Germany: New Trade Secrets Law Now in Effect

​Germany's Trade Secrets Act, effective since April 26, allows company information to be legally protected trade secrets only if companies take appropriate steps to keep the information confidential.

Changed Definition

The law changes the definition of trade secrets. The Bundestag, the German federal parliament, has redefined the concept of secrecy and tightened the requirements for protecting secrets.
Previously, information was secret if the owner intended to keep it confidential. It did not matter whether the information owner had used precautions to protect the secrecy of the information, so long as the owner intended to keep the information secret.

According to the new definition outlined in the Trade Secrets Act, a trade secret is information that is:

• Neither in its entirety nor in the exact arrangement and composition of its components generally known or readily accessible to those who normally handle this type of information.
• Of economic value and subject to appropriate secrecy measures by its lawful owner, who has a legitimate interest in secrecy.

The definition of trade secret excludes trivial information and the experience and skills that employees gain in the normal course of employment. It also excludes information that is generally known among or is readily accessible to those who normally deal with the kind of information in question. Typical trade secrets are manufacturing procedures, customer or supplier lists, cost information, business strategies, market analyses, prototypes or formulas. 

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Steps to Keep Information Secret

The most drastic change to the Trade Secrets Act is that information is a trade secret and therefore legally protected only if companies take appropriate steps to keep the information confidential.

Which steps companies should take depends on the type of trade secret and its use. Those steps can include physical restrictions on access and contractual safeguards. Labeling each piece of information confidential is not necessary. Instead, companies can take general measures for certain categories of information, such as controlling technical access and putting in place internal policies, guidelines or employment contract clauses. 

To make full use of the legal protection under the Trade Secrets Act, companies should take the following steps:

• Check their options on how to limit access to and protect confidential information, and implement measures to secure secrecy, such as placing technical and physical access restrictions, policies or guidelines.
• Review and, if necessary, amend or end confidentiality agreements, clauses in employment contracts, and internal policies and guidelines with employees and third parties.
• Prepare for increased whistle-blowing because of a new exception.

Exceptions

For the first time in Germany, the law introduced an exception that allows whistle-blowers and journalists to share trade secrets when there is a legitimate interest in the disclosure, which might include exposing illegal conduct or professional misconduct. The Trade Secrets Act also allows the disclosure of trade secrets to the employee representation (e.g., works council and unions) to the extent necessary for the exercise of their rights.

Finally, the Trade Secrets Act helps improve confidentiality in court proceedings by allowing courts to classify as confidential information used in proceedings. In such a case, all those involved in the legal proceedings or who have access to the documents of the proceedings must keep the information confidential. Courts enforce the law through fines and even jail time up to six months.

Eva von Muellern is an attorney with Ogletree Deakins in Berlin.