Trade Secrets in Employment Relationships in Germany
Trade Secrets in Employment Relationships in Germany
Trade Secrets in Employment Relationships in Germany
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Carsten Domke LL.M. CMS Hasche Sigle<br />
I. Introduction<br />
<strong>Trade</strong> <strong>Secrets</strong> <strong>in</strong> <strong>Employment</strong> <strong>Relationships</strong> <strong>in</strong> <strong>Germany</strong><br />
The strategic market position and the competitiveness, of a company h<strong>in</strong>ges on its<br />
<strong>in</strong>dividual strengths and weakness <strong>in</strong> the areas of research and development,<br />
production and market<strong>in</strong>g, distribution, f<strong>in</strong>ance and controll<strong>in</strong>g. For this reason,<br />
companies have a vested <strong>in</strong>terest <strong>in</strong> protect<strong>in</strong>g achievements <strong>in</strong> these areas as<br />
economically valuable <strong>in</strong>tellectual property aga<strong>in</strong>st unauthorized exploitation by third<br />
parties. Investments <strong>in</strong> capital and manpower should be worthwhile and not be<br />
affected by unauthorized exploitation. Especially under the conditions of constantly<br />
<strong>in</strong>tensify<strong>in</strong>g competition, company employees come <strong>in</strong>to more and more contact with<br />
trade secrets <strong>in</strong> the course of their work. If enforcement of <strong>in</strong>tellectual property rights<br />
is ruled out or no patent registration is applied for, protection of trade secrets ga<strong>in</strong>s<br />
special importance, also with regard to employment law.<br />
The follow<strong>in</strong>g presentation will deal with employees' confidentiality duties and legal<br />
consequences when such duties are breached.<br />
II. <strong>Trade</strong> <strong>Secrets</strong><br />
<strong>Trade</strong> secrets 1 are def<strong>in</strong>ed as any and all facts, circumstances and processes<br />
relat<strong>in</strong>g to a company that are not common knowledge, but are only available to a<br />
limited group of people, and with regard to which a legal entity has a legitimate<br />
<strong>in</strong>terest <strong>in</strong> non-disclosure. These <strong>in</strong>clude, for example, construction draw<strong>in</strong>gs,<br />
recipes, manufactur<strong>in</strong>g processes, calculation documents, contracts and customer<br />
lists.<br />
The term "common knowledge" is broadly <strong>in</strong>terpreted by the courts. A fact is already<br />
common knowledge if it can be discovered by an <strong>in</strong>terested party without special<br />
difficulties and efforts. Protection of secrets thus comes to an end, for example,<br />
when facts are published <strong>in</strong> a professional journal or become the subject matter of a<br />
patent.<br />
The Regional Labor Court of Rh<strong>in</strong>eland-Palat<strong>in</strong>ate def<strong>in</strong>es trade secrets as<br />
technicalities <strong>in</strong> the broadest sense: turnover, profits and losses, <strong>in</strong>ternal books,<br />
customer lists, supply sources, conditions, market strategies, documentation on<br />
creditworth<strong>in</strong>ess, calculation documents, patent applications and other development<br />
and research projects that may have a decisive impact on the f<strong>in</strong>ancial circumstances<br />
of a bus<strong>in</strong>ess. 2<br />
1<br />
See German Federal Constitutional Court decision of 14 March 2006- 1 BvR 2087/03=BVerfGE 115,<br />
2005-259.<br />
2<br />
LAG Rhe<strong>in</strong>land-Pfalz decision of 22 February 2008- 6 SA 626/07.<br />
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III. Protection of <strong>Trade</strong> <strong>Secrets</strong><br />
A company can protect its confidential <strong>in</strong>formation by way of <strong>in</strong>tellectual property<br />
rights, such as patents or copyrights, by way of general non-disclosure clauses <strong>in</strong><br />
employment contracts, or by way of separate agreements.<br />
As a rule, employees are obligated to hold trade secrets <strong>in</strong> confidence and not to<br />
