The protection of trade secrets is a valuable asset and is always a top priority for companies. Their protection is now being strengthened in light of potential disclosure requirements in civil proceedings.
Expansion of Trade Secret Protection in Civil Proceedings
The Act to Strengthen the Judicial System, which will take effect on April 1, 2025, provides not only for the establishment of commercial courts and the option to conduct proceedings in English, but also for a new Section 273a of the Code of Civil Procedure (ZPO), which aims to improve the protection of trade secrets in all civil proceedings in accordance with the provisions of the Trade Secrets Act. This extends trade secret protection to all civil court proceedings. In particular, this also affects trade secret protection in civil proceedings concerning the assertion of claims (e.g., claims for damages) arising from a business acquisition agreement. This article therefore aims to provide an overview of the implications of the new Section 273a of the German Code of Civil Procedure (ZPO) for companies and courts.
Protection of Trade Secrets to Date
Trade secrets are business-related information that is confidential, and therefore has economic value, is protected by reasonable confidentiality measures, and for which there is a legitimate interest in maintaining confidentiality.
Until now, trade secrets have generally been inadequately protected in civil courts. As a rule, the only option was to exclude the public from oral proceedings if trade secrets were to be disclosed during them.
A common problem is that either a trade secret itself is the subject of a dispute, or a trade secret is relevant to the decision in connection with other circumstances. In the past, this could put the holder of the trade secret in the difficult position of having to decide whether to disclose the sensitive information in court in order to win the case or to keep the trade secret to themselves but then lose the case. This problem arises, for example, in cases where the seller of a company files a claim for damages against the buyer of the company for breach of confidentiality obligations, provided that the seller bears the burden of proof in court regarding the breach of confidentiality.
Expansion of Trade Secret Protection Under Section 273a of the German Code of Civil Procedure (ZPO)
Section 273a of the German Code of Civil Procedure (ZPO) expands upon the existing options for restricting public access in order to prevent trade secrets from becoming known to third parties.
In the future, pursuant to Section 273a of the German Code of Civil Procedure (ZPO), courts may order that all parties to the proceedings must treat information classified as confidential as such even after the proceedings have concluded, and may not use or disclose such information outside of court proceedings, unless they obtained knowledge of the information outside of the proceedings. Violations of the duty of confidentiality may be punished by administrative fines of up to 100,000 euros or, alternatively, by administrative detention.
Conclusion
The introduction of Section 273a of the German Code of Civil Procedure (ZPO) is intended to provide better protection for sensitive corporate information, including in the context of public civil court proceedings. The aim is to ensure that confidential information is protected without putting companies in the difficult position of either losing the case or having to accept the disclosure of trade secrets.
