What’s your secret? The new Trade Secret Protection Act and first cases of application in practice

24.01.2020

At the end of April 2019, the new Trade Secret Protection Act implementing the corresponding European Directive (2016/943) came into force, which contains both civil claims and criminal provisions with regard to the disclosure of trade secrets.

Secret business information is to be better protected by the new law and industrial espionage and betrayal of secrets thus shall be effectively prevented. In the future, it will also be possible to effectively protect, for example, algorithms of artificial intelligence or innovative process sequences, which until now have been deliberately not disclosed in the course of patent applications for example due to a lack of protective mechanisms against copies. The instrument of whistleblowing, which is feared in corporate circles, is also regulated by law for the first time so that grievances in a company can be detected without the whistleblower having to fear corresponding legal consequences. Investigative journalism is now also protected by privilege.

“Trade secret” redefined

A prerequisite for a comprehensive protection of trade secrets is that companies have taken appropriate measures to maintain the confidentiality of secret information. Unfortunately, the law does not contain examples of concrete measures that the legislator considers appropriate. Furthermore, as soon as a secret information has been disclosed, it loses its secret character, so that the company concerned can no longer invoke the protection of the Trade Secrets Protection Act in case of doubt.

What we recommend

The higher the importance of the respective information for the company, the higher the demands on the confidentiality measures that are to be taken. It is therefore advisable to start by classifying existing trade secrets in a graduated manner in order to create a comprehensive protection concept in the next step.

Possible secrecy measures include, but are not limited to: Technical measures such as appropriate IT security systems, physical access barriers and encryption of communication between the co-knowns as well as organizational and legal measures such as confidentiality agreements in employment contracts with employees and in framework agreements with business partners.

Practical experiences

Half a year after the new law came into force, we have noticed that many companies have not yet adapted or amended their previous non-disclosure agreements (NDA) or corresponding nondisclosure clauses in employment contracts. When (departing) employees, in particular, pass on business secrets to their private e-mail addresses or make copies of secret documents in order to benefit from them, for example, in their next job (not unlikely for a competitor), we repeatedly see how important comprehensive protection concepts for business secrets would have been in these cases.

First of all, it can be difficult in the court proceedings to prove a measurable damage to the company concerned (owner of the secret) through the betrayal of the trade secret. Further on, the question influenced by labor law, what is the (former) employee’s freely usable knowledge from experience as opposed to trade secrets requiring secrecy, still has to be answered on a case-bycase basis. When answering this question, we often find ourselves in a grey area. Additionally, (departing) employees often lack the awareness of injustice in cases of unauthorized use of trade secrets. We therefore recommend regular training courses for employees in order to raise their awareness with regard to internal secrecy protection.

Conclusion

In principle, the new legislative situation has higher hurdles that companies have to overcome in order to benefit from the new act’s protection, but it also rewards these companies with stronger protection of their trade secrets than was the case under the old legislative situation. If your company wishes to protect its trade secrets more efficiently than before, you should take a closer look at this topic.

Published in Newsletter Confectionery Industry Special – 2020 edition.

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