Just keep your mouth shut – Protection of trade secrets 2.0

In 2016, the European legislator issued a Directive on the protection of trade secrets that will lead to key changes. In particular, companies must prove in the future that they have taken “appropriate measures” to protect their secrets.

No, this is not another article on the GDPR yet again, it deals with secrets. Your secrets. Every company has technical, strategic, or business information that is kept secret. These secrets are necessary and entrepreneurially meaningful factors to set companies apart from their competitors. There are many ways in which trade secrets may disappear from a company: employees with valuable knowledge leaving, cyberattacks, taking pictures of confidential documents, reverse engineering of products – to name but a few. According to a 2017 study, the damage caused by industrial espionage in Germany amounts to about EUR 55 billion annually. It is therefore time to take action.

Although protection of trade secrets already exists in Germany, it is a patchwork of regulations with enforcement hampered by rudimentary protection in court proceedings. This is set to change now. The European legislator issued the Directive on the protection of trade secrets (Directive (EU) 2016/943) in 2016. This Directive significantly improves the protection of trade secrets, harmonizing it in the EU Member States.

The Directive entails numerous changes. Under the new law, companies will only benefit from legal protection if they have taken “reasonable steps” to keep the information secret. Companies must substantiate and prove these steps. It is therefore advisable for companies to review their existing protection strategy relating to trade secrets and to revise it where necessary. A whole bundle of protective measures is conceivable, ranging from restrictions on access to factory premises, to a “clean desk policy,” to a clearly regulated procedure when employees are leaving the company.

What is also new is that reverse engineering is permitted to acquire information. This only applies, however, if the product has been made publicly available or is in the legitimate possession of the person or company studying the product and such person or company is free from any legally valid duty to limit the acquisition of the trade secret. To avoid reverse engineering, such clauses must be included in contracts, for example with suppliers and distributors.
This Directive must now be transposed into German law. Although the German legislator has already enacted a government draft, it is lagging behind the set schedule and has missed the transposition deadline of June 2018. The new German Trade Secret Protection Act is not expected to enter into force until the beginning of 2019.

Your contacts are the experts from the IP, Media & Technology Practice Group. Dr. Anton Horn, Birthe Struck, LL.M. and their team specialize in the protection of trade secrets.