The New German Trade Secrets Act – A Game Changer

Author:Dr. Anette Gaertner , LL.M. and Iris Kruse
Profession:Reed Smith (Worldwide)
 
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At long last, Germany transposed the Trade Secrets Directive (“Directive”) into national law. Almost a year after the implementation deadline, the Geschäftsgeheimnisgesetz (Trade Secrets Act, “Act”) came into effect on April 26, 2019. It replaces the provisions of the Unfair Competition Act on misappropriation of trade secrets and introduces new procedural rules for trade secret litigation. Many perceive the Act as a game changer, and companies doing business in Germany are well advised to take action rather sooner than later.

  1. What is the scope of the Act?

    The Act defines the “trade secret” as “any piece of information that is neither generally known nor readily accessible, subject to reasonable steps to maintain confidentiality.” Shortly before the bill passed parliament, a third requirement was added according to which the holder must have “a legitimate interest in maintaining confidentiality.” This definition potentially covers any and all business-related information, irrespective of whether it constitutes, for example, customer data or technical know-how.

  2. Who is affected?

    The Act applies to any company doing business in Germany, no matter the size or the industry sector.

  3. What are the main changes and implications?

    The definition of a “trade secret” requires that companies take adequate steps to safeguard confidentiality. The meaning of “adequate” depends on the individual circumstances and, in particular, the value of the secret. Companies are well advised to conduct trade secret audits and subsequently consider the introduction of confidentiality policies, employee training and changes to contract templates (licensing, material transfer agreements, etc.). The Act further creates potential liability for the use of information obtained from third parties. In order to mitigate risks, companies need to rely on adequate warranti...

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