On 21 March 2019, the German Parliament adopted the draft submitted by the Federal Government (BT-Drucksache 19/4724) for a trade secret law for the protection of confidential company knowhow.

The instrument of whistle blowing, feared in corporate circles, is now being regulated by German law for the first time. The new draft law is based on European Directive 2016/943 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure. The EU directive intends to effectively prevent industrial espionage and the disclosure of secrets in the EU. Its transposition deadline for the Member States had already expired in June 2018. So far, the protection of trade secrets has been inconsistently governed by various laws and the existing legal protection was insufficient to transpose the European Directive. The new law is therefore intended to strengthen the existing protection and to centralize the relevant provisions in a newly created law drafted specifically to prevent the unauthorized flow of information. In the future, it will also be possible to effectively protect items such as artificial intelligence algorithms or innovative process sequences, which until now have deliberately not been disclosed due to the lack of protection mechanisms against copies, for example as part of patent applications.

For a broad protection of trade secrets, the companies will have to take appropriate non-disclosure measures. However, the law does not include examples of specific measures that the legislator considers appropriate.

Practical advice:

The higher the importance of the respective information for the company, the higher the demands on the non-disclosure measures to be taken. It is therefore advisable to start by classifying existing trade secrets into different categories and thus to create a comprehensive protection concept in the next step.

Potential non-disclosure measures include, i.e. : Technical measures such as appropriate IT security systems, physical access barriers, and encryption of communication between the individuals who are aware of the trade secrets, as well as organizational measures such as non-disclosure agreements in employment contracts and in master agreements with business partners.

It is highly important that companies can no longer invoke the protection of the Trade Secret Protection Act once the secret information has been disclosed and has thus lost its secret character forever.