The impact of the new Trade Secrets Act on the use of IoT products

Airplanes and drones are well equipped with IoT sensors. Such digital and connected commodities provide operators with better products and added value. For example, the transmission of performance and maintenance data helps to improve the efficiency of aircraft plants. However, it must be taken into account that data is collected which allows detailed knowledge of the operator’s company and business operations. They provide an insight into the operational business and therefore affect its interest in protecting its trade secrets.

Under previous law, trade secrets used to be protected per se if the information was in any way related to the company and the company wanted to keep it secret. Since 26 April 2019, when the German Trade Secrets Act (GeschGehG) came into force (and in principle already since June 2018 with direct application of the Trade Secrecy Directive), this is no longer sufficient. Now a compliance system is required which also brings new challenges for the aviation industry.

In detail:

I. The protection of business and company secrets under previously applicable law

Until now, there was only a minimum level of protection for business and company secrets. The Act against Unfair Competition (UWG) protected companies against the betrayal of secrets by an employee, industrial espionage or the exploitation of secrets by unauthorised persons (§§ 17, 18 UWG). Information provided to third parties was only protected under certain circumstances. Furthermore, the German Criminal Code (§§ 202a ff. StGB) does not protect those who voluntarily publish information. The companies could only resort to contractual regulations.

II. The GeschGehG

The GeschGehG implements the EU Directive on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (Directive (EU) 2016/943), which sets a uniform standard for the protection of trade secrets in Europe. It now offers entrepreneurs significantly better protection and efficient means to enforce their rights.

However, GeschGehG does not only increase the protection of trade secrets, but at the same time significantly raises the threshold for the existence of a trade secret. According to § 2 No. 1 GeschGehG, „business secrets“ are, in short, information that is

  1. secret,
  2. of commercial value (because secret) and
  3. subject to appropriate confidentiality measures.

This definition is considerably stricter than defined under the previous legal situation. Up to now, operating and business secrets were comprehensively understood as all information relating to a company that is not public and in which the company has a legitimate interest not to disclose it (BGH GRUR 2006, 1044 para. 19). Thus, an interest in secrecy, the existence of which has so far not been subject to particularly high requirements, was of decisive importance. It was sufficient that the intention was gathered from the nature of the secret fact.

Under the GeschGehG, however, this intention is no longer sufficient. “Appropriate secrecy measures“ must be taken. It will take some time until the term “appropriate secrecy” is substantiated by case-law with concrete specifications. First indications of what needs to be done, however, already exist.

III. What needs to be done?

From now on, companies must develop and implement an effective know-how protection concept. This includes in particular:

1. Identification of information to be kept secret

As a first step, an evaluation should be carried out of the confidential information in stock. The information can or should already be classified according to the degree of secrecy and labelled accordingly. For particularly sensitive information, stricter protective measures may have to be taken and proven.

2. Design of internal protective measures and their documentation

The government’s draft pointed out that both physical access restrictions and precautions as well as contractual security mechanisms for the protection of trade secrets should be considered:

  • As such basic measures, physical, in particular technical, protective measures such as access and access restrictions or the prohibition of the use of private storage media as well as the encryption of documents are obvious.
  • In addition to these physical measures, corporate employees must create a comprehensive awareness of the fact that business secrets exist and also develop a feeling for cases in which such a secret is to be classified as such, e.g. through suitable training measures and clear guidelines.
  • Finally, compliance with existing protection measures and the documentation of the disclosure of trade secrets to third parties must be checked and documented.
  • Attributing clear competencies with regard to structure and implementation within the company plays a crucial part for an effective concept on protecting know-how.

3. Adapting existing or creating new contractual regulations with business and cooperation partners

In principle, existing (contract) drafts prepared under the old law should not be used without hesitation, but instead carefully reviewed and — if necessary — adapted to the new legal situation.

Non-disclosure agreements should be formulated narrowly and general clause-like formulations should be avoided. The declarations of non-disclosure within the framework of employment contracts should also be reviewed. If clauses in such contracts are ineffective, they cannot be regarded as „appropriate confidentiality measures“, with the consequence that a violation of the trade secret would possibly remain without sanction.