disclose them to third parties. With regard to time, however, a dist<strong>in</strong>ction must be<br />
made between non-disclosure obligations dur<strong>in</strong>g a term of employment and pre- or<br />
post-contractual obligations.<br />
1. Non-Disclosure Obligation Dur<strong>in</strong>g <strong>Employment</strong>:<br />
An employee's duty to hold trade secrets <strong>in</strong> confidence arises from the employment<br />
contract itself. Based on their contractual duty to show consideration for the bus<strong>in</strong>ess<br />
<strong>in</strong>terests of their employers, employees are obligated to keep trade secrets, even<br />
without any special provision. This also arises as a result of the pr<strong>in</strong>ciple of good<br />
faith. Special agreements concern<strong>in</strong>g the protection of secrets are often also<br />
<strong>in</strong>cluded <strong>in</strong> written employment contracts. When such confidentiality agreements<br />
exceed the statutory scope by lead<strong>in</strong>g to an excessive contractual obligation for<br />
employees without this be<strong>in</strong>g justifiable ow<strong>in</strong>g to special company <strong>in</strong>terests, they are<br />
<strong>in</strong>valid pursuant to §134 and §138 of the German Civil Code (BGB) (statutory<br />
prohibition, <strong>in</strong> violation of moral pr<strong>in</strong>ciples) (see IV. Requirements for Confidentiality<br />
Clauses <strong>in</strong> <strong>Employment</strong> Agreements).<br />
An employee's immanent contractual obligation to show consideration for the<br />
employer's <strong>in</strong>terests is not limited to trade secrets, but <strong>in</strong>cludes all processes and<br />
facts with which the employee becomes acqua<strong>in</strong>ted <strong>in</strong> connection with his or her<br />
position <strong>in</strong> the bus<strong>in</strong>ess establishment and which it is <strong>in</strong> the employer's <strong>in</strong>terest to<br />
keep secret.<br />
2. Non-Disclosure Obligation Prior to <strong>Employment</strong>:<br />
Confidentiality obligations, so-called "pre-contractual confidentiality duties", can<br />
already be established <strong>in</strong> the course of hir<strong>in</strong>g negotiations. Dur<strong>in</strong>g negotiations<br />
concern<strong>in</strong>g an employment contract, however, there is only a limited confidentiality<br />
duty, and evidence must be presented show<strong>in</strong>g that the future party to the contract<br />
has culpably breached it.<br />
3. Non-Disclosure Obligation After the End of <strong>Employment</strong>:<br />
Especially after the end of employment, there are confidentiality obligations for<br />
employees.<br />
Accord<strong>in</strong>g to case law of the Federal Labor Court, employees are obligated to hold<br />
trade secrets <strong>in</strong> confidence after term<strong>in</strong>ation of their employment even without any<br />
special agreement to that effect solely on the basis of general fiduciary obligations<br />
hav<strong>in</strong>g retroactive effect or on the basis of secondary obligations aris<strong>in</strong>g from the<br />
employment relationship. 3 The Federal Labor Court deems such conduct to be <strong>in</strong><br />
3 BAG decision of 16 August 1990, NZA 1991, 141.<br />
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breach of trust under §1 of the German Unfair Competition Act (Gesetz gegen den<br />
unlauteren Wettbewerb, UWG) and §823 and §826 of the Civil Code (concern<strong>in</strong>g<br />
tortious acts and <strong>in</strong>tentional unethical damage). 4<br />
It is possible to agree on a more extensive confidentiality obligation for a specified<br />
period follow<strong>in</strong>g the end of employment already <strong>in</strong> employment contracts or by way of<br />
a separate post-contractual protection of secrets.<br />
Court Rul<strong>in</strong>g<br />
In a decision rendered on 27 April 2006, the German Federal Court of<br />
Justice (BGH) dealt with misappropriation of a customer list and use of it<br />
after the end of employment. The employee had obta<strong>in</strong>ed the list of<br />
