Trade Secret Protection—action needed due to changed laws (GeschGehG in Germany)?

by ,
Attorney-at-law in Erlangen


Innovative companies specifically benefit from their intellectual achievements, more than from the simple distribution of directly tangible products. Trade secrets are often a sensible way of protecting development in such a context. The corresponding prerequisites are set out in the German Law on the Protection of Trade Secrets (GeschGehG), which implements a European directive with some delay. We highlight the requirements and the resulting need for action.

The vault—symbol for suitable protection for valuables.

What is a trade secret?

One of the most prominent trade secrets is The Coca-Cola Company's Coke recipe. The company, which Asa Griggs Candler bought in 1892, continues to keep secret the recipe, which dates back to chemist John Stith Pemberton's work in 1886. The success of the company is therefore still to a significant extent based on this trade secret (the other elements visible to the outside world are the extremely strong brand and consistent quality, regardless of the place of purchase by the customer—Coca Cola Coke is Coca Cola Coke worldwide; "Coke" and "Coca Cola" are registered trademarks of The Coca Cola Company).

Legally, a trade secret is "information", i.e. an element of knowledge that meets the following criteria (Art. 2 No. 1 Trade Secret Directive (EU) 2016/943):

It is decisive that the knowledge element is neither generally known nor accessible and is adequately protected. The fact that such an element of knowledge embodies a commercial value is usually induced by the effort the secret's owner makes to protect the secret. In individual cases, this criterion can lead to the exclusion of information that is objectively not valuable and therefore not worthy of protection. Cases in which a legitimate interest in secrecy is lacking may also remain a rare exception (in the legislative process, information on tax evasion models has been mentioned as example). Therefore, it is key for owners of secrets to take suitable and at least substantially effective measures to ensure secrecy.

Mind-map of the criteria to define a trade secret.

According to the formal definition in § 2 GeschGehG (German Law on the Protection of Trade Secrets),

A trade secret is a piece of information which
(a) is, neither as a body, nor in the precise configuration and assembly of its components, generally known or readily accessible to persons in the circles normally handling this type of information and therefore is of economic value; and
b) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret; and
c) for which there is a justified interest in confidentiality;

Outstanding features of protection of a trade secret

Compared with other legal mechanisms protecting so-called "intellectual property", a trade secret has the following distinctive features:

Effective protection—how to safeguard your trade secrets

Only knowledge subject to "appropriate security measures" is protected as a secret. These protective measures themselves keep the knowledge secret and thus serve the company's own purposes. Such measures should be systematic, comprehensive and documented to be able to serve as evidence in the event of legal proceedings. To make the procedures comprehensive, an appropriate system for the entire company or at least a business unit should be taken rather than specifically protecting each single piece of information.

Please note: to the current legal situation in the EU generally permits reverse engineering. This is a significant change compared to the previous German legal situation, according to which it was at least unclear whether reverse engineering was permissible in individual cases. Therefore, it is often permissible to analyse a product with regard to its properties to such an extent that, for example, the secrets required for production can be extracted from it. Although not unlimited in effect, this can be addressed by suitable contractual agreements, namely by prohibiting the contracting parties from carrying out precisely such analyses. It is not yet certain to what extent the courts will accept such clauses in the long run; nevertheless, it is worthwhile taking the measure, especially since secrets otherwise remain unprotected and such clauses themselves hardly pose additional risks.

Trade secrets must be protected in three regards: organizationally, technically and legally.
The triangle of protection of trade secrets: all three layers complement each other. If one protective layer is weak, the secret must be protected particularly intensely by the other two layers. All layers are necessary.

Systematic handling of trade secrets

The protection of trade secrets in the company's own (direct) best interest, as well as for the purpose to achieve legal protection as trade secret, mandates for action. The most important activities are:

An adequate agreement is helpful to effectively protect trade secrets, regardless of whether it is concluded with employees, with partners in purchasing, sales or in joint development settings. The purpose of a confidentiality agreement is to enable a contractual partner to disclose information without losing the legal protection of the information as trade secret. Within such agreements, the contractual partners also agree on the limits within which the disclosed information may be used. A holder of a secret regularly shares secret information only if it has been clearly agreed with the receiving party what may and may not be done with the secret information.

In cooperations, confidentiality agreements drawn up according to current standards are suitable for this purpose. In addition to other important topics, they now need to regulate the topic of reverse engineering, for example with a clause like this:

Prohibition of reverse engineering
The products provided must not be examined with regard to their chemical, biological, physical and technical properties and structure; in particular, they must not be dismantled or observed, examined and tested beyond the requirements of the application.

Access protection ("technical protection")

The technical implementation of access restrictions is a necessary part of the trade secret protection setup and includes:

Contractual protection

Adequate protection can only be achieved if all partners and individuals are contractually obliged to secrecy. In particular, the following contracts should be examined to verify whether they contain the appropriate clauses—if they do not, they should be supplemented where possible:

Questions and answers

Downloads and materials

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The fingolex law offices of Hubert Andres and Baltasar Cevc advise both on the organizational set-up up to a comprehensive information security management system and on the implementation in detail, for example in contracts with employees, suppliers, customers and other partners. We would be happy to assist you with further samples and corresponding explanations.

Note: The legal protection of trade secrets is only one possible path to protect relevant information and results in their commercial value. In addition, registered intellectual property rights such as trademarks, designs and patents, and unregistered ones such as copyrights and similar rights are relevant. Please to contact us if you wish to know more.

This article does not replace legal advice in individual cases. It presents the situation from a German legal perspective — the situation in other jurisdictions may differ.