On 24 April 2019 the German Trade Secrets Act came into force, implementing the EU Trade Secrets Directive into German law. Since then, three German courts have rendered decisions which help to flesh out various areas of the new Act.
On 24 April 2019 the German Trade Secrets Act ("TSA") came into force implementing into German law Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure. Since the TSA coming into force, the Higher Regional Court of Munich, the District Court of Munich and the Administrative Court of Berlin have each rendered first decisions which provide helpful guidance on various aspects of the new TSA.
1. Higher Regional Court of Munich, decision dated 8 August 2019, 29 W 940/19 - assumption of urgency not applicable under tsa claims
1.1 Facts of the Case
The applicant, an intermediary company for medical professionals, sought an interim injunction against its former employee under Section 6 TSA, claiming that he used the applicant's customer database for work he performed for his new employer without the applicant's consent . The question was, inter alia, whether the facts passed the urgency test for an interim injunction, and, if not, whether there was a statutory presumption of urgency.
1.2 Legal Analysis
An interim injunction under German Law generally requires the applicant to credibly substantiate (i) the grounds for an injunction and (ii) the grounds for the injunction pursuant to Sections 936, 920(2) of the German Code of Civil Procedure ("CCP"). "Credibly substantiate" means that the applicant must demonstrate with sufficient likelihood that an alleged fact is true, i.e. the applicant is not required to provide "hard" evidence to prove its case.
However, despite the reduced evidentiary burden for an interim injunction, applicants must still past an "urgency test" which may be more challenging. Passing the "urgency test" requires demonstrating the applicant's serious interest in a swift court decision in order to avoid irreparable damage. Establishing urgency is especially difficult in cases where the applicant waits too long before taking action and case law is not entirely consistent among German courts. Timeframes imposed by the Courts for the urgency test range between six weeks to three months (beginning from the date the applicant gains first knowledge of an infringement), after which the applicant forfeits its right to an interim injunction..
In the present case, the applicant could not credibly substantiate the need for urgent action. This led the Court to consider whether Section 12(2) of the German Unfair Competition Act ("UCA"), under which the urgency of claims is rebuttably presumed, could apply to Section 6 TSA.
However, the court held that Section 12(2) UCA was not applicable since, according to the court, the legislator could have easily implemented such a rebuttable presumption provision in the new TSA (as done, for example, in the recently modernized German trademark law). In consequence, the court concluded that the legislator deliberately did not implement such a provision in the TSA, and therefore ruled Section 12(2) UCA was not applicable in the present case.
2. District Court of Munich, decision dated 13 August 2019, 7 O 3890/19 - inspection of records By intervening parties
2.1 Facts of the Case
The plaintiff invoked patent rights against the defendant. An intervening party (a supplier of the defendant) joined the defendant and requested full inspection of the documents filed by the parties (while refusing to enter into a non-disclosure agreement ("NDA") with the plaintiff). The plaintiff asked the Court to reject the intervening party's request given the existence of documents containing trade secrets including documents regarding fair, reasonable, and non-discriminatory ("FRAND") draft license agreements, emails between the parties regarding their license negotiations, as well as other related documents. The plaintiff argued that disclosure of the documents should, at most, be allowed in redacted form.
2.2 Legal Analysis
The court ruled that, while intervening parties are usually entitled to a full inspection of documents relating to the case, such an inspection may be refused due to trade secret protection where certain requirements are met. The burden of establishing these requirements are met is on the party invoking trade secret protection (here: the plaintiff) in accordance with Section 20(3) TSA. According to the court, the following pre-requisites must be fulfilled cumulatively:
- The plaintiff has filed subject matter considered to be secret information.
- The secret subject matter was filed after a NDA had been concluded with the defendant.
- The intervening party joined the process at a later time.
- The plaintiff's request to not disclose the subject matter to the intervening party is justified.
- The intervening party refuses to conclude an NDA with the plaintiff.
- The intervening party's refusal to conclude an NDA is unjustified.
In this case, the court denied the plaintiff's request for non-disclosure, holding that FRAND license agreements should only be considered confidential in very exceptional cases where the particular facts of the case justify their qualification as trade secrets. Here, the court emphasized that a commitment to fair and non-discriminatory licensing generally requires a transparency of the licensing conditions applicable – otherwise the intervening party might be impeded to efficiently exercise its rights in the proceedings. With respect to the other documents (e.g. emails), the court applied similar principles in view of the public's substantial interest in a transparent FRAND licensing regime. However, the plaintiff was not required to disclose details justifying the license terms where this could harm its legitimate interests (Higher Regional Court Düsseldorf, decision dated 25 April 2018, I-2 W 8/18, para. 9). As mentioned by the court, stablishing such legitimate interests might nevertheless expose the plaintiff to the risk that the defendant (or other participants to the case) could draw certain conclusions from the plaintiff's explanations with regard to the content of the confidential subject matter.
3. Administrative Court of Berlin, decision dated 23 September 2019, VG 27 L 98.19, tsa and public law provisions
3.1 Facts of the Case
According to a media report, the German Ministry of Transport had communicated with a car manufacturer regarding an (illegal) emission control device (which is part of the "Dieselgate" scandal in Germany) and related administrative fines that could be imposed.
The applicant, a journalist, requested the respondent, the Ministry of Transport, to release information concerning a meeting between the Ministry and the car manufacturer on 28 May 2018 (as well as certain other related information). The journalist made this application on the basis of their constitutional right to a free press.
The Ministry, however, denied the existence of the requested information without providing any further details. In the proceedings, the Ministry invoked trade secret protection under the TSA as a grounds for the non-disclosure of information provided by the car manufacturer to the Ministry (e.g. internal motor-measures, functioning of the emission control system and the exhaust gas recirculation system).
3.2 Legal Analysis
The court held that Art. 5(1) sentence 2 of the German Basic Law ("GBL") overrides the TSA as "public law regulations on secrecy, obtaining, use or disclosure of trade secrets take precedence" over Section 1(2) TSA. Art. 5(1) sentence 1 GBL grants journalists a direct constitutional right to information against federal authorities and is therefore a public law provision aimed at obtaining the disclosure of confidential information (including potential trade secrets).
The TSA on the other hand regulates the legal consequences of unauthorized obtaining, use and disclosure of trade secrets between private persons, but not between private persons and public authorities. Therefore, the TSA does not apply, for example, in cases of information claims against public authorities based on Art. 5(1) sentence 1 GBL and only applies in cases of trade secret-related litigation in the sense of Section 16(1) TSA. Weighing the respective interests of the applicant and the car manufacturer, the court obliged the respondent to release the requested information.
The three decisions discussed here are first stepping stones towards more case law under the still-young TSA. The decisions demonstrate that despite the rather clear wording of the TSA (as well as the underlying Directive), there is still room for legal uncertainties and interpretation of the law.
It remains to be seen whether the Higher Regional Court of Munich's opinion on the (in-)applicability of a presumption of urgency under Section 6 TSA cases will be shared by other courts given that under the TSA the owner of a trade secret has a paramount interest in swift injunctive relief in order to avoid (potentially definitive) loss of the trade secrets.
The District Court of Munich has provided further insights into FRAND licensing case law, strengthening the rights of intervening third-parties to be granted access to the FRAND documents of licensors (in order to achieve transparency as well as "equality of arms" in the course of court proceedings).
Finally, the third decision clarifies the relationship of TSA provisions vis-à-vis public law in the context of the right to information against a public authority, which might become increasingly important with respect to the investigative work of journalists and the right of free press.