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Competition law: The law on the protection of trade secrets has been passed - need for action for companies

On March 26, 2019, the German parliament (Bundestag) passed the Law on the Protection of Trade Secrets. This law implements the EU Directive 2016/943 and is intended to protect companies at civil law level against the unlawful acquisition, use and disclosure of their trade secrets.

Legislative history

The EU Directive 2016/943 should have been transposed into national law by June 9, 2018. However, the German legislator did not meet this deadline. It was not until April 2018 that a draft bill was submitted for the Protection of Business Secrets Act ("GeschGehG"). This draft still underwent various changes before the Bundestag adopted the revised draft of the Federal Government for decision. The new law came into force at the end of April 2019.

Content of the Regulation

Whereas the protection of trade secrets was previously only regulated by the penal provisions of Sections 17-19 Unfair Competition Act (UWG) and the General Civil Law, a comprehensive regulation in the form of a separate law is now available for the first time. This is intended to take account of the special importance of trade secrets, which they possess in addition to industrial property rights such as patents, designs or copyrights.

Protection only with appropriate confidentiality measures by companies

The central amendment to the law is the definition of trade secrets as the protected subject of the law. According to the new definition, business secrets are such information

  • that are secret and
  • therefore of economic value and
  • which are subject to appropriate confidentiality measures by their lawful holder in the circumstances.

Thus, both technical and commercial data are recorded, provided that the other requirements are fulfilled. The data must on the one hand be unknown and on the other hand give their owner an advantage in his competitive position. This data therefore includes, for example, manufacturing processes, prototypes, formulas and recipes, but also customer and supplier lists, company data, cost information and business strategies.

The decisive innovation is the further prerequisite set by the law for protection as a trade secret: the entrepreneur himself must take "appropriate confidentiality measures" in order to benefit from the regulation. The protection of information must no longer be limited to actually preventing the disclosure of the information. Rather, the appropriate protective measures - including their documentation and evidence - are necessary for information to be considered a protected trade secret at all. The specific protective measures to be taken depend on the individual case, in particular on the nature and value of the information concerned, its significance for the company and the size of the company.

Claims of the holder of the trade secret

The holder of the trade secret is protected against unauthorized obtaining, unauthorized use and unauthorized disclosure of trade secrets. In addition to the already known claims for injunctive relief, information and damages, the new law also grants the owner of the trade secret claims for destruction, surrender, recall, removal and withdrawal of products from the market which were manufactured using the trade secret. The owner is entitled to a further claim for damages if the information is refused. The owner of the trade secret is entitled to all claims not only against the infringer himself, but also, under certain circumstances, against the owner of the company employing the infringer.

Protection of reverse engineering

The permitted actions now expressly include so-called reverse engineering, i.e. the decryption of trade secrets with regard to products from the product itself. This is now fundamentally permissible regardless of the effort a specialist would have to make to decrypt the data. However, reverse engineering remains prohibited if the manufacturer has intellectual property rights, such as a patent right, or if the imitation is an unfair exploitation of reputation or deception of origin. In addition, product manufacturers can protect themselves against reverse engineering by means of appropriate contractual arrangements if the product offered is not freely available on the market.

Practical advice - need for action for companies

Even if the law grants the companies concerned better protection of their trade secrets as a result, it also obliges them to strengthen their protection by forcing them to take "appropriate protective measures". Anyone wishing to benefit from the improved legal protection mechanisms must take appropriate precautions themselves. The following procedure is recommended:

As a first step, companies should first identify the information that needs to be kept confidential and then classify this information into certain categories depending on the degree of confidentiality.

Building on this, a protection concept must be developed. The protective measures include both physical (technical) access restrictions and corresponding organizational and contractual security measures. Secrecy agreements both with external third parties and with the company's own employees are of additional importance in the light of the law. They no longer merely establish their own contractual claims, but are also a prerequisite for the statutory protection of secrets.

In addition to concluding the relevant agreements and implementing the necessary measures, a third step also involves monitoring compliance with them. If information is passed on to third parties, these must also be monitored to ensure that the agreed standards are adhered to. In order to provide companies with assistance, standards for information security have already been developed in some sectors, such as the automotive industry, and compliance with these standards can be monitored by accredited testing service providers.

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