Urgent need for action for companies
Today (25 April 2019), following its promulgation in the Federal Law Gazette, the Law on the Protection of Trade Secrets came into force. After some changes to the government draft, the Bundestag passed the law on 21 March 2019, and the Bundesrat approved the draft on 12 April 2019. For companies, this entails substantial changes.
In our newsletter last year July (here), we had already informed about the Directive regarding the protection of confidential know-how and confidential business information against illegal acquisition, use and disclosure. After the transposition deadline for the German legislator had already expired in mid-2018, Germany now converted the Directive into national law.
No secret without appropriate secrecy measures
Amendments to the draft version were mainly made to protect freedom of the press and whistleblowers. However, the core of the law is largely unchanged from both the Directive and the government draft. According to the law, an information is only deemed to be a legally protected business or trade secret if it is subject of appropriate secrecy measures of the company. Without such measures, no claims for injunctive relief or damages can be asserted in the event of disclosure or unlawful use. The conceivable protective measures include, in particular, access restrictions, passwords and access codes as well as encryption systems, but also contractual arrangements.
Employment contracts need to be adapted
This means, in particular, that the hitherto usual clauses in employment contracts, which oblige employees to maintain secrecy about “all business secrets and processes in the company in general”, should urgently be reviewed and, if necessary, revised. The clauses formulated in accordance with previously acceptable patterns will no longer meet the requirements. As a result, trade and business secrets will largely be unprotected, unless changes are made to employment contracts with key employees.
A coordinated secret protection concept is recommended
However, we recommend not only taking a critical look on employment contracts, but also on the protection of secrets in the company as a whole. It is important to clarify, who has access to which business secrets in the company, who is responsible for protecting them, what the appropriate protective measures are and how those are recorded. This requires not only a thorough analysis of the status quo, but also constant monitoring.
We will be pleased to advise you on how a tailor-made protection concept for your company may look like and, in particular and how such a protection concept can be effectively implemented and managed under German Law.