect trade secrets and that these measures were appropriate. The decisive factors are therefore likely to be the implementation and documentation of access blocks, passwords, IT security measures, comprehensive confidentiality agreements with employees and business partners, access security to premises and the like.

Permitted Conduct under the GeschGehG

Reverse Engineering

The GeschGehG further expressly regulates permitted actions for obtaining a trade secret. This includes the independent discovery or creation, but also the observation, investigation, dismantling or testing of products or objects which have been made publicly available or are in the legal possession of the investigator.

This procedure, usually referred to as “reverse engineering”, is now fully legalized for the first time, except when otherwise contractually agreed. The law expressly aims to promote technical progress through product observation and dismantling – up to the limits of existing industrial property rights such as patents or design rights.

Protection of Whistleblowers

The GeschGehG implements exemptions intended to protect whistleblowers, journalists and employees. For example, the measures, procedures and remedies of the GeschGehG do not apply to the acquisition, use or disclosure of a trade secret if it takes place to uncover an illegal act or a professional or other misconduct and if the acquisition, use or disclosure is suitable to protect the general public interest.

Dealing with Infringements under the GeschGehG

Means of Redress

The GeschGehG codifies the means of redress in case of an infringement, e.g. the cessation of or the prohibition of the use or disclosure of the trade secret, recall of the infringing goods from the market, destruction of the infringing goods, damages, pecuniary compensation, but also claims to information.

Confidentiality of Legal Proceedings

Finally, the GeschGehG aims to protect the confidentiality of trade secrets in the course of civil proceedings by providing for an authorization to transfer jurisdiction to certain specialized courts in cases of trade secret infringement, the possibility to classify the court proceeding as confidential upon request of one of the parties, and a potential restriction of the number of persons entitled to have access to evidence and/or hearings.

 

This article was originally published on AllAboutIPMayer Brown’s blog on relevant developments in the fields of intellectual property and unfair competition law.

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Photo of Konstantin von Werder Konstantin von Werder

Konstantin von Werder is a counsel in the Intellectual Property practice of Mayer Brown´s Frankfurt office. He focuses on trademark and unfair competition law (UWG). He has extensive experience and expertise as a litigator and advises clients in legal disputes (warning letters, preliminary injunctions, actions on the merits). Konstantin also coordinates the infringement proceedings for his clients abroad. Furthermore, he advises national and international clients on patent, design and copyright law. Moreover, he has particular expertise and experience in drafting complex license and distribution agreements and in providing advice on research and development agreements. His clients include companies in the pharmaceuticals and automotive industry as well as in the hotel, catering and consumer goods sector.

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