Definition and Meaning of Trade Secrets
A trade secret is information used in a business context that is not generally known or readily accessible and for which there is a legitimate economic interest in maintaining secrecy. Trade secrets include technical, commercial, and organizational information that has economic value because it is secret. The legal protection of trade secrets in Germany is primarily governed by the Trade Secrets Protection Act (GeschGehG) and European directives, and it forms a central component of industrial property protection.
Legal Foundations for the Protection of Trade Secrets
Statutory Regulations in Germany
Trade Secrets Protection Act (GeschGehG)
With the entry into force of the GeschGehG in April 2019, the European Directive (EU) 2016/943 was transposed into German law. The law comprehensively regulates the prerequisites, scope, and enforcement of trade secrets.
The key prerequisites for protection under Section 2 GeschGehG include:
- Secrecy Requirement: The information must not be generally known or accessible.
- Economic Value: The secrecy provides an economic advantage over competitors.
- Appropriate Protective Measures: The holder of the information must take appropriate measures to protect the information (for example, access and control regulations).
Criminal and Civil Law Protection
In addition to the GeschGehG, the German Penal Code (StGB) and the Act Against Unfair Competition (UWG) also play a role in the protection of trade secrets. In the StGB, Sections 203 (Violation of Private Secrets), 17 (Betrayal of Trade and Business Secrets), and 18 (Exploitation of Third-Party Secrets) regulate corresponding sanctions. The UWG protects trade secrets from unfair competition—in particular, from disclosure or other improper use by competitors.
European and International Regulations
Directive (EU) 2016/943
The EU Directive is based on providing a uniform level of protection in the internal market and facilitating cross-border legal dealings. It primarily serves to harmonize key definitions, requirements for protection, and sanctions.
TRIPS Agreement (WTO)
The international TRIPS Agreement (Trade Related Aspects of Intellectual Property Rights) also contains, in Article 39, requirements that oblige member states to implement protection mechanisms.
Requirements and Scope of Protection
Definition of Protectable Information
According to the GeschGehG, protectable trade secrets include, among others:
- Technical knowledge such as construction plans, formulas, manufacturing processes
- Economic information such as customer lists, market strategies, pricing, supplier data
- Organizational procedures, protocols, calculations, and employee data
Appropriate Protective Measures
Protection only extends to information for which the holder implements corresponding protective measures. Such measures may include physical, digital, and organizational precautions, for example:
- Encryption of digital data
- Labeling of confidential information
- Access restrictions
- Confidentiality agreements with employees and business partners
Termination of Protection
Protection expires as soon as information becomes generally known or readily accessible, either through disclosure, passage of time, or voluntary disclosure. The loss of economic value also ends the protection of the secret.
Handling of Trade Secrets in the Company
Labor Law Aspects
Companies regularly impose confidentiality obligations on their employees, both on the basis of employment contracts and through separate confidentiality agreements. These obligations also continue after the end of the employment relationship insofar as trade secrets are concerned. Violations may result in employment-related sanctions, claims for damages, or injunctive relief.
Codes of Conduct and Compliance
Companies should establish internal guidelines for handling sensitive information. Measures such as regular training, clear organizational procedures, and digital protection systems are recommended to ensure effective and comprehensive protection.
Legal Consequences of Violations of Trade Secret Protection
Civil Claims
In the event of unlawful acquisition, use, or disclosure of trade secrets, entitled parties have civil law claims under the GeschGehG, namely for:
- Injunction
- Removal
- Damages
- Destruction of unlawfully obtained or produced copies
- Surrender of what has been obtained through the infringement
Criminal Sanctions
Criminal law provides for imprisonment or fines if trade secrets are unlawfully obtained, used, or disclosed. Particularly in connection with competition violations, the threat of criminal sanctions is significant.
Distinction from Other Intellectual Property Rights and Related Terms
Difference from Intellectual Property Rights
Unlike industrial property rights (such as patents, trademarks, or utility models), a trade secret is not a formally registered right and exists only as long as the relevant information is actually kept secret. The protection mechanism is based on secrecy—not on publication or registration.
Distinction Between Know-how and Trade Secret
Know-how describes practical expertise, which is partly protectable when it involves secret, economically valuable information. Business secrets are closely related to trade secrets, with the economic reference in common usage often being synonymous. In legislation, the term ‘trade secret’ has been established as the umbrella term.
International Aspects and Cross-border Protection
Since trade secrets are often affected in international business relationships, it is important to pay attention to the respective national regulations as well as to the regulatory frameworks of the TRIPS Agreement and the EU. The enforceability of claims can be supported by legal assistance and international cooperation.
