Protecting your IP when hiring in Germany

Most companies assume that anything an employee creates on the job automatically belongs to the employer. In Germany that is broadly true for some kinds of work and more complicated for others, and the gaps are where value leaks away.

The safest approach is to know which rules apply to inventions, software, copyright and trade secrets, and then make sure the contract deals with each one. Leaving it to a generic assignment clause written for another country is how disputes start.

Inventions made by employees are governed by a specific law, the Arbeitnehmererfindungsgesetz. Under it, an employee has to report a qualifying invention to the employer, and the employer can claim the rights to it. That part usually works in the employer’s favour.

The catch is that claiming an invention triggers a duty to pay the employee reasonable compensation, an Erfindungsvergütung, on top of their salary. So the employer can secure the invention, but not for free. The process for reporting and claiming has to be followed properly for the rights to transfer cleanly.

Software is the friendliest area for employers. Where an employee writes software in the course of their duties, German copyright law passes the economic rights to the employer automatically, so code created on the job is yours without a special clause.

Other copyright works, such as designs, text or marketing material, are treated a little differently. The author keeps their authorship, which German law does not let them sign away, but they grant the employer the rights to use and exploit the work. A clear contract makes the scope of that grant explicit so there is no argument later.

Trade secrets in Germany are protected under the Geschäftsgeheimnisgesetz, which followed the European trade-secrets directive. The important point is that a secret is only protected if the business has taken reasonable steps to keep it secret in the first place.

That means access controls, confidentiality terms and sensible security are not optional extras, they are the condition for the protection to exist at all. If you treat information as freely available internally, a court may find it was never a protected secret. Confidentiality obligations in the contract are part of meeting that standard.

A post-contractual non-compete, a nachvertragliches Wettbewerbsverbot, is enforceable in Germany, but only on strict terms. It has to be in writing, it can last no longer than two years, and crucially the employer has to pay the former employee compensation for the restricted period, at least half of their last pay.

That compensation, the Karenzentschädigung, is what makes a German non-compete real. A clause without it is not binding, so a template lifted from a country where non-competes are free will not hold. If you want to restrain a departing employee, you have to be ready to pay for it.

Once you know the rules, the contract is where you lock them in. A well-drafted German contract handles each strand of IP so nothing is left to assumption.

• An invention clause that follows the Arbeitnehmererfindungsgesetz process
• Confirmation of the employer’s rights in software and other works
• Confidentiality terms that support trade-secret protection
• A non-compete only where you will pay the required compensation
• Clear rules on return of materials when the job ends

As an employer of record, we make sure these are drafted to German law in the contract we issue, so your IP is protected from the first day.