In a labor law case, the Hamburg Labor Court ruled that a cocktail recipe did not qualify as a trade secret (decision dated July 1, 2021, Case No. 4 Ca 17/21). However, this was not based on the premise that recipes are generally ineligible for trade secret protection, but rather on the fact that the recipe in question was readily accessible and the alleged trade secret holder had not implemented adequate protective measures.
The background of the case
The defendant and counterclaimant operated a bar where the plaintiff and counterdefendant was employed as a bartender. In the wake of the bar’s closures due to the COVID-19 pandemic, a dispute arose between the parties regarding the (non-)existence of the employment relationship. At that time, both the defendant and the plaintiff, the latter through a civil law partnership she had founded, were operating a takeout service for cocktails. The cocktails had different names, but the cocktail recipes were identical in terms of ingredients, their proportions, and preparation. For example, both parties used verjus instead of lemons (Wikipedia explains what verjus is).
A dispute arose between the parties regarding claims for wages and vacation pay, as well as the existence of the employment relationship. The plaintiff sought a court declaration that the employment relationship continued to exist, as well as payment. In a counterclaim, the defendant requested, among other things, that the plaintiff refrain from using various recipes for the cocktails in the context of her off-premises sales.
Legal assessment
The Labor Court dismissed the counterclaim. It found it to be partially inadmissible and otherwise unfounded.
The determination of whether the plaintiff had violated the provisions of the GeschGehG fell within the jurisdiction of the labor court pursuant to Section 2 (1) no. 3 d) of the Labor Court Act (ArbGG). When an employer and an employee dispute the breach of trade secrets in the course of the employment relationship, this constitutes a civil dispute arising from tortious acts, to the extent that such acts are related to the employment relationship. In such a case – as in the present one – the labor courts also have subject-matter jurisdiction over this issue.
The motion to “order the plaintiff to refrain from using or disclosing to third parties the defendant’s ‘XY-Cocktails’ concept in the course of business, and in particular the bottle recipes for the cocktails ‘… -30th Century Sour’ and ‘Le Perfect Mec’ in the course of business, or to disclose them to third parties, as well as to use or disclose to third parties minor variations of the recipes’– the court dismissed the motion as inadmissible due to lack of specificity. Neither an “XY Cocktails concept” nor the “insignificant modifications” could be defined with sufficient clarity to determine the scope of the res judicata effect and its implications for the enforcement of a judgment.
Furthermore, the court clarified that the recipes did not constitute a trade secret. The product labels and online stores each listed the ingredients of the cocktails. The ingredients were therefore already publicly known. In addition, the defendant had argued that any (amateur) bartender could determine the composition of these very ingredients through testing and tasting. The plaintiff had not contested this argument. Since (amateur) bartenders are precisely the group that typically deals with this specific type of information, what matters is (solely) the ease with which bartenders can access the information.
Furthermore, the defendant had not implemented any protective measures for its recipes. The recipes therefore did not meet the requirements of Section 2 (1) GeschGehG, meaning that the defendant could not assert any claims against the plaintiff under the GeschGehG.
Conclusion
The case described illustrates two typical problems with the GeschGehG:
First, it confirms that, particularly in employment relationships, there is a lively and often insufficiently systematized flow of information. As a potential trade secret holder, the employer can only curb the risk of unwanted information flows by implementing protective measures that go beyond the ordinary duties of loyalty under labor law. In this regard, case law does not require every trade secret holder to implement the legendary measures allegedly used to protect the Coca-Cola formula (see here regarding appropriate protective measures). In this respect, the decision serves as both a warning and a reminder: without protective measures, there is no protection.
The case also underscores that, within the scope of the GeschGehG, any type of information can be subject to trade secret protection. Unlike in industrial property rights and copyright law, there is no distinction made based on different purposes or categories. Any information that meets the requirements of Section 2 (1) GeschGehG can constitute a trade secret. In principle, this also applies to a recipe and individual pieces of information regarding the preparation of a cocktail or other products such as paints, plastics, etc. In the present case, the court denied trade secret protection because the ingredients of the cocktails were known and, at the same time, the proportions could easily be determined by taste. However, if this is not the case – for example, if the order or temperature conditions during mixing play a role (which is often the case in industrial processes) -then even this specific piece of information may constitute a trade secret, provided that this information is not readily accessible to the relevant trade circles, as was the case with the cocktails.