customer data <strong>in</strong> the course of his employment. The Federal Court of<br />
Justice ruled that, although it is true that employees may make use of<br />
knowledge acquired dur<strong>in</strong>g their term of employment without restrictions<br />
later as long as they are not under obligation not to compete with their<br />
former employers, this right concerns only <strong>in</strong>formation that employees reta<strong>in</strong><br />
<strong>in</strong> their memories. The right to make use of acquired knowledge after<br />
term<strong>in</strong>ation of employment, even to the detriment of the former employer,<br />
does not, however, apply to <strong>in</strong>formation to which a former employee has<br />
access only because he is able to draw on written documents from his term<br />
of employment. Such <strong>in</strong>formation, for example, <strong>in</strong> private, written records or<br />
<strong>in</strong> the form of a file saved on a private notebook, are deemed trade secrets<br />
and are thus protected. 5<br />
4. Other Special Non-Disclosure Obligations<br />
There are other confidentiality obligations that apply to works council members 6 and<br />
to tra<strong>in</strong>ees 7 . No special rules apply to manag<strong>in</strong>g directors because of their positions<br />
as members of the board. The pr<strong>in</strong>ciples that apply to employees apply to them;<br />
however, the special relationship of trust is to be taken <strong>in</strong>to account.<br />
IV. Requirements for Non-Disclosure Clauses <strong>in</strong> <strong>Employment</strong> Agreements<br />
The parties to employment agreements may validly stipulate that an employee may<br />
not use or share specified trade secrets of which he ga<strong>in</strong>s knowledge as a result of<br />
his work either while still employed or after term<strong>in</strong>ation of employment.<br />
Confidentiality clauses may be declaratory or substantiate law <strong>in</strong> terms of the scope<br />
of their subject matter with the consequence that they do not have <strong>in</strong>dependent<br />
substance and are merely descriptive of the protection of secrets that is already<br />
4<br />
BAG decision of 15 June 1993, NZA 94, 502.<br />
5<br />
BGH decision of 27 April 2006 – I ZR 126/03.<br />
6<br />
under §79 and §99(1), third sentence, of the German Works Constitution Act (Betriebsverfassungsgesetz,<br />
BetrVG)<br />
7<br />
under §9 No. 6 of the Federal Academic Tra<strong>in</strong><strong>in</strong>g and Assistance Act (Bundesausbildungsgesetz, BBiG)<br />
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provided under statutory law. However, the requirements for more extensive<br />
agreements are str<strong>in</strong>gent.<br />
"All-encompass<strong>in</strong>g confidentiality clauses" subject all bus<strong>in</strong>ess events of which<br />
an employee becomes aware while employed to the duty of confidentiality and thus<br />
exceed statutory confidentiality obligations, particularly those conta<strong>in</strong>ed <strong>in</strong> §17 and<br />
§18 of the Unfair Competition Act. The employees are thus not allowed to make<br />
professional use of the knowledge they have acquired <strong>in</strong> the sector. Such a<br />
provision is thus to be treated like a non-compete clause with<strong>in</strong> the mean<strong>in</strong>g of §74 ff.<br />
of the German Commercial Code (Handelsgesetzbuch, HGB), with the consequence<br />
that it will be b<strong>in</strong>d<strong>in</strong>g only if a compensation payment for the employee <strong>in</strong> question<br />
was agreed upon at the same time.<br />
Accord<strong>in</strong>g to case law of the Federal Labor Court, such confidentiality clauses<br />
without a stipulation of compensation are <strong>in</strong>valid ow<strong>in</strong>g to their <strong>in</strong>tensity. 8<br />
When trade secrets are less important, the term of the post-contractual confidentiality<br />
duty should also be reduced. For trade secrets of extreme importance, this term can<br />
exceed two years <strong>in</strong> exceptional cases.<br />
