New German Trade Secrets Act Enacted

Summary

With the release of Federal Law Gazette dated 25 April 2019, the new Trade Secrets Protection Act (Gesetz zum Schutz von Geschäftsgeheimnissen – GeschGehG) (Act) came into force in Germany. The Act implements the EU Trade Secrets Directive (EU 2016/943) (Directive) with a delay of nearly one year after the expiry of the time-limit for transposition the Directive into national law. The reasons for this delay were, inter alia, significant political controversy between the German political parties upon the scope of protection with regard to whistleblowers, employees and journalists.

The necessity for the transposition of this European law into domestic law was a good opportunity for the German legislator to comprehensively reorganise the German system of trade secret protection. Previously, the protection of trade and business secrets had been provided for in several areas of law: tort, criminal and unfair competition law, without a comprehensive and coherent approach. Now, following implementation of the Directive, there is only one code to protect trade secrets, containing civil, as well as criminal law provisions.

Key changes

The most significant material amendment in comparison to the former provisions is that from now on trade secrets will only be protected if appropriate measures of protection have been taken. Previously, it was enough for information to qualify as a trade secret if a fact was not generally known and the owner of this secret had a legitimate economic interest to keep the fact secret – notwithstanding whether he took steps to keep it secret or not. Whether measures are "appropriate" is to be assessed with regard to the significance of the respective trade secret.  Companies, in particular, whose businesses are based mainly on information (IT, technology companies etc.,) need to take note of this requirement. In a dispute, the owner of a trade secret now has to assert and, if applicable to prove, whether they applied appropriate measures to keep the facts secret.

There is also an express concept of permitted activities for obtaining or using a trade secret. Under the previous German law, it was unclear whether "reverse engineering" would be legal, through the dismantling or testing of products or objects which are publicly available or in the possession of the examiner. Now, "reverse engineering" is expressly legalized. The intention of the law is to promote technical progress, limited only by other intellectual property rights (patents or designs, respectively). If the owner of a trade secret wants to exclude "reverse engineering", he may impose respective prohibitions upon the purchasers by contract.

As a result of political discussions, the Act contains exemptions for the protection of whistleblowers, journalists and employees. There are some exceptions: legal measures provided by Act do not apply, for example, if the acquisition or disclosure of a trade secret aims to detect or expose illegal activities or misconduct or it is justified as a matter of public interest.

As to means of redress, the Act provides remedies equivalent to those which are applicable to infringements of  intellectual property rights: injunctions prohibiting use or disclosure of the trade secrets, the recall of infringing goods from the market and destruction of such goods, provision of information, damages and other pecuniary compensation.

A significant improvement are provisions about the confidentiality of trade secrets with civil proceedings. In particular, the court may classify proceedings as confidential upon application of one party and may admit only a limited number of persons to attend hearings.

Altogether, the new Act seems to be provide an improvement for trade secret protection in Germany.

For more on the implementation of the Trade Secrets Directive across Europe see our earlier posts in relation to the UK here (and here a video on the IP and employment impact of the Directive in the UK), Italy here and France here.

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