Summary
A trade secret is a legally protected asset that makes an essential contribution to preserving a company’s competitive advantage, promoting innovation, and protecting sensitive economic information. The legal framework requires the existence of appropriate secrecy measures and offers comprehensive civil and criminal enforcement possibilities. With the implementation of the EU Directive and the GeschGehG, the protection of trade secrets in Germany is subject to clear and systematic regulation. Effective protection of trade secrets requires, alongside technical and organizational measures, a pronounced awareness of information security in everyday business life.
Frequently Asked Questions
Who is entitled to dispose of the trade secret and who is responsible for its protection?
As a rule, the holder of the trade secret—often the company itself—is entitled to decide on its use, disclosure, or revelation. Legally, ownership under Section 2 No. 2 GeschGehG refers to who has lawful control over the information and has taken measures for its protection. Responsibility for the protection of trade secrets also lies primarily with the holder, meaning that organizational, technical, and legal precautions must be taken to prevent unauthorized access or disclosure. This also includes the obligation to bind employees and business partners contractually (e.g., confidentiality agreements/NDA) and to inform them about the confidentiality of the information. Breaches of these obligations may result in civil or even criminal consequences, particularly if adequate protection of the secret cannot be proven legally.
What legal requirements must be met for the protection of a trade secret?
The legal protection of trade secrets requires that the information in question constitutes a trade secret within the meaning of Section 2 No. 1 GeschGehG. This means, first, the information must be secret—that is, neither as a whole nor in its entirety and details generally known or easily accessible. Second, it must have economic value, i.e., its protection must provide a business advantage to the company. Third, appropriate secrecy measures must have been implemented, such as physical access restrictions, encryption, secure data rooms, or contractual arrangements with internal and external parties. Without these technical, organizational, and legal protective measures, statutory protection of the trade secret lapses. In case of dispute, the burden of proof for compliance with these requirements lies with the holder of the secret.
What legal claims does a holder have in the event of a breach of the trade secret?
If a trade secret is unlawfully obtained, used, or disclosed, the rightful holder is entitled to various civil law claims as regulated in the Trade Secrets Protection Act (GeschGehG). These include, in particular, claims for injunctive relief (Section 6 GeschGehG), which can prevent continued use or disclosure. Claims for damages (Section 10 GeschGehG) may also be asserted if the breach results in financial loss. Other possible claims include the destruction or surrender of the infringing products (Section 8 GeschGehG) as well as the return or destruction of unlawfully obtained information. In serious cases, criminal consequences under Section 23 GeschGehG may also arise.
Can trade secrets be effectively protected in court and before authorities?
In court or administrative proceedings, it is possible to secure trade secrets through procedural protective measures. Under the GeschGehG, particularly in Sections 16 et seq., courts can order that certain trade secrets be discussed only in a limited way or in camera (e.g., non-public hearings, restricted access, or redactions in court files). Parties, their legal counsel, and court staff can be subject to special confidentiality obligations. The aim is to provide the necessary legal protection without requiring the holder of the trade secret to risk further disclosure by participating in the proceedings.
How long does legal protection for a trade secret last?
Protection for a trade secret exists under German and European law for an unlimited period, as long as the requirements for a trade secret are fulfilled. In contrast to industrial property rights (such as patents or trademarks), which have a statutory duration, a trade secret remains protected as long as it stays secret and appropriate protection measures exist. As soon as the secret information becomes public or the holder fails to take adequate protection measures, the protection ends irrevocably. Ongoing review and adjustment of protection measures are therefore essential to maintain the legal protection status.
What is the significance of contractual provisions in the protection of trade secrets?
Contractual provisions, especially so-called confidentiality agreements (Non-Disclosure Agreements, NDA), are a central element of the legal protection mechanism for trade secrets. They serve to concretely and legally bind employees, business partners, or third parties to confidentiality. In the event of a dispute, they facilitate the enforcement of claims, as a breach of contractual obligations is often easier to prove than just a violation of statutory protection provisions. Contracts should therefore precisely define which information constitutes trade secrets, what obligations the contractual partners have, and what sanctions apply in case of breach. If such regulations are missing, the holder of the trade secret may be unable to enforce, or only able to enforce limited, legal rights.
What role do employees play in the protection and violation of trade secrets?
Employees are often persons of trust, but also one of the greatest risk factors regarding trade secret protection. Employers are legally obligated to inform their staff appropriately about the significance and scope of the information to be protected and to ensure compliance with required protective measures. This includes incorporating relevant provisions in employment contracts as well as ongoing awareness-raising and training activities. Unauthorized disclosures by (former) employees often constitute a breach of legal and contractual confidentiality obligations and give rise to claims for injunctive relief, damages, or even employment law sanctions up to dismissal. The ability to enforce these claims also strongly depends on how comprehensive and clear the internal regulations and protective measures are designed.