Accord<strong>in</strong>g to §310(4), second sentence, of the Civil Code, an <strong>in</strong>valid contractual<br />
clause that is significantly detrimental to an employee cannot be reduced to preserve<br />
its validity.<br />
"Restricted confidentiality clauses" are allowed as long as they restrict the trade<br />
secrets <strong>in</strong> terms of subject matter to those that are of particular importance for the<br />
company, so that the company has a legitimate <strong>in</strong>terest <strong>in</strong> keep<strong>in</strong>g them secret. If<br />
this is done, it is generally assumed that the company's <strong>in</strong>terest <strong>in</strong> confidentiality<br />
outweighs the employee's <strong>in</strong>terest <strong>in</strong> professional advancement. 9 The explosive<br />
nature of a trade secret is thus determ<strong>in</strong>ative for the assumption of a legitimate<br />
<strong>in</strong>terest <strong>in</strong> secrecy. <strong>Trade</strong> secrets should be specified precisely.<br />
With regard to the temporal scope of confidentiality clauses <strong>in</strong> employment contracts,<br />
it must be considered whether and to what extent the employee has to rely on use of<br />
acquired knowledge for professional advancement. When weigh<strong>in</strong>g the conflict<strong>in</strong>g<br />
<strong>in</strong>terests, the extent to which the employee was <strong>in</strong>volved <strong>in</strong> the creation of the secret<br />
is relevant, because otherwise the employee's use of professional knowledge based<br />
on experience might be impermissibly restricted.<br />
In any case, if an employee's <strong>in</strong>terest <strong>in</strong> freedom of occupation outweighs the<br />
company's <strong>in</strong>terest <strong>in</strong> secrecy, it is impermissible to permanently forbid him to make<br />
use of a secret. If the company-specific issues cannot affect the employee's freedom<br />
of occupation, the Federal Labor Court considers the boundary for a post-contractual<br />
non-compete clause to be overstepped, and a confidentiality obligation can be validly<br />
agreed upon only by way of post-contractual non-compete clause with compensation<br />
and for a maximum term of two years. The maximum term will also be assumed if an<br />
employee is forbidden to make any use whatsoever of professional knowledge based<br />
on experience.<br />
8 BAG decision of 16 March 1982, 3 AZR 83, 79.<br />
9 Gaul, NZA 1988, 230; Kunz, DB 1993, 2482; Mes, GRUR 1979, 583.<br />
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Example of a Confidentiality Clause <strong>in</strong> an <strong>Employment</strong> Agreement:<br />
"For the duration of his/her employment, the Employee undertakes to hold <strong>in</strong><br />
confidence all bus<strong>in</strong>ess and trade secrets and bus<strong>in</strong>ess events of which he/she<br />
becomes aware dur<strong>in</strong>g the term of this Agreement. This confidentiality obligation<br />
shall cont<strong>in</strong>ue to apply after the term<strong>in</strong>ation of employment with regard to the<br />
follow<strong>in</strong>g bus<strong>in</strong>ess and trade secrets: […]<br />
This confidentiality obligation shall not extend to such knowledge that is generally<br />
accessible or to knowledge the disclosure of which is clearly not detrimental to the<br />
company. In the case of doubt, the Employee shall be obligated to obta<strong>in</strong> a directive<br />
from management on whether a specific fact is to be held <strong>in</strong> confidence." 10<br />
V. Protection of <strong>Trade</strong> <strong>Secrets</strong> Under Crim<strong>in</strong>al Law<br />
<strong>Trade</strong> secrets that are targets of <strong>in</strong>dustrial espionage are protected under crim<strong>in</strong>al<br />
law, primarily by §17 of the Unfair Competition Act and §266 of the German Crim<strong>in</strong>al<br />
Code (Strafgesetzbuch, StGB) and further by §18 and §19 of the Unfair Competition<br />
Act, and also by §202a, §203 and §204 of the Crim<strong>in</strong>al Code.<br />
The key statute <strong>in</strong> practice is §17 of the Unfair Competition Act. Under subsection 1<br />
