Update Compliance 5/2019

German Bundestag adopts new law for the protection of trade secrets

Companies will need to take appropriate steps in the future to protect their secrets. The new law on the protection of trade secrets places greater demands on the sensitivity of secrets to this extent. Whistleblowers can also reveal trade secrets with impunity - one more reason to set up a whistleblower hotline. Reverse engineering will be a permissible way of acquiring a trade secret in the future.

The introduction of the new law on the protection of trade secrets is based on the Directive (EU) 2016/943 and will largely replace the existing protection of secrets, which is ensured in particular under Sec. 17, 18 UWG [German Act Against Unfair Competition]. The law will enter into force on the day after its promulgation in the German Federal Law Gazette. 

The interest in confidentiality is no longer decisive, but rather confidentiality measures are

Trade secrets are only protected in the future if the owner has taken "confidentiality measures appropriate for the circumstances". Here, there is room for broad interpretation in the case of a dispute. The legal justification only offers general suggestions: The protection should be triggered by physical or technical access hurdles as well as clauses in employment contracts or guidelines. The objective requirement of appropriate safeguards supersedes the previous requirement of a subjective interest in secrecy of the owner and must be demonstrated by the latter in the case of a dispute. Whistleblowers may disclose trade secrets if they do so in public interest. It covers not only legal violations, but also "unethical conduct". The legal justification cites. for example, the acceptance of child labor or health-threatening working conditions of companies producing abroad. 

Reverse engineering is permitted

The previously inadmissible practice of reverse engineering publicly available products and such products that are lawfully owned by a person who is not subject to any restrictions on reverse engineering, is now considered admissible upon entry into force of the law. Thus, the acquisition of a trade secret will often be legally possible. Protection against the consequences of reverse engineering continues to be guaranteed, for example, by copyright or patent law and unfair competition law. 

Practical notes: There are multiple needs for action for companies: What a trade secret should be, must be demonstrably protected by "appropriate measures" in the future. At a minimum, this requires internal trainings and policies for company employees, if such is not already regulated by employment contract. Further measures are also required, where needed. It is also advisable to set up a whistleblower hotline, which soon becomes obligatory for many companies due to the future EU whistleblower directive. Whistleblowing will then also be subject to legal protection. The number of whistleblowers is therefore likely to increase in the future. If a company does not offer whistleblowers the opportunity to turn to the company itself, the whistleblower will then have no choice but to turn to the authorities or the press.

The permission for reverse engineering limits the protection of secrets. Published products may be "dismantled". Wherever products are made available to third parties without publishing them - for example, with contracting parties to the secret holder - reverse engineering should be ruled out.

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