Update on the Implementation of the EU Trade Secrets Directive into German Law

The EU Trade Secrets Directive, officially titled “Directive (EU) 2016/943 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure” (the “TSD”), is a legal instrument by the European Union (EU) that is intended to harmonize the currently fragmented laws regarding trade secrets across the EU Member States. While the TSD does not have direct legal effect, each of the Member States are required to transpose the TSD into its respective national laws by June 9, 2018.  Germany has recently published its first draft bill on a new trade secrets act, which is now subject to public consultation and anticipated to be passed in the fall.  The German draft bill aims at implementing the TSD at the so-called “minimum harmonization” level and does make much use of the right of the Member States to go beyond such minimum provided by the TSD.

In a previous client alert, we outlined the content of the TSD (and the Defend Trade Secrets Act of the US) and the likely implications for trade secret holders with an international footprint (see “Harmonization of Trade Secrets in Europe and New US Trade Secrets Law Gets the Green Light—What Do These Changes Mean for Companies in Germany, the UK and the US?”).

In the following, we will outline the key aspects of the draft bill with a particular focus on regulations beyond the mandatory provisions of the TSD as well as deviations from current provisions under German law, and discuss potential implications of the draft bill for companies operating in Germany.  In a nutshell, the draft bill:

  • Brings the definition of trade secrets to an international standard by switching from the fairly subjective approach that is currently in effect to a more objective approach, which will require trade secrets holders to implement reasonable measures to protect their trade secrets, akin to the concept known under TRIPS (The Agreement on Trade-Related Aspects of Intellectual Property Rights);
  • Does away with existing restrictions by codifying commonly accepted permitted uses of trade secrets, e.g., in the context of reverse engineering or whistleblowing;
  • Fundamentally improves the rights of trade secrets holders in litigation by introducing more practical measures to ensure secrecy of certain information in litigation, hopefully helping to overcome Germany’s reputation as a “lose the trial or lose the trade secret” jurisdiction; and
  • On the remedy side, adds clarity on certain civil remedies like the right to request destruction and recall of infringing products, but, on the other hand, provides for exceptions that may pave the way for the grant of compulsory licenses in certain scenarios; misappropriation of trade secrets remains a criminal offence under German law, however.

Read our client alert.