It is the nightmare of many entrepreneurs: Highly qualified managers leave the company — taking away construction plans, confidential documents and other trade secrets in addition to their expertise. They found a rival company and thus directly harm their former employer.
An Austrian manufacturer of railway track maintenance machinery recently experienced this scenario. He wanted to file an injunctive relief within the meaning of the Trade Secrets Act (GeschGehG) against his competitor before the Higher Regional Court of Hamm — but the lawsuit was filed as Rejected unfounded. Two former senior employees — an engineer and an employee whose responsibilities included service and complaints — had brought a machine onto the market that was an almost identical imitation of a product from their former employer. However, the court found that the plaintiff's establishment did not take appropriate secrecy measures for confidential documents (in this case: construction plans). Therefore, no claim for injunctive relief within the meaning of the Trade Secrets Act (GeschGehG) could be asserted.
Since 2019, Germany has had the Trade Secrets Act (GeschGehG). The Act implemented an EU Directive that transposes the protection of trade secrets into national law. Of course, trade secrets existed even before that, which were specially protected. However — unlike patent or copyright law, for example — there were no uniform requirements as to how to deal with them and what claims injured parties could make. With the GeschGehG, trade secrets were uniformly defined — and it was also defined what measures entrepreneurs must take to protect their secrets.
What is a trade secret anyway?
According to Section 2 No. 1 GeschGehG, information is a trade secret if it...
- neither in its entirety nor in the precise arrangement and composition of its components is generally known or readily available to people in the circles who normally handle this type of information and is therefore of economic value, and
- is subject to the circumstances under appropriate secrecy measures by its rightful owner, and
- which has a legitimate interest in maintaining confidentiality.
Put simply: A trade secret is information that is not easily accessible to every employee within the company and is particularly economically valuable for the employer. However, it must also be adequately protected.
Top secret: Protect organization, technology and contracts!
The GeschGehG also determines which protective measures entrepreneurs must take to adequately protect their trade secrets. The law distinguishes between organizational, technical and contractual measures. In addition, the protection of trade secrets must be planned in advance: Even before confidential documents are created, for example, a protected folder must be available to store them. However, if the documents are initially available to all employees, the secret holder cannot invoke protection from the GeschGehG at a later date.
Entrepreneurs can also contractually ensure in advance that trade secrets do not fall into the wrong hands. This is possible both as a confidentiality obligation under the employment contract, as a separate agreement or — for example with suppliers and intermediaries — as non-disclosure agreements (NDA). An additional confidentiality note can also ensure this on individual documents.
Exactly which measures are taken depends on the type of secret and also on its degree of secrecy. It is important that trade secrets are also clearly identified as such.
Technical protective measures are particularly important for digital data. If, for example, a confidential document is only protected with the password “password”, it is likely to be difficult to assert a claim for omission or compensation as defined by the GeschGehG. Minimum requirements for password allocation, clear distribution of roles when accessing documents and encrypted data transmission are technical measures that guardians of trade secrets should take.
Which secrets are not protected?
There are scenarios in which trade secrets are explicitly not protected by GeschGehG. Works councils can share trade secrets under certain conditions — provided that this is important for their office. Disclosures by whistleblowers and journalists are also among the exceptions: When they reveal misconduct by companies, the GeschGehG rates this public interest higher than the protection of secrets. Particularly controversial: It is sufficient if the company's misconduct is legal but ethically indefensible.
Reverse engineering is also an exception to GeschGehG. This means the reproduction of a finished product — the construction plans are therefore either publicly available anyway or derived from a finished product. Trade secrets are not revealed in this way — but the purchase of the finished product may then be restricted by patent law.