of this statute, a betrayal of trade secrets by a person employed by the affected<br />
company dur<strong>in</strong>g the term of employment carries a penalty. The offender can thus<br />
only be an employee of the company.<br />
Section 17 of the Unfair Competition Act reads as follows:<br />
"(1) A prison sentence not exceed<strong>in</strong>g three years of a f<strong>in</strong>e shall be imposed on<br />
any employee, workman or apprentice of a bus<strong>in</strong>ess enterprise who dur<strong>in</strong>g the<br />
term of his employment, without authorization, communicates to a third party a<br />
trade or <strong>in</strong>dustrial secret that has been confided to him or made available to him<br />
by virtue of his employment, if he does so for purposes of competition, for<br />
personal ga<strong>in</strong>, for the benefit of a third party or with the <strong>in</strong>tention of damag<strong>in</strong>g<br />
the proprietor of the bus<strong>in</strong>ess.<br />
(2) The same punishment shall be imposed on anyone who, for purposes of<br />
competition, for personal ga<strong>in</strong>, for the benefit of a third party or with the <strong>in</strong>tention<br />
of damag<strong>in</strong>g the proprietor of the bus<strong>in</strong>ess,<br />
1. obta<strong>in</strong>s or secures a trade or <strong>in</strong>dustrial secret without authorization through<br />
a. the use of technical means,<br />
b. the creation of an embodied reproduction of the secret, or<br />
c. the removal of an item <strong>in</strong> which the secret is embodied, or<br />
10 Arbeitsrechtliches Formular- und Verfahrungshandbuch, 9 th ed. 2998, §2 Arbeitsverträge für Angestellte,<br />
Marg<strong>in</strong> No. 25.<br />
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2. uses or communicates to anyone without authorization a trade or <strong>in</strong>dustrial<br />
secret which he has acquired or otherwise obta<strong>in</strong>ed or secured without<br />
authorization through a communication as described <strong>in</strong> subsection 1 or through<br />
an act of his own or of another person under paragraph 1.<br />
(3) The attempt shall be punishable.<br />
(4) In particularly serious cases, a prison sentence not exceed<strong>in</strong>g five years or a<br />
f<strong>in</strong>e shall be imposed. A particularly serious case shall be generally deemed to<br />
exist if the perpetrator<br />
1. acts commercially,<br />
2. knows at the time of communication that the secret is to be used <strong>in</strong> a foreign<br />
country,<br />
or<br />
3. if he himself makes use of it <strong>in</strong> a foreign country as described <strong>in</strong> subsection<br />
(2), paragraph 2.<br />
(5) The offense shall be prosecuted only upon application unless the<br />
prosecut<strong>in</strong>g authority deems official <strong>in</strong>tervention necessary ow<strong>in</strong>g to particular<br />
public <strong>in</strong>terest <strong>in</strong> prosecution.<br />
(6) Section 5, No. 7 of the Crim<strong>in</strong>al Code shall apply analogously.<br />
Simple acquisition of knowledge, alone, goes unpunished. Long-term retention of<br />
secrets by way of memory goes unpunished as well. Section 17(2) No. 2 of the<br />
Unfair Competition Act provides sanctions for trad<strong>in</strong>g <strong>in</strong> secrets.<br />
In the <strong>in</strong>terest of a comprehensive protection of trade secrets, the elements of<br />
offense under §17 of the Unfair Competition Act are supplemented by the provisions<br />
conta<strong>in</strong>ed <strong>in</strong> §18 and §19 of the Unfair Competition Act.<br />
Section 18 of the Unfair Competition Act protects the knowledge of a company set<br />
out <strong>in</strong> models or <strong>in</strong>structions of a technical nature aga<strong>in</strong>st abuse of trust <strong>in</strong> bus<strong>in</strong>ess<br />
relationships. This does not have to refer to trade secrets <strong>in</strong> the narrower sense.<br />
Section 18 of the Unfair Competition Act serves, <strong>in</strong> particular, to protect technical<br />
knowledge that is made available to other companies with<strong>in</strong> the framework of knowhow<br />
