Peter Koch and Lara-Christina Willems of Pinsent Masons, the law firm behind Out-Law.com, made the recommendation after a leaked copy of draft new trade secrets laws in Germany was circulated.
The proposed new Act on the Protection of Trade Secrets would implement the EU's Trade Secrets Directive into German law. The Directive was introduced as a means of trying to harmonise the existing patchwork protection that applies to trade secrets across the EU and came into force in 2016.. New UK trade secrets laws designed to implement the Directive were outlined earlier this year.
"Although the thrust of the Directive will provide a minimum level or harmonisation, it is expected that substantial differences in enforcing and protecting trade secrets in the EU will remain," Koch said.
The "political deadlock" in Germany, which saw a new coalition government formed in the country just last month following elections in September 2017, has held up the process of implementing the Directive into German law, he said.
According to Koch, the leaked draft suggests that the government plans to transpose much of the wording of the Directive into German law.
"There appears to be little ambition to go beyond what is stated in the Directive or provide more guidance to businesses," he said.
Under the Directive, a trade secret is considered to be information that is secret, has commercial value because it is secret and has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret. Information is only considered secret if it is "not … generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question".
The Directive includes rules that protect businesses against the unlawful acquisition, use and disclosure of their trade secrets, including in respect of second-hand sharing of that information. However, there are protections built into the Directive, and within existing UK laws, that permit the acquisition of trade secrets through, for example, reverse engineering.
Koch said that there were shortcomings with some aspects of the leaked German draft, but that other provisions promise "real change".
"Businesses face administrative fines of up to just €1,000 for not keeping information confidential that has been disclosed to them in court proceedings – such a small penalty may not serve as a deterrent," Koch said.
However, Koch welcomed provisions which would, if introduced, provide for the protection of confidential information disclosed not only during oral hearings but in initial written briefs submitted to the courts.
According to the leaked proposals, the new laws will also provide a mechanism for owners of trade secrets to get rival products taken off the market where their characteristics or manufacture was based on a misappropriation of their trade secret, or where those who have obtained the confidential information have plagiarised the product marketing.
Koch said: "Business should familiarise themselves with the definition of a trade secret, according to which the information must have been 'subject to reasonable steps to keep it secret'. There is little guidance in the Directive or the German draft legislation as to what that actually means, however. It is thus advisable for business to assess what qualifies as a trade secret within their business and then assess how this is protected, or should be protected, and document the steps taken in this respect."
Willems said: "This in particular applies also to the termination of employees, which can lead to trade secrets being misappropriated. A well-scheduled termination process, disconnecting employees from IT or document management systems, and ensuring they return phones, laptops, USB-sticks, for example, are a few essential measures taken to protect the business interests."
Koch also advised trade secrets owners to establish an incident response action plan. This plan should "define who is responsible within the business and who needs to be contacted once a breach or misappropriation of trade secrets is identified, install means to discover the leak and shut it down, and finally to assess damages and necessary actions to remedy such damage," he said.
Both Koch and Willems advised businesses not to wait for the implementation of new trade secrets laws across Europe, whether in Germany or other EU member states, before taking these actions.
