The topic is short and compact
Under Section 2 of the GeschGehG, a trade secret requires reasonable technical, organisational and contractual protective measures.
Reverse engineering is permitted under Section 3 of the GeschGehG; an NDA should contractually prohibit analysis of the product.
Ingredients below 1 percent are listed in the INCI list in no particular order, which keeps exact concentrations hidden.
With private label, the rights to the formulation are negotiated, whereas with white label, they remain with the manufacturer.
The product information file under Article 11 obliges the responsible person to keep the formulation readily available for the authorities.
So läuft die Entwicklung bei Labtree
1
Konzeptionierung
2
Bemusterung – Standardmuster in 24 h
3
Individualisierung
4
Prototyping
5
Produktion
White Label 2–3 Monate · Private Label 3–6 Monate · Produktion ab 1.000 Stück
When is a formula legally a trade secret?
A cosmetic formula is not automatically protected by law. Anyone who wants their formula treated as a trade secret must check whether it meets the statutory definition: Section 2 No. 1 of the Trade Secrets Act (GeschGehG) sets out three cumulative conditions, and only once all of them are met do the prohibitions and claims under the Act apply.
Not generally known and of commercial value: the information must not be generally known to, or readily accessible by, the persons in the circles that normally deal with this kind of information, neither as a whole nor in the precise configuration and composition of its components; it is precisely this that gives the information its commercial value, for example as a differentiator against competitors.
Reasonable secrecy measures: the lawful holder must protect the information under circumstances that are reasonable in the situation.
Legitimate interest: there must be a legitimate interest in keeping the information secret.
For brand practice, the second condition is decisive: the reasonable secrecy measures. A formula sitting in a lab folder, emailed to several service providers with no confidentiality agreement in place, can lose its status as a trade secret even if it is technically difficult to replicate. If proof of reasonable measures is missing, statutory protection fails entirely, not just in part. In a dispute, the holder must also be able to demonstrate which measures were actually taken. An NDA with the contract manufacturer is therefore not a formality but a building block of that proof.
The Act does not prescribe what reasonable measures look like in concrete terms; it only requires that they be reasonable in the circumstances. For a formula developed and produced by a contract manufacturer, they fall into four areas:
Contractual: confidentiality agreements (NDAs) with the contract manufacturer, with raw material intermediaries and with external service providers such as safety assessors, each with a defined purpose of use.
Organisational: restricting access to the complete formula to the people who genuinely need it for safety and production, plus labelling of confidential documents and a rights and roles concept for laboratory and ERP systems.
Technical: access restrictions on formula databases, encrypted storage, and logging of who accessed the complete formula and when.
Demonstrable: simple documentation showing which measures were introduced when. In a dispute, this is the basis on which trade secret status can be maintained at all.
Anyone who documents these points only when a conflict looms has a problem: trade secret status depends on the measures in place at the time of disclosure. Rules introduced after the fact generally do not cure earlier gaps in practice. For founders, this means in concrete terms: the NDA is signed before the first formula discussion, not before the launch.
What does the INCI list reveal about your formula?
Labelling under Article 19 of Regulation (EC) No 1223/2009 makes part of the formula public, and it does so because the law requires it: under Article 19(1)(g), ingredients must be listed in descending order of weight, and ingredients present at less than 1 percent may be listed in any order after the ingredients above 1 percent. The exact concentrations, by contrast, do not appear on the label and are not part of the mandatory labelling.
What the INCI list reveals | What the INCI list keeps secret |
|---|---|
Which ingredients are contained, in descending order of weight above 1% | The exact percentage of each ingredient |
That ingredients below 1% are present, without their order | The order and distribution of the ingredients below 1% |
The general formula class, e.g. emulsion or W/O system | Process steps such as blending temperatures, dispersion method, cooling profile |
Active ingredient labelling down to the declaration threshold | Raw material specifications, suppliers and pigment dispersions in detail |
For assessing your own level of protection, this distinction matters: purely qualitative knowledge of the ingredients is public and may legally be analysed by competitors. The commercial value of your formula lies in the quantitative and the process side: the exact concentrations, the composition of the raw material blends, texture and sensorics, the pigment dispersion and manufacturability at scale. It is precisely this part that the reasonable secrecy measures under Section 2 No. 1 GeschGehG must protect. Anyone who wants to examine the labelling requirements in detail will find them in the magazine article on INCI labelling.
What must an NDA with the contract manufacturer cover?
The reason a contractual provision is needed lies in the law itself: Section 3(1) No. 2 of the Trade Secrets Act (GeschGehG) expressly permits observing, studying, dismantling or testing a product that has been made publicly available or is lawfully in the possession of the person examining it, provided that person is not subject to any restriction. Reverse engineering a purchased product is therefore generally permissible. Against this route, no law helps — only a contractual obligation does: the analysis prohibition in the NDA contractually excludes the permitted act and makes dismantling your samples and pre-series products a breach of contract.
Analysis prohibition: The recipient may not dismantle, chromatographically analyse or have third parties analyse samples, pre-series products or batches, unless this has been expressly agreed for the safety assessment.
Purpose of use: The information received may be used exclusively for the agreed service, such as development, sampling and production for your brand — not for the manufacturer's own formulas or for third parties.
Circle of recipients: Named individuals and roles with access to the complete formula, with an obligation to pass it on under the same terms.