agreements or subsequently failed contract negotiations.<br />
Section 19 of the Unfair Competition Act provides crim<strong>in</strong>al law protection for <strong>in</strong>dustrial<br />
secrets already prior to their violation <strong>in</strong> that the attempt to <strong>in</strong>duce another to violate<br />
§17 or §18 or the offer to commit such violation can result <strong>in</strong> a penalty.<br />
If the prerequisites of §17 of the Unfair Competition Act are met, the elements of<br />
betrayal of confidence by abus<strong>in</strong>g rights under §266(1), second alternative, of the<br />
Crim<strong>in</strong>al Code are often also met if the offender had a duty to safeguard the assets of<br />
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the damaged company. This is always true with regard to members of the board and<br />
executive employees, as well as all employees who have a say <strong>in</strong> events <strong>in</strong> the<br />
company. What is necessary is that such a person has a fundamental duty of care<br />
with regard to the f<strong>in</strong>ancial <strong>in</strong>terests of the company.<br />
An employee is always <strong>in</strong> breach of his duty to safeguard assets if he communicates<br />
an <strong>in</strong>dustrial secret that has been confided <strong>in</strong> him or makes use of it for himself or for<br />
others.<br />
Accord<strong>in</strong>g to §202a of the Crim<strong>in</strong>al Code (data espionage), it is also a crim<strong>in</strong>al<br />
offense for a person to obta<strong>in</strong> data for himself or another, without authorization, that<br />
was specially protected aga<strong>in</strong>st unauthorized access and that was stored <strong>in</strong> such a<br />
way that it was not directly perceivable or was be<strong>in</strong>g transmitted. This can <strong>in</strong>clude<br />
secret trade and bus<strong>in</strong>ess data. The penalty can be imprisonment not exceed<strong>in</strong>g<br />
three years or a f<strong>in</strong>e.<br />
Under §203 and §204 of the Crim<strong>in</strong>al Code (violation of private secrets), trade<br />
secrets are expressly <strong>in</strong>cluded <strong>in</strong> the protected secrets confided <strong>in</strong> specified<br />
professionals, such as officeholders. They are protected there aga<strong>in</strong>st disclosure<br />
and exploitation even without the subjective prerequisites set out <strong>in</strong> §17 of the Unfair<br />
Competition Act be<strong>in</strong>g met. An offender faces imprisonment not exceed<strong>in</strong>g one year<br />
under §203 of the Crim<strong>in</strong>al Code and not exceed<strong>in</strong>g two years under §204 of the<br />
Crim<strong>in</strong>al Code or a f<strong>in</strong>e.<br />
If one of the provisions of crim<strong>in</strong>al law has been violated, sanctions imposed dur<strong>in</strong>g<br />
employment can be based on such violation.<br />
VI. Punitive Provisions Under Labor Law, Corporate Law and Commercial Law<br />
There are explicit provisions under commercial law, particularly corporate law, for the<br />
protection of trade secrets, such as §90 of the Commercial Code, accord<strong>in</strong>g to which<br />
commercial agents may not exploit trade secrets confided <strong>in</strong> them, §79 and §120 of<br />
the German Works Constitution Act, accord<strong>in</strong>g to which members and substitute<br />
members of works councils may not exploit trade secrets of which they ga<strong>in</strong><br />
knowledge through their membership, or §404 of the German Stock Corporation Act<br />
(Aktiengesetz), accord<strong>in</strong>g to which members of management boards or supervisory<br />
boards may not disclose trade secrets to third parties.<br />
The different provisions all have a uniform structure. The elements of the offenses<br />
<strong>in</strong>clude the acts of reveal<strong>in</strong>g secrets that offenders ga<strong>in</strong>ed knowledge of as<br />
officeholders of a company and exploit<strong>in</strong>g them without authorization. Reveal<strong>in</strong>g a<br />
