Trade Secrets Act - simply explained

The GeschGehG was adopted in Germany in April 2019 to implement an EU directive. This brings the regulations protecting the existence of trade secrets and preventing their unlawful use to a uniform level within the EU.

In contrast to other intangible legal assets, trade secrets were not explicitly protected by a separate law until this time. They were only covered by individual sections of scattered laws such as patent and copyright law, the Unfair Competition Act (UWG) or Section 204 of the German Criminal Code (StGB) - exploitation of other people's secrets. However, there were gaps and ambiguities in this protection, which were essentially eliminated by the GeschGehG.

This new law has now established binding definitions to determine when a trade secret exists. Companies are provided with measures to protect trade secrets, for example by giving them clearly regulated claims against infringers. Exceptions to the protection of trade secrets are also regulated, for example for whistleblowers.

What constitutes a trade secret is defined in Section 2 GeschGehG. Accordingly, a trade secret is information that is not publicly accessible and is subject to reasonable confidentiality measures by the authorized owner, has a certain economic value for the company and for which there is a legitimate interest in confidentiality. This covers a broad field. For example, in addition to certain production processes, construction plans or recipes, it can also include customer bases, algorithms and corporate and marketing strategies.

This open definition also includes negative circumstances that could harm the company if disclosed. The decisive factor for classification as a trade secret is not whether this information is labeled as such internally. According to the legal definition, objective measures must be taken to protect the secret protected by a legitimate interest.

However, it should be noted that this protection does not last forever. According to the case law of the Federal Constitutional Court, the necessary legitimate interest diminishes with the passage of time. Thus, the information should no longer be considered a trade secret after around five years. However, this is not a rigid time limit. It always depends on the individual case and the quality of the company's evidence.

Protective measures which, according to the definition, must necessarily be taken in order to classify information as a trade secret can be categorized according to different types. Thus

• organizational,
• technical and
• contractual

measures are taken.

It is essential that the respective protective measure must be suitable for the confidentiality of the respective type of secret.

Organizational measures include, for example, the internal designation and categorization of trade secrets and their disclosure only in fragments to specially trained personnel in certain workplaces.

Technical confidentiality measures include, for example, the protection of written information from unauthorized access. For example, documents printed on paper can be kept locked away or information stored as data can be encrypted. This also includes restricting access to storage media, such as servers and stored content, for example through internal access restrictions and passwords. This also applies to e-mail communication by staff with the relevant knowledge.

Contractual measures include agreements with the company's own staff, partner companies, intermediaries or suppliers, for example through confidentiality clauses with penalties.

Essentially, the Trade Secrets Act grants the owners of trade secrets three categories of claims against infringers. They are entitled to

• Information,
• Destruction or removal from the market and
• Damages.

The aggrieved company has a right to know from whom the information was passed on and to whom.

In addition, the rights holder can demand that goods created on the basis of the betrayal of secrets be destroyed or, if they have already been placed on the market, that they be removed from there.

In addition, the injured company is entitled to claim damages from the infringer. The amount of the claim for damages is determined on the one hand by the actual damage incurred and on the other hand by the value for which the trade secret would have been legally disclosed.

Due to the intervention of interest groups, three exceptions to the protection of secrets were included in the law.

With regard to the public interest in knowing about corporate misconduct, an exception for whistleblowers and journalists has been included in the law. As a result, the protection already afforded to journalists by case law has now been extended to whistleblowers.

These are protected if the public interest in revealing the information outweighs the company's interest in confidentiality. This does not necessarily have to involve criminal misconduct. Ethically unacceptable behavior may also be disclosed. However, it is not possible to say in general terms when this is the case. It always depends on the individual case.

It is often essential for works councils to have knowledge of certain business secrets in order to carry out their work. There is therefore an exception if employees disclose business secrets to the employee representatives within the company if these are relevant to the work of the works council.

There is also an exception under the GeschGehG for the reconstruction of a finished product, known as reverse engineering. In this case, publicly available information or a legally obtained product is used to manufacture a similar product by a competitor company. This results from the peculiarities of the process, because secrets are not accessed. The competitor company merely makes use of information that is not protected.

However, outside the GeschGehG, intangible legal assets are protected in this respect by patent and trademark law.