Term: How long confidentiality applies, including after the contract ends, and what happens to documents and remaining stock.
Contractual penalty: An agreed penalty in the event of a breach, which can replace proof of concrete damage in individual cases and reduces the incentive to breach.
Two limits of the NDA matter for your assessment. First, it operates as an independent contractual obligation: it applies even if the information in question falls short of the threshold of a legally protected trade secret. Second, an NDA does not create ownership of the formula. It prohibits use and disclosure; it does not transfer rights. Who owns the formula is decided by the development contract, not the confidentiality agreement. Which additional questions you should clarify before signing is covered in the article on questions to ask a contract manufacturer.
Who needs access to the complete formula?
In cosmetics, confidentiality has a legal limit: product safety. Whoever places a cosmetic product on the market under their own name is the manufacturer within the meaning of Regulation (EC) No. 1223/2009 — in contract manufacturing, that is the brand, not the contract manufacturer; the brand is therefore the responsible person under Article 4 and can only transfer this role by written mandate. As the responsible person, it must be able to demonstrate compliance with the safety requirements, and that is impossible without the complete, quantitative formula.
The responsible person: It bears the obligations under the Regulation and must maintain the product information file or have transferred it to the contract manufacturer by mandate.
The safety assessor: The safety assessment under Article 10 requires the exact composition with concentrations and raw material specifications, not the short INCI form. An external safety assessor is therefore subject to the same confidentiality obligation as the contract manufacturer.
The competent authorities: Under Article 11, the product information file must be accessible to the authorities in full at any time.
The practical conclusion: confidentiality does not mean the complete formula exists in only one place. It means every access is defined, contractually recorded and traceable. The obligations around the responsible person, the safety report and notification are set out in detail in the magazine article on the EU Cosmetics Regulation.
When do the formula and exclusivity pass to the brand?
A mere order to produce a formula does not trigger a transfer of rights. What matters is the service model — and this is where two routes that are often confused diverge.
White Label | Private Label | |
|---|---|---|
Starting point | Market-ready, tested standard formula of the manufacturer, specifically adapted for the brand | New development of the formula according to the brand's individual requirements |
Ownership of the formula | The standard formula remains the property of the manufacturer | Formula rights and exclusivity can be contractually transferred to the brand |
Exclusivity | None; the formula remains with the manufacturer and can serve as the basis for other brands | Contractually regulated, from exclusion of competing brands to full transfer |
Time to market readiness | Usually 2 to 3 months | Typically 3 to 6 months, due to stability testing and regulatory deadlines |
Both models are legitimate, but they answer different questions: White Label buys speed on the basis of an existing standard formula, Private Label buys differentiation through individual new development. Anyone who wants to stand out from the competition through an active ingredient concept, a performance claim or technology cannot avoid new development — and that is precisely the point where the ownership question must be clarified in advance. The fundamentals of working with a manufacturer are described in the article on contract manufacturing.
Private Label: Settling formula rights before development starts
The most common and most expensive mistake in this area is a question of sequence: the ownership question is settled after laboratory work has begun. At that point, the brand's position is weaker, because a formula already exists into which development work has gone, and the legal status depends on negotiations instead of an agreement made in advance. By contrast, brands that negotiate the rights before the formula is first mixed pay for the same development work and get a clearer status and stronger exclusivity terms, because the manufacturer does not yet hold any upfront work of its own.
As a B2B cosmetics developer and cosmetics manufacturer, Labtree is the partner in this constellation that covers formula development, in-house laboratory work, sampling, manufacturability testing and cosmetics production in one process. In the Private Label model, the formula is newly developed in our own laboratory according to the brand's individual requirements. Formula rights or exclusivity can be transferred to the brand by contract. Brands that settle the ownership question this way before development starts combine the contractual protection of the NDA, the statutory protection under Section 2 GeschGehG (German Trade Secrets Act) and a clear legal position on the finished product.
More useful links
FAQ
Who owns the formula at a cosmetics contract manufacturer?
With an individual new development under the Private Label model, the formula rights can pass to the brand by contract. If a brand uses market-ready White Label products, the standard formula remains the property of the manufacturer and is generally not disclosed.
May a competitor rebuild my cosmetic formula in a laboratory?
Yes, so-called reverse engineering of publicly available products is expressly permitted under Section 3(1) No. 2 of the Trade Secrets Act (GeschGehG). Competitors may lawfully analyse and reverse-engineer freely available products, provided no contractual prohibitions such as a targeted NDA stand in the way.
What must an NDA for cosmetic formulas contain in any case?
To qualify as an effective protective measure, a valid NDA should contain, in addition to the basic confidentiality obligation, a clear analysis prohibition, define the specific purpose of use of the shared information precisely, and stipulate appropriate contractual penalties and a fixed term.
Who is legally entitled to inspect the complete cosmetic formula?
The responsible person and the external safety assessor need the exact and complete formula in order to carry out the legally required safety assessment. In addition, the product information file must be accessible to the competent authorities at any time in accordance with Article 11 of Regulation 1223/2009.
Does the INCI list on the packaging reveal my exact formula?
No, the INCI list names ingredients only qualitatively in descending order of weight, so the exact concentrations remain secret. Moreover, ingredients used below the 1 percent threshold may, under Article 19, be listed in any order at the end of the list.