secret means any communication of it to a third party. The attempt to do so is not a<br />
crim<strong>in</strong>al offense. The penalty is imprisonment not exceed<strong>in</strong>g one year or a f<strong>in</strong>e.<br />
Aggravated offenses are cases <strong>in</strong> which an offender acts <strong>in</strong> return for payment or<br />
with the <strong>in</strong>tent of enrich<strong>in</strong>g himself or others or of harm<strong>in</strong>g another party (§404(1),<br />
second sentence, of the Stock Corporation Act, §333 of the Commercial Code,<br />
§120(3), first sentence of the Works Constitution Act.<br />
However, these provisions have not ga<strong>in</strong>ed any particular importance <strong>in</strong> practice to<br />
date because their restriction to a group of offenders, the necessity of fil<strong>in</strong>g charges<br />
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and the low penalties always cause §17 of the Unfair Competition Act to be applied <strong>in</strong><br />
important cases.<br />
VII. Labor Law Consequences and Damages<br />
When employees breach their confidentiality obligations, there are consequences<br />
under labor law, and not only under crim<strong>in</strong>al law. What labor law <strong>in</strong>struments come<br />
<strong>in</strong>to consideration for an employer depends on whether the violation was committed<br />
prior to the commencement of employment, dur<strong>in</strong>g employment or <strong>in</strong> the postcontractual<br />
area.<br />
1. Prior to Commencement of <strong>Employment</strong><br />
In the pre-contractual area, a company can assert damage claims based on a<br />
breach of pre-contractual protective duties under §311(2) and §241(2) of the Civil<br />
Code. Because it is often difficult to calculate the amount of damage done, the<br />
courts have developed the pr<strong>in</strong>ciples of triple damage calculation accord<strong>in</strong>g to which<br />
the damaged party has a right to choose whether to calculate the actual damage, to<br />
be paid a reasonable license fee or to be awarded the net profits of the offender.<br />
The calculation of actual damage corresponds to the system of the general law on<br />
compensation. The company must provide proof of the actual loss <strong>in</strong>curred. The<br />
damage then <strong>in</strong>cludes the actual <strong>in</strong>curred asset reduction and the <strong>in</strong>crease of assets<br />
that did not take place.<br />
Alternatively, the company can demand payment of a reasonable license fee. The<br />
amount is then calculated on the basis of what a reasonable licensor would have<br />
charged and a reasonable licensee would have paid if a license agreement had been<br />
concluded if both parties had been familiar with the circumstances of the case at the<br />
time of the decision. 11<br />
Courts have awarded license fees between 1 percent and 12.5 percent. The<br />
calculation of damage is done objectively, regardless of whether the employer has <strong>in</strong><br />
fact lost profits, and if so, <strong>in</strong> what amount.<br />
The company may also demand the net profit ga<strong>in</strong>ed by the offender; it is implied<br />
that the company would have ga<strong>in</strong>ed the same profit that the offender did. In this<br />
case, the company must prove that the offense <strong>in</strong> all probability caused the company<br />
to <strong>in</strong>cur a loss and the offender to ga<strong>in</strong> a profit.<br />
2. Dur<strong>in</strong>g <strong>Employment</strong><br />
In the event of breaches of confidentiality obligations dur<strong>in</strong>g employment, employers<br />
may dismiss such employees without notice for good cause, <strong>in</strong> addition to fil<strong>in</strong>g<br />
claims for damages <strong>in</strong> accordance with the above-mentioned pr<strong>in</strong>ciples, because<br />
communication of trade secrets, as well as the suspicion 12 that secrets have been<br />
11<br />
BGHZ 44, 372, 380 f., BGHZ 77, 16, 27.<br />
12<br />
BAG decision of 26 September 1990, 2 AZR 602/89; decision of 17 August 2001, Landesarbeitsgericht Köln,<br />
11(7) Sa 484/00.<br />
