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22.05.2019 | KPMG Law Insights

Protection of secrets under the GeschGehG – risks and opportunities for companies

Protection of secrets under the GeschGehG – risks and opportunities for companies

In times of a knowledge and data-driven economy, information can be the all-important factor in the race for market success. Companies have therefore always tried to secure their know-how. On April 26, 2019, the new Business Secrets Act (GeschGehG) came into force. For companies, this means opportunities, but also risks. One thing is clear: there is a need for action for every company.

Whether technical know-how, customer lists or market strategies: Almost every company has something that can give it an edge on the competition. The decisive prerequisite, however, is that this knowledge remains within the company. The protection of such trade secrets is thus of considerable economic importance.

Background: Protection of trade secrets
In Germany, the protection of trade and business secrets was previously scattered across various areas of law. There was a lack of both a uniform legal definition and comprehensively defined rights of the owner of the secret in order to be able to effectively ward off the use of one’s own secrets by third parties.
In the past, trade secrets were protected primarily by the criminal provisions of Sections 17 and 18 of the German Unfair Competition Act (UWG). However, since these presupposed that the perpetrator of the betrayal of secrets was acting out of certain subjective interests, the legal enforcement of claims by the owner of the secret usually involved considerable forensic effort and was economically risky.

New legal regulation – only those who protect themselves are protected
In order to better protect companies from unlawful acquisition, use and disclosure of their trade secrets in the future, the legislator has created some essential new regulations with the GeschGehG. In essence, only those who protect themselves are protected. The new regulations in detail:

Uniform objective definition of a trade secret
Trade secrets are information that is of commercial value because it is secret and is subject to reasonable secrecy measures appropriate to the circumstances. The extent and form that these secrecy measures must take in individual cases in order to meet the legal requirements will have to be assessed according to the circumstances of the individual case. In general, however, anyone who does not protect their own trade secrets in the future will not benefit from the new legal regulations. In concrete terms, this means that business-relevant secrets can be legally acquired and passed on without protective measures.

Claims of the owner of the secret
However, if the owner of the secret has adequately protected its trade secrets and if a third party violates the legally defined prohibitions of action, the owner of the secret is entitled to extensive claims:
In the event of infringement, in addition to ceasing and desisting from the infringement and surrendering or destroying documents, the infringer can primarily take action against the distribution of infringing products. The infringer must remove such products from the market, recall them and/or destroy them, depending on the circumstances of the individual case. In addition, the owner of the secret is also entitled to comprehensive claims for information and damages.
If a conviction results from the infringement of a trade secret, the owner of the secret may, depending on the circumstances of the individual case, even demand publication of the judgment at the expense of the infringer. However, the same applies in reverse in the event that a lawsuit is dismissed on the grounds of alleged infringement of trade secrets.

Criminal liability for infringement of another’s trade secrets
In addition to claims by the owner of the secret, a violation of another’s trade secrets may also trigger criminal sanctions. Thus, a violation of the prohibitions of action defined in the GeschGehG can be punished with a maximum term of imprisonment of up to five years if, for example, acting on a commercial basis is involved. Infringers within the meaning of the GeschGehG may be both natural persons and legal entities. This will be of considerable relevance in the future, especially against the background of the planned corporate criminal law (Association Sanctions Act). In addition, the owner of a company is also liable if the infringer is an employee or agent of his company. In addition to protecting their own trade secrets, companies must therefore also ensure that no (recognizable) third-party trade secrets are infringed from within their organization.

Exemption for whistleblowers
Due to the far-reaching claims of the owner of the secret, it is generally possible for the owner to effectively prevent the disclosure of protected information. In addition, it is to be expected that the sensitive threats of punishment will make access to internal company information a considerable risk for the person acting. However, in order to mitigate excessive monopolization of information by the owner of the secret, the legislator has provided for exceptions to protect legitimate interests. In particular, an exception applies to whistleblowers:
Accordingly, the disclosure of a trade secret does not fall under the statutory prohibitions if this is done to uncover an unlawful act or professional or other misconduct and the acquisition, use or disclosure is suitable to protect the general public interest. The statutory wording “suitable” indicates that this need not have been the whistleblower’s sole objective, but that other subjective aspects may also play a role. In which cases this will be cannot be conclusively assessed at present. It remains to be seen how the case law will develop.

Risks and opportunities for companies
For companies, the new regulations mean risks and opportunities in equal measure. Those who implement the legal requirements in good time will be rewarded with extensive rights. At the same time, however, passive companies must fear not only losing the protection of their own trade secrets, but also becoming the addressee of claims by competitors or, in the future, possibly even corporate penalties in the event of infringement.
As a result of the new legal regulations, companies are once again faced with the concrete challenge of analyzing their operational organization, identifying the need for action and introducing suitable measures in good time.

What companies need to do now
Anyone who wants to protect their trade secrets must first determine their individual protection needs and then align their company with the legal requirements. Companies should therefore first obtain an overview of their own knowledge worthy of protection, classify these trade secrets according to the need for protection, and consider what appropriate and suitable measures they can take to protect them in the best possible way.
In particular, risk assessments provide assistance in this regard. After identification and evaluation, they lead to a comprehensive definition of measures to mitigate the identified risks. The compilation of assessment criteria and the selection of suitable measures, both internal and external, should be carried out with a view to each individual case in order to adequately address the size- and industry-specific challenges of each company.
At the same time, the company’s internal structure should be analyzed for secrecy-specific compliance risks. Compliance risk assessments can identify corporate structures that are unsuitable for ruling out the violation of third party trade secrets or even encourage such a violation. After identifying such vulnerabilities, open flanks can be closed and the company can be effectively protected against compliance risks.

We are happy to support you in the legally compliant identification and evaluation of trade secrets and the definition of suitable protective measures.

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