The German “Law on the Protection of Business Secrets” (“Gesetz zum Schutz von Geschäftsgeheimnissen“, “GeschGehG“) entered into force on 26 April 2019. With this law, the German legislator has implemented the so-called “Know How Directive” of the European Union into German law (with a delay of more than three quarters of a year) and thus, on the one hand, has extended this legal institution, which has so far been predominantly regulated in the secondary criminal law provisions of Sections 17 to 19 UWG (“Gesetz gegen den Unlauteren Wettbewerb“, German Act against Unfair Competition), in particular under civil law, and, on the other hand, replaced the above-mentioned provisions of UWG by an independent set of regulations.
Initial practical experience indicates a considerable paradigm shift in this area, as the following aspects show.
1. The first innovation which is – extremely (!) – relevant for the practice can be found directly in the legal definition of a “trade secret”. While the German Supreme Court in civil matters (“Bundesgerichtshof“, “BGH“) – in the absence of any other legal definition – defined the trade secret as “any fact in connection with a business, which is not obvious, but known only to a narrowly limited circle of persons and is to be kept secret according to the expressed will of the proprietor based on economic interests”, the new legal definition of § 2 para. 1 GeschGehG narrows the scope of application considerably. Accordingly, a trade secret only is information,
- 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 which is therefore of economic value, and
- which is subject to appropriate confidentiality measures by its lawful holder under the circumstances, and
- who have a legitimate interest in confidentiality.
In contrast to the previous (larger) definition, no trade secret exists if the information in question is not actively protected by “confidentiality measures”. This may sound normal for design sketches for the next Porsche. However, if one takes into consideration the facts of the decision of the Higher Regional Court of Düsseldorf in 2007, described in more detail below, which easily recognised a trade secret in the customer lists without even examining any confidentiality measures, it becomes obvious that a paradigm shift has taken place since April 2019 and that a stricter standard may already be applied to the existence of a trade secret than before.
2. This is another reason why, after the entry into force of the GeschGehG, a breach of trust in the disclosure of trade secrets to third parties, e.g. in the context of due diligence in the case of a company acquisition, should no longer be so easily sanctionable. According to the previous understanding (see only BGH, 2012, below), the disclosure of trade secrets to third parties, even without the conclusion of a confidentiality agreement, did not lead to the loss of the legally anchored protection under the now defunct § 17 UWG. Now, on the other hand, the disclosure of information worthy of protection to third parties without a corresponding confidentiality agreement (at least until the first decisions of the higher court) could possibly lead to a loss of protection.
3. Since the burden of proof for the protection of the relevant information as a trade secret lies probably with the company claiming an infringement, it makes sense to systematise the protection of trade secrets in the company and to document it in an appropriate protection concept. Whether, in addition – as can already be read in some professional articles – the internal appointment of a “secret protection officer” (analogous to the data protection officer) is necessary will depend on the size of the company, the relevance of the information worthy of protection for the continued existence of the company and on the developing case law.
Already the issues in the course of this short post clearly show the impending paradigm shift in the practice of the protection of trade secrets. The previous case law on this subject is likely to be applicable only to a limited extent and – as with the introduction of the GDPR – the resulting legal uncertainty will only subside over time. Until then, those responsible for the protection of company’s trade secrets should act on the assumption to be “better safe than sory” rather than subsequently risk to become the subject of a “surprising” supreme court ruling.
Richtlinie (EU) 2016/943 des Europäischen Parlaments und des Rates vom 8. Juni 2016 über den Schutz vertraulichen Know-hows und vertraulicher Geschäftsinformationen (Geschäftsgeheimnisse) vor rechtswidrigem Erwerb sowie rechtswidriger Nutzung und Offenlegung (in German)