German Trade Secrets Act - appropriate confidentiality measures and meaningless non-disclosure clauses

A company applied for an interlocutory injunction against a former employee, alleging that trade secrets had been disclosed. Even after he left the company, the employee still had a customer list containing over 240 of the company's customers, their addresses, quantities of a product purchased and the sales generated with it. In addition, he had made private (e.g. in his private calendar) records of customer appointments, contact persons as well as contact information and turnover. The former employee used this information to approach customers of his former employer as part of his new position with a competitor.

The claimant company submitted that both the customer list and the private records were trade secrets of the company and that the use of this information constituted an infringement under the Trade Secrets Act. The company referred exclusively to a contractual obligation of secrecy, according to which "all matters and transactions which become known in the course of the activity" were to be kept secret by the employee. Such catch-all clauses are in fact widely used in many types of contractual documents in the field of secrecy protection.

Dusseldorf Higher Labour Court first of all declared in its judgment that contractual agreements can indeed be a means of protecting secrets. However, it made it clear in the case under review that the regulations on the provisions concerning the obligation of secrecy in the employment contract were "clearly too extensive" and, moreover, "meaningless". According to the Court, the provisions lack any reference to the concept of a trade secret within the meaning of the law, and the clause even expressly covers what is not a trade secret. The Court therefore concluded that Section 2 No. 1 b) GeschGehG would be deprived of its content and purpose if such a provision were to be sufficient. It decided accordingly that the company lacked appropriate confidentiality measures with regard to the customer list. It also took into account the fact that the former employer was aware that the customer list was still in the possession of the employee after he left the company but did not reclaim it. This also indicates, according to the Court, that there is no active protection of secrets.

As regards the private records of the former employee, these had been the subject of sufficient protective measures, since the employment contract provided for the return of business-related documents and "records and discussion documents" prepared by the employee in the event of termination of the employment relationship and the records were thus specifically designated. The fact that the company did not request the employee to return the relevant documents in this case either, does not speak against an appropriate protection of secrecy, as the existence of the private records was not known to the company, the Court held.

While Dusseldorf Higher Labour Court denied claims arising from the use of the customer list, it awarded the company claims to refrain and desist based on the private records of the former employee.

The judgment makes it clear that generally worded confidentiality clauses are not suitable for establishing adequate protection of commercial know-how in the company. Especially the wording in many contracts, which is intended to extend to as much information as possible available in the company, can lead to the fact that effective protection under the Trade Secrets Act does not even arise in the first place. This applies in any case if other appropriate protective measures have not been taken.

Companies are well advised to establish an effective policy for the protection of trade secrets above and beyond the isolated assessment of individual contract clauses. Information worthy of protection should first be identified, classified and then also recorded. On the basis of the overall picture created this way, suitable protective measures can then be introduced, of which contractual confidentiality obligations can only be one, albeit critical, cornerstone. However, other aspects, such as technical and organisational measures and protective mechanisms under labour law, also play an important role. Once an undertaking's trade secrets have been correctly identified and classified, it should be easy to formulate appropriate confidentiality obligations. Since what follows from the judgment of Dusseldorf Higher Labour Court is that it is important here to name the trade secrets for which protection is to be claimed as specifically as possible.

The full text of the judgment of Dusseldorf Higher Labour Court is available in German athttps://www.lag-duesseldorf.nrw.de/beh_static/entscheidungen/entscheidungen/saga/0004-20.pdf