Data Protection and the Trade Secret Act (GeschGehG)

What are trade secrets?

Trade secrets include, for example, recipes, manufacturing processes, business strategies, formulas, and market analyses. This information is worth protecting because it provides a specific competitive advantage .

A trade secret is information that:

• has commercial value (§ 2 No. 1 lit. a GeschGehG)
• is secret or not generally known (§ 2 No. 1 lit. a GeschGehG),
• is subject to a legitimate interest in secrecy by the holder, and
• for which the lawful holder has taken reasonable steps to keep it secret (§ 2 No. 1 lit. b GeschGehG).

With the criterion of "reasonable confidentiality measures," companies must now proactively protect their trade secrets for legal protection to apply, which may include the right to claim damages in the event of a trade secret breach.

What does the Trade Secret Act (GeschGehG) state?

The Trade Secret Protection Act has been in effect since April 26, 2019, and replaces the previous regulations on the betrayal of trade and business secrets under the Act Against Unfair Competition (UWG). With the entry into force of the 2019 Trade Secret Act, companies can take action against the unauthorized use of trade secrets.

Since 2019, the definition of a trade secret has been expanded to include the criterion of having reasonable confidentiality measures in place. Reasonable measures mean that companies must weigh the risk associated with each specific trade secret and determine which appropriate steps should be taken accordingly. The Trade Secret Act is based on EU directives and, among other things, facilitates the cross-border exchange of trade secrets.

Difference between data protection and trade secret protection

The fundamental difference between the GDPR and the Trade Secret Act is that the GDPR protects personal data under Art. 4 No. 1 GDPR of third parties, while the Trade Secret Act protects a company's own trade secrets. Consequently, the Trade Secret Act enables companies to enforce civil claims against those who commit breaches and allows for the prevention of unlawful use.

Measures for protecting trade secrets

The holder of a secret is required to protect this information through appropriate confidentiality measures. Consequently, companies must now become aware of what their specific trade secrets are and what these confidentiality measures should look like in order to benefit from the new law. Employers have several options for protecting their trade secrets. The following measures are recommended for companies to implement now:

Organizational measures

Organizational measures relate to the internal handling of procedures under the Trade Secret Act. It is important to mark relevant information as confidential and to define clear responsibilities for trade secrets. Through Employee training they also stay up to date with the latest knowledge.

Legal measures

Since legislation changes frequently, contracts related to the Trade Secret Act should also be updated to reflect the latest guidelines—for example, employment and supplier contracts. General confidentiality clauses are no longer sufficient. In the event of a dispute, it is useful to be able to present detailed documentation of the trade secrets to be protected in order to meet the burden of proof.

Technical measures

Sensitive information should not fall into the hands of unauthorized persons. Therefore, it must be electronically encrypted and subject to clear access regulations. All possible measures to protect trade secrets should be taken to ensure an appropriate level of protection is maintained.

Overall, it is advisable to regularly review existing confidentiality measures for relevance and, if necessary, adjust the protection concept to maintain your competitive advantage when there is an interest in secrecy.