We have previously discussed the particular difficulties of presenting evidence in GeschGehG proceedings in another article (here). An analysis of a decision by the Aachen Labor Court illustrates the objections a trade secret owner must overcome to successfully enforce their claims when the alleged infringer invokes permissible reverse engineering (Judgment of Jan. 13, 2022, Case No. 8 Ca 1229/20).
Initial case
The plaintiff is a leading manufacturer of filling machines for food and beverages, as well as related packaging material in the form of so-called “sleeves.” These are thin plastic tubes that are already sealed along a longitudinal seam. To manufacture the sleeves, the plaintiff uses special machines (folding carton gluing machines), which it procures from a supplier. The supplier of these machines is contractually obligated to supply them exclusively to the plaintiff. However, very similar machines for processing sleeves are offered worldwide by several companies. Furthermore, several companies – particularly Chinese ones – are active on the global market that also produce sleeves, albeit in significantly smaller quantities.
The defendant is a former executive of the plaintiff who was involved in R&D activities and had access to numerous technical documents. In 2015, the defendant sent several emails, including attachments, under a pseudonym to the shareholders of a potential competitor of the plaintiff. The attachments contained a range of specific technical information regarding the manufacture of sleeves. However, the recipients of this information were unable to successfully manufacture sleeves.
An injunction proceeding initiated by the plaintiff in 2018, shortly after the defendant’s email transmission became known, was unsuccessful in two instances (Cologne Regional Labor Court, Judgment of Dec. 2, 2019, Case No. 2 SaGa 20/19). Among other things, the Regional Labor Court (LAG) found that, in light of the undisputed availability of sleeves from other manufacturers, it could not be assumed in this proceeding that the information transmitted by the defendant constituted a trade secret. The plaintiff is now pursuing its claims in a main action.
The plaintiff argues that the existence of competing products does not preclude the assumption of a trade secret. The competitors’ sleeves are of inferior quality because they merely meet lower standards for aseptic properties, shelf life, and impermeability to liquids. Furthermore, a comparable production speed cannot be achieved with the competitors’ sleeves. For all of these characteristics, the plaintiff argues, the use of the specific technical information that the defendant provided to the competitor is precisely what is required. The same applies to a particularly cost-effective and resource-efficient production process. Furthermore, the plaintiff explains that the technical data cannot be determined from the available sleeves using standard measuring equipment.
The defendant, in turn, explains in detail that any production of sleeves must meet certain quality and aseptic requirements; otherwise, they would be unusable from the outset.
Much of the technical information contained in the documents is not a trade secret anyway, because this data is provided by the manufacturers of the packaging machines. Furthermore, a large number of these machines have been sold to various customers at unit prices of at least 500,000 euros. No company would purchase these machines if it could not actually use them in practice to produce packaging with sleeves.
Decision
The court dismisses the complaint. The plaintiff failed to demonstrate that the relevant technical information was not accessible to a wider circle of third parties (Section 2 no. 1 a) of the German Act on the Protection of Trade Secrets (GeschGehG)).
The court notes that it is undisputed that several suppliers of sleeves operate on the global market, with one supplier having manufactured as many as 250 million products. Against this backdrop, the plaintiff cannot make a blanket assertion that all products from competitors are of inferior quality. Given such high sales figures, this objection is implausible. In light of the defendant’s detailed statement of facts, it was rather the plaintiff’s responsibility to provide precise information regarding the manufacture and quality of the competing products and regarding the possibility of obtaining technical information about these products through reverse engineering. Among other things, the plaintiff should have compared the physical and chemical properties of the competing products with those of its own sleeves and provided further details on the possibilities for measurement or obtaining additional information. Overall, the plaintiff failed to establish a concrete connection between any of the technical information at issue and specific properties or manufacturing circumstances. To clarify, the court lists a number of specific circumstances which, in its view, the plaintiff could have presented. Given the insufficient presentation of evidence, the court holds that obtaining an expert opinion is not an option and concludes that the plaintiff, who bears the burden of proof in this regard, has failed to demonstrate the existence of information not publicly known.
Note
This case exemplifies the significant evidentiary challenges faced by the plaintiff in proceedings under the GeschGehG. A distinctive feature here certainly arose from the fact that products were available on the market that exhibited at least generally similar characteristics and could (theoretically) be used for reverse engineering. This significantly eased the defendant’s position. Nevertheless, it is noteworthy that the claim was dismissed despite the undisputed disclosure of a large amount of technical information.
Ultimately, it is impossible to assess from the outside whether the Labor Court applied overly strict standards to the plaintiff’s burden of proof. It is entirely conceivable that the plaintiff’s legal representatives failed to present the technical details and to specifically link individual pieces of technical information from the disclosed data to particular production parameters. In one instance, however, the court’s reasoning is not convincing, so that the plaintiff’s representatives may have no choice but to shake their heads and place their trust in the Regional Labor Court (LAG) or the Federal Labor Court (BAG):
As far as can be seen, the court assumes that information is no longer considered “not generally known” within the meaning of Section 2 no. 1 a) GeschGehG if it were theoretically possible for a third party to obtain such information through reverse engineering. This assessment is likely incorrect.
Of course, obtaining technical information through actions under Section 3 (2) GeschGehG (i.e., reverse engineering) precludes an allegation of a violation of the Trade Secrets Act. However, this is a privilege granted to those who actually carry out such actions and thereby obtain specific technical information. By contrast, the purely hypothetical possibility that a third party could obtain information in this way does not permit any conclusions regarding the question of whether the information is in fact generally known. The person conducting reverse engineering may have a significant interest in continuing to keep this information secret themselves. They then become a further lawful holder of the trade secret, which is identical in content. However, it is in the nature of a trade secret that multiple legitimate holders can coexist – and this is precisely where the difference from intellectual property rights becomes apparent. The court does not appear to have recognized this difference, as suggested by its reference to the plaintiff’s use of “exclusive know-how.” Information that constitutes a trade secret does not, in fact, have to be exclusive. It is entirely conceivable that two or three companies worldwide use the same technical information and keep it secret. However, this does not mean that this information is generally known or readily accessible within the circles that typically deal with it. The element of the offense under Section 2 no. 1 a) GeschGehG is not satisfied only if the information in question is generally known or readily accessible to members of the relevant circles, without the need for (typically time-consuming) reverse engineering. The decision in this case would therefore depend on the amount of effort a third party would have to expend to obtain the technical information. If a potential competitor can obtain the information with minimal time and cost, it is “readily accessible” and does not constitute a trade secret. If obtaining the information is possible only through complex measurement procedures and, where applicable (as suggested in this case), by acquiring special analytical and measurement instruments, then the technical information is and remains a trade secret until it is further disseminated.