According to the Mannheim Regional Court – a view also held, albeit in a slightly less stringent form, by the Düsseldorf Higher Regional Court – the need for legal protection required for a confidentiality order under Section 145a PatG/Section 16 GeschGehG would be absent if the parties have already entered into an NDA regarding the relevant information. The Higher Regional Court of Karlsruhe has now clearly rejected this argument in a ruling dated October 4, 2023 (6 U 122/22).
Facts of the case
In the context of a patent dispute before the Mannheim Regional Court, both parties moved to have certain information regarding the antitrust compulsory license defense classified as subject to confidentiality within the meaning of Section 16 GeschGehG. However, the parties had previously entered into a non-disclosure agreement (NDA) regarding this information. The Mannheim Regional Court rejects any confidentiality measures with respect to information that is also covered by the NDA.
Considerations of the Mannheim Regional Court
Essentially, the Regional Court puts forward a significant argument and explains:
“If an NDA exists between the parties to protect the information, a court order for protection is generally not required, meaning that a corresponding motion by a party typically lacks a need for legal protection.”
Ironically, the court begins its reasoning with the “chilling effect.” This refers to the phenomenon whereby trade secret holders in civil proceedings are regularly forced to disclose their secrets during the trial and, for this reason, shy away from enforcing their rights. The Mannheim Regional Court correctly states:
“Without the procedural protection under Sections 16 et seqq. GeschGehG, the trade secret holder (…) may refrain from pursuing legal action because he fears the loss of confidential information.”
However, the court considers only the risk of disclosure by the opposing party. In the court’s view, Sections 16 et seqq. GeschGehG are “primarily” aimed at protecting the information from being obtained by the opposing party and do not consider the risk of disclosure to third parties. The court cites a systematic argument as justification: Under Section 20 (2) GeschGehG, only the opposing party is to be heard; therefore, the need for legal protection with regard to a confidentiality order is also limited solely to that party. Furthermore, the Regional Court explains that nothing to the contrary follows from EU law. In the area of patent law, the national legislature has “in any case, implemented the requirements of the Trade Secrets Directive more broadly than required.” The provisions of Article 9 of the Directive apply only to proceedings concerning the unlawful acquisition or use of trade secrets (Mannheim Regional Court, Order of April 14, 2023, 7 O 91/22 – Confidentiality Order II).
Critical view also expressed by the Higher Regional Court of Düsseldorf
A few months earlier, the Higher Regional Court of Düsseldorf had also expressed a similar view. First, the panel clarified that the mere fact that trade secrets were introduced into the proceedings does not, under any circumstances, give rise to an obligation on the part of the court to issue a confidentiality order (even this, with all due respect, can be viewed quite differently). In any case, the Düsseldorf Patent Division continued, the existence of an NDA enforceable by contractual penalties – from which the opposing party has not withdrawn – generally argues against the necessity of a concurrent court-ordered confidentiality order. Furthermore, there is generally no reason to restrict access to certain information under Section 19 GeschGehG to specific individuals if this is not also provided for in the NDA. The Chamber does not address the possibility of the secret being compromised by third parties (Higher Regional Court of Düsseldorf, Order of November 3, 2022, 2 U 102/02).
Clarification by the OLG Karlsruhe and assessment
For the OLG Karlsruhe, there is no doubt that the protective purpose of Sections 16 et seqq. GeschGehG extends beyond the protection of secrets from the respective opposing party in the proceedings. The Senate expressly refers to the effects of the order on the other parties to the proceedings and explains
“Regardless of whether, from a legal perspective, the law ‘primarily’ focuses on the risk of disclosure by the opposing party, it is in any case (also) among the legal consequences intended by the unambiguous statutory provision that the holder of the secret can, by applying for a classification, ensure that the risk of disclosure by other persons is mitigated in the manner provided for in Section 16 (2), (3), Sections 17, 18 GeschGehG.”
According to this Senate, a differing assessment cannot be based on the limited hearing Section 20 (2) GeschGehG) or on other aspects and would disregard the (clear) intent of the legislature (Higher Regional Court of Karlsruhe, Order of Oct. 4, 2023, 6 U 122/22).
The view of the OLG Karlsruhe is correct and convincing. Both the OLG Düsseldorf and – even more clearly – the Mannheim Regional Court overlook in their reasoning that both the German and the EU legislature intended to ensure the protection of trade secrets in court proceedings not only in relation to the respective opposing party. The Mannheim Regional Court’s formal observation that there has been an excessive transposition in the area of patent law cannot obscure the fact that the provisions in Article 9 of Directive 2016/943 clearly refer to all parties to the proceedings. It would be contrary to any systematic approach to define the scope of confidentiality measures for trade secret disputes differently from the scope of protection afforded by identical measures in patent disputes.
Furthermore, the analyses by the Regional Court of Mannheim and the Higher Regional Court of Düsseldorf fail to consider the problem that, with NDAs – as with any contractual agreement – objections regarding the lack of a valid conclusion of the contract or grounds for nullity can be raised retroactively. Thus, even among the parties, an NDA does not, from the outset, provide the same level of protection as a court-ordered confidentiality injunction. Finally, there is the advantage that the terms of the injunction can be enforced more efficiently within the framework of proceedings for enforcement by means of coercive measures than contractual provisions, which require a lengthy dispute over contractual penalties. For these reasons as well, there is rightly always a need for legal protection with regard to a confidentiality order, regardless of whether a confidentiality agreement exists. This understanding is also reflected in the legislative rationale, according to which confidentiality orders are to be assessed independently of other confidentiality obligations (see BT-Drs. 19/4724, p. 35).
The Higher Regional Court of Düsseldorf can be agreed with, at most, to the extent that a need for legal protection may be lacking for specific substantive provisions in the confidentiality order if the parties have previously agreed to contrary provisions in an NDA. Thus, if an NDA contains a time limit or permits the disclosure of information within the recipient’s corporate group, an applicant must provide a substantiated explanation as to why the content of a confidentiality order should go beyond these provisions. In most such cases, a substantive limitation of the confidentiality order is likely to be warranted.
Conclusion
An NDA does not provide protection in the context of court proceedings that is equivalent to that of a court-ordered confidentiality order under Sections 16 et seqq. GeschGehG (also in conjunction with Section 145a PatG). This applies not only with regard to the higher degree of certainty resulting from the order, but even more so (and obviously) with regard to the group of parties bound by the confidentiality obligation. Therefore, there is generally a need for legal protection justifying the issuance of a confidentiality order when a party introduces information into the proceedings and files a motion pursuant to §§ 16 et seqq. GeschGehG.