A common trigger for the German Act on the Protection of Trade Secret (GeschGehG) proceedings is an employee’s move to a new employer. Not only the – impermissible – removal of documents, but also the – generally permissible – use of knowledge obtained in good faith gives rise to litigation risks if the origin of certain information cannot be proven. In such cases, the establishment of so-called “clean teams” can reduce these risks.
It is widely known that the departure of employees poses particular risks regarding the loss of trade secrets, and this has also been the subject of numerous disputes. As early as the famous “López Affair,” former Opel manager Ignacio López was accused of systematically collecting confidential documents prior to his departure and then taking them with him to his new employer, Volkswagen AG. Although criminal proceedings in Germany for violating Section 17 of the Unfair Competition Act (UWG) (old version) were dismissed, Volkswagen did pay 100 million dollar in damages to Opel’s parent company, General Motors, to settle a legal dispute in the U.S. and committed to purchasing an additional 1 billion dollar worth of components from General Motors (for background information, see here and here).
Prominent recent disputes once again involve the automotive industry: Google, or rather its subsidiary Waymo – which is developing a self-driving car – has sued Uber for the misuse of trade secrets. The legal dispute was settled with a payment of 245 million dollar. The dispute originated when Uber poached a software engineer who had previously worked at Waymo and who took technically relevant data with him. Tesla and Apple are also involved in several disputes with former employees (further information can be found here and here).
Use of experiential knowledge
According to established case law of the Federal Court of Justice, a former employee may use their experiential knowledge without restriction for the benefit of their new employer, provided they are not subject to a non-compete clause. The new employer may also use this experiential knowledge specifically for the development of new products. It is important to carefully document the development steps in order to be able to prove independent development in the event of a lawsuit. We explained the details in our last post (here).
Development by “Clean Teams”
It is even easier to prove the independent origin of a development if the development department is divided from the outset into several independent groups and the actual new development is carried out by a “clean team.” Although there are numerous variations of this approach, the basic idea can be summarized as follows:
One team focuses on analyzing the competition and its products. This team may also include former employees of a competitor, who then contribute their practical experience. All analysis results and specifications developed by this team are comprehensively documented.
In particularly important cases – especially at larger companies – there is a second team responsible exclusively for coordination and review tasks. This intermediary body verifies whether the information compiled by the first team might in any way contain trade secrets, such as those of an employee’s former employer. However, this mediating function can also be integrated into the first team.
It is then crucial that the employees entrusted with the actual new development receive only the information prepared by the first team and are involved in the development of new products or processes solely on the basis of this documentation (and, of course, freely available sources). Such a process ensures that the employees of the “clean team” have no access to further information – in particular, no contact with the original team or with the employee who has changed jobs.
Provided that the clean team’s development activities are also fully and properly documented and the documents transmitted by the original team do not contain any trade secrets, the allegation of unauthorized use should be easily refuted. Proving independent development and mounting a defense in court proceedings are then significantly easier.
Conclusion
Defending against allegations of unauthorized use of trade secrets brought in by new employees requires thorough preparation. Complete documentation of one’s own development process is essential. The use of a “Clean Team” can further reduce risks and make it considerably easier to prove independent development.