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betrayed, constitutes good cause for term<strong>in</strong>ation without notice under §626(1) of the<br />
Civil Code. 13 .<br />
Court Rul<strong>in</strong>g<br />
The decision of the Regional Labor Court of Berl<strong>in</strong> rendered on 10 July 2003<br />
dealt with a case <strong>in</strong> which an employee had copied a considerable number<br />
of files belong<strong>in</strong>g to her employer. These files were projects lists <strong>in</strong>clud<strong>in</strong>g<br />
names of customers, names of project leaders, descriptions of projects, offer<br />
prices and general company data. The court held the op<strong>in</strong>ion that the<br />
employee's act constituted an <strong>in</strong>tentional betrayal of trade secrets that gave<br />
the employer the right to dismiss her for good cause and without giv<strong>in</strong>g her<br />
prior warn<strong>in</strong>g. 14<br />
Employers are also entitled to an <strong>in</strong>junction aga<strong>in</strong>st future offenses pursuant to §8(1)<br />
of the Unfair Competition Act <strong>in</strong> conjunction with §3 of the Unfair Competition Act if<br />
employees have committed acts of unfair competition. If there was no competitive<br />
purpose, the employer is entitled to an <strong>in</strong>junction <strong>in</strong> any case based on tortious acts<br />
pursuant to §823(1) and §1004 of the Civil Code. In urgent cases, an action can be<br />
filed for a prelim<strong>in</strong>ary <strong>in</strong>junction.<br />
In preparation for actions for damages and <strong>in</strong>junctions, companies are also entitled,<br />
under §242 of the Civil Code (good faith), to demand <strong>in</strong>formation from offenders if<br />
they lack <strong>in</strong>formation to assert their claims, for example, for the calculation of lost<br />
profits, on the amount of profits ga<strong>in</strong>ed that was made possible by us<strong>in</strong>g the trade<br />
secret.<br />
3. After the End of <strong>Employment</strong><br />
If employees breach their post-contractual confidentiality obligations after the end of<br />
their employment, their former employers may assert compensation claims <strong>in</strong><br />
accordance with the above-mentioned pr<strong>in</strong>ciples.<br />
VIII. Conclusion<br />
This shows that <strong>in</strong> <strong>Germany</strong> applicable law, primarily §17 of the Unfair Competition<br />
Act and §2667 of the Crim<strong>in</strong>al Code, conta<strong>in</strong>s statutes provid<strong>in</strong>g comprehensive<br />
protection for trade secrets. In addition, companies can impose obligations on their<br />
employees by way of contractual clauses to hold trade secrets <strong>in</strong> confidence if they<br />
restrict such clauses <strong>in</strong> employment agreements to specified trade secrets.<br />
Otherwise, the boundary for a prohibition on competition without compensation and<br />
limited <strong>in</strong> terms of time to a maximum of two years would be overstepped, with the<br />
result that employers would be obligated to compensate their employees.<br />
13 Decision of 12 November 2004, Landesarbeitsgericht Rhe<strong>in</strong>land-Pfalz, 8 Sa 460/04; decision of 15 June 1967,<br />
Landesarbeitsgericht München, 1 Sa 648/67.<br />
14 LAG Berl<strong>in</strong> decision of 10 July 2003 – 16 Sa 545/03.<br />
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Employers may dismiss employees without notice for good cause if they commit a<br />
material breach of their confidentiality obligations. Case law of the Federal Court of<br />
Justice concern<strong>in</strong>g a triple damage calculation makes it easier for a damaged<br />
company to calculate the damage it has <strong>in</strong>curred. In practice, preventive measures<br />
cont<strong>in</strong>ue to be of decisive importance, and they should be implemented through a<br />
calculation of the need for protection <strong>in</strong> <strong>in</strong>dividual areas, a risk assessment and a<br />
comprehensive <strong>in</strong>formation and security policy.<br />
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