Protection without an IP right? How trade secrets complement an IP portfolio

Companies are often confronted with the problem that information appears relevant even if it does not fall within the scope of a classic IP right. A company's “Know-How” is often just as valuable as inventions that can be moulded into the classic forms of intellectual property rights.

1. How to protect “Know-How”?

How can knowledge be protected that is not a technical invention and does not manifest itself in a particular external form?

Think of price calculations that should be kept secret from competitors, market analyses, business strategies or special organisational processes. So-called "negative knowledge" can also be an asset. “Negative knowledge" refers to failed attempts on the way to a successful product. This knowledge cannot be patented. However, a large part of the work of a research and development department consists of finding out what the most efficient way to a solution is and sorting out other approaches in the process. Naturally, you don't want to spare your competitors this effort.

2. The German Trade Secrets Act

Fortunately, this information is not unprotected. The German Trade Secrets Act (GeschGehG) serves to defend trade secrets from unauthorised acquisition, use and disclosure (Section 1 (1) GeschGehG). It implements the Directive of the European Parliament and of the Council of 8 June 2016 on the protection of confidential know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (Directive (EU) 2016/943).

Although the German Trade Secrets Act came into force in Germany on 26 April 2019, more than 5 years ago, it does not appear to have been fully implemented in companies to date. The uncertainties regarding the requirements for a trade secret are only slowly being eliminated by the advancing case law in this area. These are the obstacles on the road to successful protection of a trade secret:

Before companies can benefit from protection for their trade secrets, they need to do some homework. Although it is not necessary to register a trade secret, this protection is not automatic. Companies must take certain precautions to be able to effectively invoke a trade secret in court.

3. What is a trade secret?

Section 2 No. 1 GeschGehG defines a trade secret as information

1. a) which is not generally known or readily accessible, either as a whole or in the precise arrangement and composition of its components, to persons in the circles that normally deal with this type of information and is therefore of commercial value; and
2. b) which is subject to measures of secrecy appropriate in the circumstances by its rightful owner; and
3. c) for which there is a legitimate interest in confidentiality.

In summary, there must be an information of economic value, which the authorised party protects by taking appropriate measures to maintain secrecy. Only through these efforts of the authorised party the information is elevated to the category of a trade secret.

4. Appropriate confidentiality measures

The key question here is: What constitutes "appropriate confidentiality measures under the circumstances"?

A company-internal inventory is necessary, in which the existing knowledge is categorised into three sections:

Which protective measure is appropriate depends largely on the information to be protected. The higher the economic value of the information, the greater the efforts that must be made to protect it. The courts also consider the size of the company, with global corporations being required to do more than small start-ups with a handful of employees. It is not necessary for every confidentiality holder to realise optimal protection, but rather to achieve a level of protection that takes the aforementioned factors into account appropriately.

5. What are suitable confidentiality measures?

Practical confidentiality measures comprise a whole bundle of precautions. Interfaces from data protection to labour law are relevant here. Suitable measures include in particular:

1. Physical access restrictions to company premises/parts of the building.
2. Technical security solutions such as firewalls and IT security concepts.
3. Legal instruments, e.g. confidentiality clauses for employees and inventors
4. Non-disclosure agreements/confidentiality agreements with co-operation partners.
5. Organisational measures, e.g. a "need to know" approach that makes information accessible only to those employees who need it for their work.

Finally, compliance with these measures must be monitored. A compliance system is necessary to document violations. This is the only way to gather court-proof evidence of the existence of a trade secret.

It is a protection that is strengthened by corporate practice, but which collapses if it is not actively pursued.

Which measures the courts consider appropriate is subject to a case-by-case approach.

We will be happy to advise you on a suitable confidentiality protection concept for your company and have an experienced team at our disposal to draw up confidentiality agreements