In Germany, the protection of trade secrets is governed by the German Trade Secrets Act (GeschGehG), which was enacted in 2019 to implement the EU Directive 2016/943 on the protection of undisclosed know-how and business information against unlawful acquisition, use, and disclosure.
This directive aims to harmonize the protection of trade secrets across the European Union, setting clear standards and requirements for companies. Before the implementation of the GeschGehG, the protection of trade secrets in Germany was primarily covered under §§ 17-19 of the Unfair Competition Act (UWG). The new law provides clearer guidelines and expands the scope of protection, particularly by defining what constitutes a trade secret and what actions companies must take to secure these protections.
Steps for Companies to Protect Trade Secrets in Germany
To benefit from legal protection under German law, companies must implement “reasonable steps” to safeguard their trade secrets. This means taking active measures to protect sensitive information, which may include:
- Technical Measures: Use of encryption, access controls, firewalls, regular IT security audits, and backups to protect digital information.
- Organizational Measures: Establishing clear policies for handling confidential information, employee training, and limiting access to sensitive data on a need-to-know basis.
- Legal Measures: Using non-disclosure agreements (NDAs) with employees and business partners, and including clauses related to trade secret protection in employment contracts.
It is crucial for companies to document these measures, as proof of such efforts is necessary in any legal dispute to demonstrate that the company actively protected its trade secrets.
Risks for Employees and Common Disputes
Employees play a key role in both protecting and risking the exposure of trade secrets. Common disputes arise when employees misuse or disclose confidential information upon moving to a competitor. In these cases, companies may take legal action to enforce their rights and protect their secrets.
For employees, this means that they can face legal consequences if they unlawfully use or disclose trade secrets. Under § 23 GeschGehG, severe cases can result in fines or even imprisonment. This is especially true if it can be proven that the employee acted with intent to harm their former employer or gain an unfair advantage.
A typical issue in this area is suspected misconduct dismissal, where an employer may terminate an employee if there is suspicion—though not yet proven—that they have leaked a trade secret. The German Federal Labor Court has ruled that such suspicion can be sufficient grounds for dismissal if it irreparably damages the trust required in the employment relationship.
Economic Espionage and the Importance of Trade Secret Protection
Economic espionage is a growing threat, particularly through cyberattacks and state-sponsored espionage activities. Nations such as China and Russia are frequently suspected of systematically targeting German companies to gain strategic and technological advantages. The damage from such attacks is substantial, often involving critical technologies that form the backbone of the German economy.
Given these threats, protecting trade secrets is not just a legal necessity but also a strategic imperative. Companies need to understand that their competitiveness and innovation potential are at risk without adequate protection.
The German Trade Secrets Act and the underlying EU directive make it clear that protecting trade secrets is an integral part of corporate security. This includes both technical safeguards and fostering a culture of secrecy within the company. Current geopolitical tensions and the increasing number of cyber threats underscore the importance of proactive and comprehensive measures to protect sensitive information.
Key Differences Between the U.S./U.K. and Germany
For U.S. and U.K. companies operating in Germany, it’s important to note some key differences in the approach to trade secret protection:
- Legal Framework: In the U.S., trade secrets are primarily protected under the Defend Trade Secrets Act (DTSA) at the federal level, as well as under state laws like the Uniform Trade Secrets Act (UTSA). In the U.K., trade secret protection is guided by common law principles, the Trade Secrets (Enforcement, etc.) Regulations 2018, and case law. Unlike in Germany, where companies must demonstrate active protection measures, the U.S. and U.K. legal systems focus more on the misappropriation aspect rather than stringent requirements on maintaining secrecy.
- Definition and Scope: While all three jurisdictions recognize the importance of keeping trade secrets confidential, the threshold for what constitutes “reasonable steps” can vary. German law emphasizes demonstrable actions taken by companies to secure their secrets, whereas in the U.S. and U.K., the courts often have broader discretion in determining what measures are sufficient.
- Employee Considerations: In the U.S. and U.K., restrictive covenants, such as non-compete and non-solicitation agreements, play a significant role in protecting business secrets from being exposed by employees. However, such covenants must be carefully drafted to be enforceable, and their enforceability varies significantly between jurisdictions. In contrast, German courts are typically more restrictive regarding the enforceability of non-compete clauses.
Conclusion
Protecting trade secrets is a complex but essential part of modern business strategy. The legal framework in Germany and the EU sets clear requirements for companies on how to protect their sensitive information. Implementing adequate measures and fostering awareness among employees are crucial to not only comply with legal standards but also to maintain competitive advantage and safeguard against escalating threats like economic espionage.
U.S. and U.K. companies operating in Germany should be mindful of the local legal requirements and differences, adapting their internal policies and protections to align with German standards. As economic espionage continues to rise, ensuring robust trade secret protection remains a vital priority in today’s global business environment.
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